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What Is Globalisation And Is It Good?

By Michael Bond

 

WHAT IS GLOBALISATION?

Globalisation refers to a variety of events that are rapidly changing the world. The machine that powers globalisation, however, is the global economy. At the heart of the global economy are the twin policies of privatisation and deregulation, which national governments have adopted worldwide since the 1980ís. Terms like free market economy, level playing field, monetarism, market economy, and neo-liberalism embrace processes such as privatisation and deregulation.

Privatisation is about putting governments out of business. The economic theory behind privatisation is that, Business knows best. In this age of globalisation, our governments cheerfully tell us that they are too incompetent to manage our economy, so as a service to the public they will instead let the free market run it. Then our governments sell off publicly owned businesses and assets, which usually end up controlled by multinationals and financed by public shareholders. Competition within the marketplace rather than government management, we are told, will allegedly produce lower prices and better services for consumers. This is called a better standard of living, which implies that the public are better off for having a privatised economy so they should be happy about it.

The strange part is that governments streamline their businesses, making them efficient and profitable, before they offer them for sale. If governments can do that before they privatise, why were they not doing it all along? Also, if governments are competent to get their businesses profitable and efficient, why not keep running them that way in the future rather than sell them? If governments genuinely are that incompetent, how can the public trust their competence to manage anything?

Why also do governments sell businesses that were always running profitably and were never losing money? All these actions contradict the stated reason why privatisation is allegedly necessary. They also imply a lazy, if not negligent attitude from government towards citizens, whose assets they are selling off, often at undervalued prices.

Deregulation takes several forms. Within a country, the lifting of trade restrictions and easing of government regulation in business is meant to allow business to run more efficiently. The best businesses will survive the competition to give consumers a better standard of living, that is, more material goods for lower prices.

Deregulation also applies to national currencies. Currency is no longer pegged at a certain value by government decree or gold reserves, but its value is floated in the global market place, where it will find its own natural level in the ocean of other global currencies.

Deregulation does not just apply within a country though. Deregulation also involves opening a country up to foreign competition. Foreign businesses can operate in our country, on the basis that our countryís businesses can trade in other foreign countries.

What is the benefit from all this? A better standard of living through a wider range of cheap goods is what globalisation is all about. This is what the media, politicians and multinationals keep telling the public.

HOW DID GLOBALISATION ARISE?

Why are democratic governments now putting themselves out of business by selling their companies and assets, and giving control of national infrastructures and economies over to multinationals? The present phase of the process began in the latter 20th century.

After World War II most countries were in an economic mess. Governments were the only entities large enough to get economies repaired and moving again.  The governments took control of the commanding heights of their national economies. Government directed economies were based upon the idea that Government knows best .

For three decades after WW2 the government led economies worked reasonably well. However, the US monetary system had a problem left over from a 1930's quick fix, and this problem began to catch up by the 1970ís. [1] In 1971 the US economy was technically as good as bankrupt. President Nixon took an easy way out by severing the link between the US dollar and gold. This allowed the US to have adequate money supply, where previously gold had stifled it. While this fixed the short-term problem for the US, it created several long-term problems globally.

Now US dollars had become freed from the restraint of a gold standard and the US banks could create as much money as they chose to, virtually without effective regulation. The ensuing flood of money aggravated economic malfunctions within many other countries that were still on the US dollar standard. As nations floundered economically, they contaminated other trading partner economies. Stagflation, stagnant economies with rampant inflation, became like an epidemic sweeping around the world.
Let us look at how inflation works. When money is in short supply (credit squeeze, recession), interest rates go down to stimulate more lending, which puts more money into circulation. However, when there is an over supply of money (inflation) interest rates go up to curb lending, which removes money from circulation.

After global currencies lost the regulation of gold, the raising of interest rates no longer curbed borrowing like it did under the gold standard. During the earlier 1980's so much money continued pouring into circulation that many people could afford the higher interest rates and they kept on borrowing, which took inflation even higher.

The global banking fraternity could have regulated the inflation chaos that occurred after the US severed its link to gold, but they did not. All the banks had to do was cut back on the number of loans they granted, but instead banks kept on lending to the unwary world. Why? Because the banks knew that the day of reckoning would come, when the interest burden of the loans inevitably caught up with and stalled the free flow of money. It is similar to a pyramid sale scheme, but instead of the patsies ending up with a garage full of soap, they end up with a life or business full of debt.
Why did the banks encourage an economic situation that they knew would stall itself? Because the banks knew that when it stalled, they would be in a position to take control of vast amounts of property and businesses, when the people that built them inevitably defaulted their loans. It was good business.
As nations became debt burdened, privatisation and deregulation did effectively deliver public property and businesses into multinational control to pay off national debts.
The 1980ís and 1990ís were the decades of crippling inflation and stagnant economies. In Africa and South America the 1980ís are referred to as the lost decade. Great Britain was brought to its knees, and the Mexico currency crisis nearly destroyed the global economy. The 1990ís were when Japan, SE Asia and the USSR crashed economically. The real cause of the economic instability was the willingness of the global banking fraternity to oversupply a faulty money system. This was quietly ignored. The blame for the world's economic woes was instead cast upon government interference and ineptitude in economics.

