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Chapter XI (1)
Globalization and "Financing"

Besides progress in the telecommunications and information technology fields, an ideology favoring financial deregulation was needed. Ronald Reagan and Margaret Thatcher were the driving forces behind the globalization of financial flow deregulation and liberalization. George Soros, a main beneficiary of this phenomenon acknowledges its detrimental effects.

Globalization should be seen as the result of a project promoted by certain economic, financial and industrial sectors of industrialized countries and should be carried out by the governments that represent it. It should not be considered a "natural" event, the unavoidable outcome of scientific and technological progress in the IT and telecommunications fields.

The globalized financial system includes stock holders and stock agents, whose attention to financial market fluctuations is supported by international speculators, investment funds, and large oligopolistic banks that control most of the global economy. In addition, there are the mafias linked to money laundering, drug and weapon trafficking, smuggling, governmental corruption, illegal immigration, organ trafficking, child prostitution, trafficking in women, tax havens managers.

State policies are in fact non existent. They stopped representing a sovereign decision to correspond to the norms set by the deregulatory 1989 Washington Consensus, norms that included a reduction in the state's role and privatizations, among others. An inescapable dichotomy was created: inauspicious state involvement versus beneficent deregulation.

This sly trick conceals "deregulation", which is no more no less than the imposition of a new type of regulation; the only difference is that instead of relying on regulations imposed by authorities theoretically accountable to the citizens and controllable by them through universal suffrage, this new type of regulation is based on norms and standards imposed by the oligopolies that control the markets and set the rules of the game themselves to best serve their interests. The reported supergains in financial capital, the main beneficiary of the new kind of regulation, stand as proof. Before, the governments used to regulate the markets; now, with the alleged "deregulation," those in charge of the financial power structure impose the legislation that will favour and benefit them. Therefore, the question is not whether regulation exists, but rather who sets the regulating norms and at the expense of whose interests.

There are no deregulated markets. All markets are regulated and only function under this condition. The only concern is finding out who regulates them and how. Behind this "deregulation" concept hides unilateral market regulation on the part of the dominant capital.

Globalization and Transnationalism

Simultaneous multi-level globalization generated a variety of problems that are difficult to manage by states internally. It has become increasingly costly to manage migratory flows of money, information, pollution and disease. At the same time, new challengers of state authority, known as "non-state actors," appeared in the global context. They are divided into ethnic and religious groups, transnational networks of criminals and drug dealers, globalized terrorist networks, large multinational corporations, and rapidly proliferating non-governmental organizations. Through the growth and promotion of local or national operations on a global level, these organizations were reducing relative state power.

Figure 10: Globalization versus Sovereignty?

Globalization vs Sobereignty

In the future, governments and international organizations will have to take into account the authority of these non-state actors when decision-making time comes.

In contrast, the question arises as to what extent a state so powerful such as the U.S. can act independently, given that the governing Republican party represents the political entity most bound to the interests of the great corporations; this is particularly true of George W. Bush and his Vice-President, Richard Cheney. It is important to understand if the mandatory division between the political and economic powers will take place, often under the management of business elite.

Globalization and Its Discontents

Why has globalization become so controversial? In certain countries, the advent of international trade resulted in rapid economic growth, which could not have been achieved otherwise. Foreign trade encourages development when it is triggered by the country's exports. This form of growth was the basis for the industrial policy that brought about prosperity to Asian nations and improved the fate of millions of people. Right now, a country must export competitively and with value added, since many countries did not experience growth with the opening, given that their exports lacked value added, and most of the products that had it were imported.

Many Latin American countries that were "integrated" in the global economy from the 1940s to the 1970s are in this situation. This was due to the fact that they produced what the world produced, that is in the iron and steel, metallurgical and mechanical sectors at a time when these areas were considered an important starting point towards development, no matter how open their economies were. However, especially after the fall of the Berlin Wall and the disintegration of the USSR, which spread capitalism worldwide, these nations remained non-integrated in the global economy, despite their opening. This is because they do not produce what the rest of the world generally does, namely, microelectronics, computer science, robotics and telecommunications, among others. Asian countries manufacture goods belonging to these industries and Latin American countries import them.

