Soc 222, 6th class

Instituting the Globalization
Project
PhD Fatma Altınbaş Sarıgül

□ Development redefined as a private,
global project.
□ World Bank’s ‘World Development Report
1980’ ; ‘development-participation in the
world market’.
□ The global economy was emerging as the
unit of development.
© Sage Publications, 2011.

Securing the Global Market
Empire
□ Emerging partnerships between states and
corporations required to “pry open” the Third World
often through military intervention and orchestrated
by the United States
□ 1965: Coup in Indonesia against President
Sukarno by General Suharto to protect Western
economic interests
□ Strategic interventions in Chile, El Salvador,
Nicaragua, Panama, Grenada, Iraq
□ Military and economic aid to secure the perimeter
of the “free world” and its resource empire

New International Economic
Order (NIEO)
□ 1973: Collusion among OPEC countries
threatened Western economic stability
□ 1974: G-77 proposal of NIEO (a charter of
economic rights and duties) to improve Third
World position in international trade
□ Widely perceived as “the revolt of the Third
World”
□ In 1974 World Bank reported the situation-
read pg.114

Consequences of NIEO
□ 1974: World Bank response was to refocus on
basic needs via elevating rural development
funding
□ Recognized inequalities within Third World
□ Questioned concept of aggregate growth as goal
□ United Third World front unraveled
□ Divergence between middle-income and poor
countries
□ Group of Seven (G-7) strengthened
□ Finance ministers of U.S., U.K., France, West Germany,
Japan, Italy, Canada
□ Performed crisis management including containing
NIEO

Debt Regime
□ 1980s debt crisis led to
□ Instituted new era of global governance in which
individual national policies were subjected to
external, rule-based procedures that
strengthened the grip of the First World through
the international financial institutions (IMF and
World Bank)
□ Spawned debt regime:
□Used Asian NICs as example to advocate for
export diversification and neoliberal policies
(although they were state-managed
economies) © Sage Publications, 2011.

Debt Crisis
□ Debt was not new in the 1980s.
□ By 1960s, 2/3 of new loans in Latin America and
Africa were for debt servicing (paying off
interest)
□ 1970s: inflated oil prices and unsecured lending
deepened debt vulnerability
□ 1970s Debt Crisis
□ U.S. Federal Reserve Board reduced dollar
circulation to prevent the fall of the dollar with
lending binge
□ Interest rates rose
□ Lending to Third World states slowed

Debt Trap
□ By 1986, Third World debt totaled $1 trillion
□ Rising oil prices made some states continue to
borrow
□ Countries devoted new loans entirely to servicing
previous loans
□ Many Third World countries unable to continue
debt servicing
□ First World recession reduced consumption of
Third World products
□ Third World export revenues collapsed as primary
export prices dropped
□ Debt trap: Had to curtail imports and raise exports
but commodity prices were at 40-year low

Debt Management
□ The Bretton Woods Institutions were back.
□ IMF as debt manager, working with World Bank
and structural adjustment loan (SAL):
□ Mid-1980s: Structural Adjustment policies
(SAPs) restructured production priorities and
government programs
□ Loan conditions required policy restructuring,
including austerity measures
□ Debt defined as individual liquidity problem,
not a systemic problem

Debt Management
□ Development alliance constituencies
—particularly ruling elites and middle
classes used political power to shift
debt repayment costs to the working
poor via austerity cuts in social services
□ 1982 – Mexico’s $80 billion debt became
model with bailout by IMF, banks and
foreign governments and with austerity
measures

Reversing The Development
Project
□ Debt regime rules restructured Third World
economies, reversed development project
□ New definition of development as
“participation in the world market”
□Focus on export intensification and
shrinking state
□ World Bank: New Social Funds run by NGOs,
included decentralized feeding and micro-
credit programs
□ Programs neglected local participation and
gender differences

Structural Adjustment
Measures
□ Drastic reduction of public spending (especially on
social programs)
□ Currency devaluation (to inflate prices of imports
and reduce export prices)
□ Export intensification (to earn foreign exchange)
□ Privatization of state enterprises
□ Reduction of wages to attract foreign investors and
reduce export prices
□ Structural adjustment hurt the poor and least
powerful the most. Poverty rates climbed.

Impacts of Loan Conditions:
Mexico
□ Food subsidies eliminated; malnourishment grew
□ Minimum wages fell 50% between 1983 and 1989
□ Purchasing power fell to 2/3 of the 1970 level
□ 1990: Basic needs of 41 million Mexicans unsatisfied;
17 million lived in extreme poverty
□ Manufacturing growth rates fell; depleted formal
employment opportunities
□ Mexico became agro-exporter of farm products,
such as fresh fruits, vegetables, and beef

Impacts of Loan Conditions:
Africa
□ Vulnerable economies
□ Fall in commodity prices during 1980s
□ Tanzania, the Sudan and Zambia used more than
100% of export earnings to service debt in 1983
□ Cuts in food subsidies and public services led to
urban demonstrations and riots in Tanzania, Ghana,
Zambia, Morocco, Egypt, Tunisia and Sudan
□ All development indicators fell
□ Oxfam: 1993 – sub-Suharan Africa
□ Cuts in public health spending; 10% decline in primary
school enrollment