The global crashes of the 1980ís and 1990ís were caused by deregulation of the global financial system and business decisions made by banks, not government ineptitude. No government could have survived what the banks were doing (and continue to do). Banks reaped an economic harvest across the Earth while the cause of the problem was deflected in the direction of national government incompetence. The governments had run up huge debts, therefore they must be inept at running business. Its logical.

Through privatisation and deregulation, banks and other multinationals could now begin to purchase and control infrastructures and businesses that had previously been run by national governments for reasons of national security. Much of the essential business of running countries was now being put on the market for sale through privatisation. The banks and their multinational affiliates began to purchase the infrastructures of countries, while governments signed away national rights of control through international laws in the World Trade Organization (WTO).

In the early 1980ís, England under Thatcher was the first country to embrace the principles of privatisation and deregulation, which the Chicago School of US economists had been promoting since the 70's. [2]  The USA under Ronald Reagan quickly joined in. As other countries around the world fell into economic chaos, the US economists were close at hand to sell them the benefits of government privatisation and deregulation. The magic fix of the market led deregulated economy seemed to work in the failing economies, and the economies began to stabilize. But as countries bit the bullet through loss of national assets and jobs, all that really happened was that their economies were being painfully reset to an even ledger again after selling the farm to pay off crippling debts. New debt would continue to accumulate as it had before. Getting out of debt made governments look impressive to voters and gave the voters false hope that perhaps now the economy might be fixed.

The illusion was that the globalisation mantra of Business knows bestí was an axiom of economic reality, a fundamental truth. This was because government privatisation and deregulation seemed to stabilise economies. However, the quick fix of privatisation and deregulation was not a long-term solution for the global economy because the debt fault still remained. This meant that nations would eventually fall victim to uncontrollable, escalating debt again.

 

WHO IS RUNNING GLOBALISATION?

The excessive lending by banks in the 1980ís had been the bait, and their catch was the gains they made through bankruptcies and sales of national assets. As these profitable bankruptcies cleared away the immediate economic chaos, the banks resumed more moderate policies of lending. 

While governments had no choice but to float their currencies, doing so was just a short-term fix rather than a long-term solution. In the new economy if countries did not join in and deregulate their currencies (and economies) they became sitting ducks for global money speculators, foremost among which are multinational banks. The floating of national currencies was an inevitable result of the US severance from regulated currency. It was an offer to weaker economies that could not be refused - either join the club of globalised currency or be clubbed by globalised currency. The floating of currencies partly addressed the threat from global money speculators, but it did not fix the fault in the global monetary system, which continues to hamstring national economies through debt. [3]

Foreign debt is largely a misnomer. The debt is foreign in the sense that it is not owed within the same country and its economy. The word foreign implies that the debt is owed to another country. These days that is not entirely the case either, because most countries on Earth have excessive foreign debts. Foreign debt is mostly owed to multinational banks, which have no loyalties to any nations and are in the business of creating debt.

Privatisation and deregulation also ignore the fact that debt growth outpaces economic growth in the post-1970's global money system. Just as private debts had bankrupted citizens and companies through the 1980ís and 1990ís, debts are now preparing to bankrupt whole countries in one go.
Australia has about the same growth averages as the entire global economy. Both have economic growth of about 4% and debt growth of about 10%. At that rate, by about 2030
Australiaís annual growth in debt will be larger than Australiaís annual gross income. Australia will be in economic ruins well before 2030. Yet Australia is classed as one of the best performing economies in the developed world. [4]

In the new global economy, all the banks need to do is keep running steady as she goes, and within a few years they will theoretically be able to foreclose upon entire nations. Society is induced into thinking that the global economy is resilient enough, and is the best alternative possible.

Privatised and deregulated national economies have allowed multinationals to take control over the business, infrastructures and economies that run countries and shape their futures. In reality, the world is really run by an oligarchy of global corporations. After deregulation, national governments just take care of lesser, more trivial tasks that still need doing, like building roads and taxing the nation. A country's economic destiny is dictated to it and life for everyday citizens falls into line accordingly. Meanwhile, nobody is meant to notice that their nation is steadily marching towards a precipice of debt.
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WHAT IS GOOD ABOUT GLOBALISATION?
We have wide-screen TV's. We have cheap Chinese goods. The greatest benefit from globalisation is that it gives some countries a greater range of cheap overseas goods to buy. The cheaper prices are not a lasting result of globalisation though, but rather a reflection of the non-level playing field that currently exists within the global economy.
Government subsidies, import tariffs and lower paid workforces are what make the playing field of the global economy non-level. If the global economy ever reaches its proclaimed goal of a level playing field, then the cheap goods will become more expensive again. There would not be cheap labour or protective subsidies anymore. Cheap foreign goods are bait to encourage citizens to accept and assist the process of globalisation.
As wealthier nations buy those foreign goods they raise the wages of foreign workers and reduce the wages of workers in our own countries by ultimately putting them out of work. Prolonged high unemployment eventually leads to effective reduction in real wages.
So in effect, cheaper goods, which are an evident benefit from globalisation, are precisely what globalisation is aiming to remove through its level playing field policy. Achieving a level playing field is a stated goal of the WTO.