Overall, the globalization process has reduced the feeling of isolation experienced by most of the developing world and has given many individuals from these nations access to knowledge that was hardly within the reach of the world's wealthiest a century ago. Anti-globalization protests themselves have resulted from this major interconnection.

Nevertheless, the number of poor people has increased in spite of various compromises on the reduction of poverty in several world forums. This happened at the same time when the total worldwide income increased by an average of 2.5% annually.

The industrialized world and the United States in particular promised Eastern European countries that the economic system would bring them unprecedented prosperity. Instead it brought them unprecedented poverty. In many regards, for the majority of the population, the market economy has proven even worse than their communist leaders had forecasted. The contrast between the Russian transition managed by international economic institutions and the Chinese one, managed by Chinese people could not be greater. In 1990, the Chinese GDP represented 60% of the Russian GDP, but the situation reversed by the end of the decade. Russia recorded a new increase in poverty, and China a new decrease. The latter country developed a peripheral opening and exercised central protectionism.

Globalization critics blame industrialized countries for imposing the removal of trade barriers on developing countries, while they maintained theirs and did not allow peripheral nations to export agricultural products, depriving them of a needed export-based income. The U.S. has been one of the main instigators of this situation. This was not only [sic] due to the fact that industrialized countries refused to open their markets to goods from developing countries, maintaining export quotas on a variety of products, from textiles to sugar, although they insisted that these countries open theirs. The industrialized countries continued to subsidize agriculture and to make it difficult for developing states to compete, although they insisted that these countries themselves remove subsidies on industrial goods. After the 8th and last trade agreement in 1995, the "terms of trade" revealed that the real effect was a reduction in the prices that some of the world's less favored countries charged in relation to what they would pay on their imports. Consequently, the situation of some of these nations grew even worse.

Banks in the industrialized countries benefited from the relaxation of capital market controls in Latin America and Asia. Nevertheless, these regions were negatively affected when speculative monetary flows or "hot money" that had poured into them, suddenly changed direction. The abrupt monetary capital outflow resulted in collapsed currencies and weakened banking systems.

The GATT Uruguay Round strengthened intellectual property rights; however, it mainly served American and Western pharmaceutical companies to prevent laboratories in peripheral countries from making use of their intellectual property. For an adequate measurement of the asymmetry in terms of power relationships that characterize the patent system, we should remember that, according to the World Intellectual Property Organization (WIPO), in the mid-1990s, individuals and firms in the industrialized countries held 95% of African patents, as well as almost 85% of the Latin American and 70% of the Asian. As for AIDS, the international sentence was so harsh that laboratories were forced to stand back and finally agreed to lower the prices and sell the pharmaceutical products at cost price at the end of 2001. Nevertheless, this did not resolve the issue; in other words the intellectual property regime established at the Uruguay Round remained imbalanced and continued to reflect above all the producers' interests and perspectives rather than those of the consumers in developed or developing countries.

For decades, the industrialized world refused to hear the requests of the poor in Africa and developing countries from other parts of the world. Those working in these regions knew that something was not right as they witnessed the spread of the financial crises and the rise in the number of poor people. However, they were unable to change the rules of the game or to exercise influence over the international financial institutions that made these rules. Moreover, these processes occurred thanks to governments mainly in agreement with the dominant ideology and in disagreement with the interests of the people, although it was the people who had voted for them. The "democratic" processes, so named more for their "delegative electoralism", became political regimes conditioned by requirements that international moneylenders imposed in exchange for their cooperation, undermining national sovereignty and following criteria of transnational actors, such as country risk qualifiers.

Before the protests started, there were few hopes for change. The demonstrations in Prague, Seattle, Washington and Geneva furthered the need for a reform on the agenda of the developed world. There was a contradiction between the demonstrators' view of globalization and that of the U.S. Secretary of the Treasury or of the industrialized countries' ministers of Finance and Trade. A disparity of approaches was recorded.

