Rethinking Globalization: Nirvana or Armageddon?

Yanuar Nugroho, Director, The Business Watch Indonesia, Secretary General, Uni Sosial Demokrat Surakarta
yanuar-n@unisosdem.org

Globalization remains a paradox up to today in our world. It brings about dramatic economic growth and advancement of technology, but at the same time also causes unprecedented human and ecological problems. Anthony Giddens (1999) describes this situation as being like a runaway "juggernaut" with all of us being trapped in it -- neither able to control the course nor to stop it. We may become wealthier and have a better life, but we also suffer from the "manufactured risks" like new diseases, computer viruses, etc.

As a result of globalization, foreign trade and investment have grown dramatically. But inequality remains and the gap both within and between rich and poor countries seems to be widening.

In 1960, the fifth of the world's people who live in the richest countries had 30 times more income than the fifth living in the poorest countries. By 1997 this income gap had more than doubled to 74:1. One-fifth of the world's people live in the high-income countries that have 86 percent of the world's gross domestic product (GDP), whereas the poorest fifth received only 1 percent (UNDP, 2002).

Over US$1.5 trillion is exchanged every day in currency markets around the world. About 95 percent of this total represents speculative transactions that fail to benefit the world's poorest countries. The real beneficiaries of globalization seem to be the transnational corporations. Of the top 100 companies, 51 are transnational corporations. The combined sales of the world's top 200 companies surpass the combined economies of 182 countries (Hertz, 2001).

It is clear that since globalization has both positive and negative consequences on the development of societies, it has become a constitutive factor, i.e., it is a result of, but at the same time also a source, of change.

Consequently, globalization is an irreversible process. Therefore, it hardly makes sense to adopt a defensive approach in the effort to combat this phenomenon. What is much more important is the creation, or further refinement, of operative and institutional tools, not in order to accept globalization as a "force majeure" of which we are entirely at the mercy, but in order to control it more efficiently by defining a democratic and humane form of global governance. Why?

Over the past 30 years, 2 billion people were added to the world's population, mostly in developing countries, with substantial gains in human welfare accompanying the growth. This included the cutting in half of the infant mortality rate in low and middle income countries from 11 percent of live births to 6 percent; illiteracy among adults fell from 47 percent to 25 percent, and for women, from 57 percent to 32 percent. Real per capita income (in population-weighted 1995 dollars) rose from $989 in 1980 to $1,354 in 2000.

But, some social and environmental trends associated with past development strategies in the majority of countries are not sustainable. There are still 1.2 billion people living on less than $1 a day. The average income in the richest 20 countries is 37 times that in the poorest 20 -- a ratio that has doubled in the past 40 years, mainly because of lack of growth in the poorest countries. More than 1 billion people in low and middle- income countries lack access to safe water, and 2 billion lack adequate sanitation, subjecting them to avoidable disease and premature death (WB, 2002).

In Indonesia, absolute poverty (those who live with less than $2 a day) was reduced to 16 percent of population, and only 12 percent of the population above 15 years old is illiterate. An improvement? Probably, but do not forget: Infant mortality still touches 31 per 1,000 live births, child malnutrition affects 25 percent of the total number of children under 5 years, and access to improved water sources is available to only 78 percent of the population.

How should we understand this situation? And how should we place the people -- all humankind -- within the dynamics of globalization?

Let us go back to some fundamentals to properly understand this phenomenon. To talk about globalization is to talk about the consequential impacts of business and financial power on society. The reason is clear: All empirical evidence shows that the present character of globalization in cultural, social or political aspects stands on the massive expansion of business and financial power.

The fact that it involves the exercise of power, however, does not mean that globalization is inherently "bad" since the problem is not the presence or absence of the power (for it is a constant factor in life), but the way it is being used. So, the problem with globalization is not about "pro" or "anti", for both seem to be self-defeating. Rather, how to identify the consequential powers involved in globalization, then how to devise accountability movements aimed at those socially consequential powers. And in practice, this will be closely related to what we understand as development.

One lesson we must learn is that people, especially the poor, must be at the center of development -- not only in the traditional view that people are the engine of change, but also in the less-traditional sense of development that puts people first. People are the critical factor in development -- first in terms of their numbers and the social, health, economic and environmental consequences of their actions; and second, in terms of the decisions they make concerning domestic issues and the way they live their lives. People-centered development also means full community participation at both the decision-making and implementation levels.

Poverty remains intractable despite economic growth in many countries. This partly reflects the problem of income inequality within countries. Income inequality in turn reflects inequality of opportunity. What is the cause? At least in part, the still tragically unmet need for equitable and inclusive investment in human capital -- e.g., investment in people through better education and healthcare -- and for wider access to the infrastructure and capital needed to broaden the basis of opportunity. Here lies a two-way relationship between poverty and growth. Growth might be a necessary -- but not a sufficient -- condition for poverty reduction, but persistent poverty and inequality can reduce growth rates.

A second lesson is that development must be sustainable and environmentally sound. If economic development destroys the earth's natural resource base in the process, it is self- defeating. But, this is what happens. In Indonesia, 40 percent of Indonesian forests have been cut down since 1950 and half of the remaining forest has been utilized for public roads, and timber and oil palm plantations.

The saddening thing is that every minute 5 hectares of forest disappears -- which means that a forest area equal to the size of a football field vanishes every 12 seconds. On the other hand, 40 -- 50 million Indonesian people's lives are heavily dependent on the forests. The impact on habitats is also severe as over the past 10 years the number of orangutans has decreased by up to 50 percent.

Thus, whatever the economic development argument is, we cannot but take into account that its practical consequences will directly affect the majority of the people. Economic development is not considered any longer as part of social development, as it should be, but precisely the opposite.

So, although difficult, let us put the people first before all the growth and profit generated by development and globalization.