Coping with globalization

B. Herry-Priyono, Researcher, Alumnus, London School of Economics, Jakarta, herryprb@lse.ac.uk

When asked how sustainable development has been overshadowed by globalization, the Coordinating Minister for the Economy, Dorodjatun Kuntjoro-Jakti, replied: "the realities (of globalization) will continue ... We cannot stop them."

Despite its non-inevitable character, globalization seems unstoppable. Although the relationship between "sustainable development" and "globalization" is far from being a zero-sum game, the demise of the meaning of "development", let alone "sustainable development", can be accounted for by the rise of the present form of globalization.

If the core of development lies in the importance of people's planning in attaining common welfare of a nation, the type of globalization at work seems to render such planning empty. Even from the most conservative point of view, the demise is like changing the substance of Adam Smith's famous book, from The Wealth of Nations (1776) to The Wealth of Individuals.

It is the replacement of "common purpose" by "private interest" as the core principle of neo-liberal political economy that has brought development in a state of disarray. Privatization, deregulation and liberalization can be strategic devices for injecting moribund state-owned enterprises with new entrepreneurial ethos; yet they also reflect this profound shift.

Then common welfare simply becomes the unintended consequences of individual profit-seeking pursuit rather than the target of collective efforts called "development".

The shift is so profound that welfare is not the effect of "development" -- but scraps from the financial masters' party tables.

If globalization is inevitable, how should we approach the problem? First, just "let it happen". Second, try to resist it by cutting off our economy from the outside world. Third, introduce some policies to maximize the gains and minimize the losses. The last is the most attractive option, yet easier said than done.

Globalization is as ambiguous as every other phenomenon under the sun. Only when put under some ethical criteria does globalization become a contested issue. Its proponents argue that the world has been better-off with globalization.

We are connected more closely. The cost of a three-minute call between New York and London has fallen from US$300 (in 1996 dollar) in 1930 to less than 45 cent today. Indeed, the existence of losers is not sufficient argument for resisting globalization.

The opponents claim that large numbers of the world population have become losers (like in Indonesia, Brazil, sub-Saharan Africa, landlocked parts of Asia such as the Ganges valley of India and interior China). The share of wealth has also deteriorated quickly. While in 1960 the 20 percent richest controlled 70 percent and the 20 percent poorest controlled 2.3 percent of the world's wealth, in 1989 the first group had 82.7 percent whereas the second were left with 1.4 percent. The post- 1990 trend has been no better.

Then others would say that the problem is not globalization itself but, that at least one-third of the world's population (more than 2 billion people) are unaffected (untouched) by globalization. So, the task is to touch them with the midas of globalization. Assuming that we will ride the tiger of globalization (third option), this seems like a Sisyphean task.

Policy recommendations to this effect have included more investment in infrastructure, social safety net, more market information for the poor, growth-oriented development aid, more access for poor countries to global trade.

Yet economic globalization is largely, if not entirely, a deregulation of business. By removing socially-oriented regulations on the operation of business, it gives more power to owners of financial assets. Power is largely a question of options. By handing over more options to capital owners (like no constraints on location of production, sources of supply, environmental standard), globalization gives them immense power and prerogatives.

Power in economic life means an ability to shift more and more of the value produced by society into increasingly fewer hands. Simply letting globalization to happen is a de facto formula for shifting income and resources to the owners of financial assets, that is, for increasing inequality. Through investment more and more people may be touched by the benefits of globalization.

But, being touched is one thing, being uplifted by globalization is quite another. It is on this torturous issue that the future of globalization hinges.

Of course, this problem has far-reaching implications for a democratic movement. If democracy is a movement to make the socially consequential exercise of power accountable, the criteria of democratic accountability should also be applied to the exercise of power by capital owners/controllers.

The problem is, in policy-making circles, questioning the problematic status of business power is like a subject that dares not speak its name. But it is the key to a more humane globalization. At a time when business is held in high esteem, recognition of this truth may sound unpopular. But we should not confuse popularity with validity.

The challenge is a policy package to bring companies and financial powers under democratic accountability. This would include competition policies to restrict the market share of any one company, together with a "site-here-to-sell-here" policy for manufacturing and services, domestically and regionally reducing the power of companies' threat to relocate by making access to markets dependent on physical presence.

If globalization is a fact of life, the question is not about "to accept" or "to reject", but about how to make the powers involved in the directions of globalization accountable.