WHAT IS BAD ABOUT GLOBALISATION?
The bad aspects of globalisation involve human wellbeing, the environment and economic realities.
Human Wellbeing and Quality of Life
Quality of life is at risk from globalisation in a number of different areas.
THE END OF DEMOCRACY AND NATIONAL CONTROL
While democratic-styled governments are being installed around the world in the name of freedom, the essential structure of democracy itself is being undermined by globalisation.
Many fundamental areas of society that were traditionally administered by democratically elected governments are now becoming administered by unelected and unapproachable multinational boards.

*   Where governments were open to public scrutiny, corporations operate in secrecy within their boardrooms in faraway countries.
*   Where governments could be voted out if society disapproved, corporations are not subject to elections.
*   Where governments made decisions in the interest of the nation, corporations now make decisions in the interest of profits.
*   Where governments were the highest authority in a land, now international laws overrule national laws that conflict with them. Even in matters like environmental care and public health, international law protects multinational profits over national wellbeing.
PERSONAL STRESS
Globalisation has create new kinds of stress into everyday life. Even proponents of globalisation admit this, on the basis that "markets are relentless".
Corporations rationalise jobs whenever possible. This can be done by laying off workers or importing cheap workers from other countries. Job insecurity and the escalating workloads of existing jobs are eroding quality of life.
At any time fuel prices or interest rates may rise so much it hurts. What if there's a recession? What if the stock market crashes? What if the real estate market spikes up high - or down low? A new culture of "fear of the future" is entering society, caused by multiple long-term insecurities stemming from the new economy. [5]
Environmental Survival
How big must the global economy grow in order to be big enough? How much is enough? Globalisationís answer is that there can never be any such thing as big enough. In 100 years when, at current growth rates the global economy would have grown 50 times it present size, it would still not be large enough. Continual growth is necessary for this present economy to survive because of the way it is designed. The growth rate is deceptive. 4% annual growth does not sound like much but the global economy grows exponentially, not mathematically.
Mathematical Growth   1 + 1 + 1 + 1 +  1  +  1  +  1  = 7 
Exponential Growth      1 + 2 + 4 + 8 + 16 + 32 + 64 = 127 
The destruction of natural resources like clean water, forests, arable land, ocean fish stocks, coral reefs and so on are already causing extreme concern even in the traditionally conservative ranks of society. The current rate of extinctions from the planet is comparable to the rate of the extinction event that destroyed countless millions of species along with the dinosaurs from Earth 65 million years ago.
Earth is clearly not coping with the demand for resources in the present sized global economy. At present rates of growth in 30 years the global economy would be about 4 times larger than today, and in 60 years it would be 10 to 20 times larger than today. 
The global economy, which must grow exponentially in order to survive, does not recognize the realities of the natural world. The logic behind the present global money supply system is like sustaining your life by eating your own body from the feet up. The global economy is presently on a course to destroy itself through the planetís lack of ability to sustain it. Like a cancerous growth, the global economy is growing so vast that it will soon kill it host.
Economic Realities
Their still remains a fundamental flaw built into the post-1970's global monetary system, and economic trouble is arising from it again. The flaw in global money supply ensures that debt will always grow at a much faster rate than economies.
View the mathematics yourself in the article Why Economic Growth Is Unsustainable  [6]
On its present course, unless there are fundamental changes made quickly to the global money supply system, the global economy has no option but to collapse well before 2030.
It will be curious to see which inevitable reality the global economy succumbs to over the next two decades, crippling debt or nature's inability to cope. 
 
IS GLOBALISATION GOOD?
It would be possible to have a different kind of global economy that works in the real world to sustainably serve humanity. The pain and destruction caused by the global economy are not inevitable, but simply the result of the way this particular global economy is designed.
Is there not more to life than cheap consumer goods? Environmental degradation, social breakdown and high personal stress levels do not factor into mathematical profit margins.
The people of a nation care about the well being of their environment and society. Multinational corporations have no such national sentiments. They would give the world for a dominant market share, and presently they appear to be doing just that.
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Click the bracketed endnote numbers to return to text

[1]   This flaw in the money system is outlined in The Fatal Trap In The Global Economy, available  from www.eveoftheapoc.com.au
[2]   Thatcherism used the model of Milton Friedman, an economist from the University of Chicago. The Chicago School version of economics was embraced by Reagan and later by most of the world.
[3]   See footnote 1
[4]    OECD rating in 2003.
[5]    For example, see The Commanding Heights Ė The Battle For The World Economy, D Yergin & J Stanislaw, A Touchstone book, pub. Simon & Schuster Inc, USA, 2002, p 404.
[6]    Available from www.eveoftheapoc.com.au

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A copy of this document is available from www.eveoftheapoc.com.au
Michael Bond is a promoter of social and environmental reform. 
His book Eve of the Apocalypse sheds light on the present global situation and its affect on individual people.