More limited economic aspects of globalization were rejected, such as international institutions that have set the rules and established or facilitated the liberalization of capital markets, favoring the flow of volatile money, generating shortage of funds or of investments in the periphery. At the same time, thanks to globalization of telecommunications, many are aware of the presence of medication or knowledge in other parts of the world that could cure children or adults dying at the periphery due to lack of drugs or of funds to purchase them. This generates a bad image of globalization.

 There is a contradiction among international organizations currently in force. For example, the International Labor Organization is concerned because the IMF pays little attention to labor rights or with the role the WTO has over them, but lacks authority to enforce the rules so far attained with great sacrifices. The Asian Development Bank pleads, against the IMF or the World Bank, for "competitive pluralism", which offers developing countries different approaches to development strategies; this includes the "Asian model", in which states base themselves on the markets but play an active role in creating, shaping and guiding the markets; this is a process that includes promotion of new technologies, and where businesses assume responsibility in the social wellness of its employees.

The International Monetary Fund has changed profoundly throughout time. Although it was founded on the belief that the market may function poorly many times, the IMF is now proclaiming market supremacy with ideological fervor. It was also based on the belief that international pressure is necessary for countries to carry out expansive economic policies; however, nowadays, the IMF contributes funds only on the condition that the states take on policies, such as deficit reduction and tax or interest increases, which contract the economy. The IMF created at Bretton Woods in 1944 is now contradicting itself. A more significant change occurred in the 1980s, when Ronald Reagan and Margaret Thatcher preached the free-market ideology in United States and Great Britain, respectively and exported it to the rest of the world.

During the 80s, the World Bank began to readjust its functions, and passed from infrastructural project loans to structural adjustment loans. Yet, it only acted with approval from the IMF, which in turn imposed its own conditions on the country. Supposedly the IMF focused on the crisis, but developing countries always needed help, so that this institution became the permanent ingredient in the life of many of these countries. The fall of the Berlin Wall in 1989 and the collapse of the Soviet Union in 1991 created the following new grounds for the IMF: management of the transition towards a market economy in the former USSR and Eastern European countries. When the crises worsened and the IMF funds proved insufficient, the World Bank was called upon to provide billions of dollars in emergency funds, but essentially as an inferior associate, abiding by the rules dictated by the IMF. A labor division apparently ruled. It was assumed that the IMF limited its involvement to macroeconomic issues of the specific country, to its budget deficit, its monetary policy, inflation, trade deficit and external debt. It was also implied that the World Bank was in charge of structural issues, such as to whom the government assigned public spending, the country's financial institutions, its labor market and trade policies. However, the IMF adopted an expansionist position, meaning that practically everything fell under its range of action.



[1] © DALLANEGRA PEDRAZA, Luis, La Construcción de un Orden Mundial Imperial, (The Construction of an Imperial World Order) (Buenos Aires, Edic. del Autor, 2003), ISBN: 987-43-6267-7. Chapter translated by Sorina Cuperman, Master in Spanish Translation, Honours Bachelor of Arts in International Relations and Spanish, Canada. sorina@transitconsult.com - http://www.transitconsult.com
Foto Autor This Homepage was made by Luis DALLANEGRA PEDRAZA

PhD in Political Science and International Relations (National University of Rosario , Argentine). Professor and assessor in Degree, Post degree and Doctorate in the country and abroad. Director of the Center of International-Argentinean Studies (CIAS/CEINAR), and of the Argentine Review of International Relations, 1977-1981. International Observer of the International Committee of Support and Verification CIAV-OAS in the guerrilla's "demobilization" "contra" in Nicaragua, 1990. Director of Doctorate in International Relations, National University of Rosario , Rosario , Argentine, 2002-2005. Scientific Researcher of the "National Council of Scientific and Technical Researches" (NCSTR/CONICET), Argentine.

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