Case Study: Citizens Versus
Structural Adjustment
□ 1976-1992: IMF riots across 2nd
and 3rd
World
□ 146 riots in 39 of 80 debtor countries
□ Large, coordinated urban uprisings protesting
public austerity measures; broke into food banks
□ Grievances:
□State policies of economic liberalization
□Collapsing entitlements
□IMF undermining national public capacity
□ SAPs weaken motivation of states to respond to
popular demands, thus shrinking democratic space

1980s: The “Lost Decade”
□ 1978-1992: 70 countries undertook 566
IMF and World Bank structural
adjustment and stabilization programs
□ Did not necessarily resolve debt crisis
□ Debtor countries were 61% more in debt in
1990s than in 1982
□ 1984: Direction of capital flows reversed:
□Inflow of loans and investment into former
Third World replaced by outflow via debt
repayment

The Debt Regime Challenges
the Development State
□ Debt managers demanded shrinking of former Third
World states by reducing social spending and privatizing
state enterprises
□ 1986-1992: Proportion of World Bank SALs demanding
privatization rose from 13 to 59%
□ By 1992: More than 80 countries had privatized
almost 7,000 public enterprises such as water,
electricity, or telephones
□ Privatization:
□ Reduced public capacity in development
planning and implementation
□ Extended reach of foreign ownership in the global
South
□ Banks profited from investments in global South

SALs, State, and Society
Restructuring
□ World Bank established parastatals (local agencies) to
administer SAPs
□ Power shift to central bank, trade and finance ministries
over social services, agriculture and education
□ Power shift from economic regulating agencies to
agencies supporting global enterprise
□ Reinterpreted “shrinking” the state to mean a
reorganization of state administration to encourage
popular initiatives.
□ “Trusteeship” is revived: IMF is “insinuated into the inner
sanctums” of governments around the world

Impacts of the Debt Regime
□ Relocated power within states in former Third
World to global agencies and markets
□ Imposed standard rather than locally-tailored
remedies on debtor states
□ Governments and business elites benefit
□ The poor are hurt

Incorporating the Second World Into
the Globalization Project
□ 1989: End of Cold War, advent of unilateral world
order
□ East European countries subject to IMF supervision of
economies after borrowing from the West
□ 1986: Soviet President Gorbachev planned perestroika
(restructuring) in exchange for participation in Bretton
Woods institutions
□ IMF policies replaced central planning with “market-
responsive” enterprises, reduced subsidies for food,
transport, housing (economic rights of socialist systems)
□ 1989: Western shock treatment methods deployed once
the Soviet Union and empire
□ Precipitous decline in Russian living standards; explosion of
organized crime.
□ Unipolar instead of Cold War bipolar world

Globalization Project Succeeded
Development Project
□ Key principle: Implementation of a free world
market through political intervention
□ Economic nationalism viewed as limiting
development
□ Obstructs transnational mobility of goods, money and
firms in the service of efficient (i.e., private) allocation
of global resources
□ TNCs represented by institutions such as the
World Trade Organization (WTO) aim to govern
this project
□ WTO vision of the globalization project:
□ Implementation of “market rule” via restructuring of
policies and standards across the nation-state system

Emergence of the
Globalization Project
□ 1980: Global management of capitalism as
Bretton Woods claims to manage a global
economy with the debt regime
□ Global managers: Bretton Woods institutions,
transnational corporate elites, governments
restructured for market freedoms
□ Washington Consensus: Development redefined
as “trade not aid” and backed with financial
coercion of multilateral institutional debt
management

Global Governance
□ Global institutions have assumed more powerful role
in governance, but require compliance from
governments in two ways: consensus and coercion
□ Compliance can be guaranteed through
institutionalizing market rule
□ Individual governmental functions recomposed as global
governance functions and enforced through multilateral
protocols
□ The World Bank, now the principal development agency,
has played a definite governing role.
□LIBERALIZATION

Liberalization and
Reformulation of Development
□ Liberalization downgrades the social goals of national
development, while upgrading participation in the
world economy through such means as tariff
reduction, export promotion, financial deregulation
and relaxation of foreign investment rules.
□ Globalization project: Under comparative
advantage, “Find your niche in the global market”
□ Key for National Development
□ Globalization: Comparative Advantage:
Specialization
But as mechanisms of specialization are repeated
everywhere, they intensify competition, and cause
social and economic marginalization, poverty,
environment stress and displacement© Sage Publications, 2011.

Making of a Free Trade
Regime
□ 1980s U.S. initiated Uruguay Round of GATT to
liberalize agriculture and services
□ 1948-80 General Agreement on Tariffs and Trade had
expanded trade by reducing tariffs on manufactured
goods by 75%
□ Liberalization supported by “free trader” agro-exporting
states, TNCs, and agribusinesses
□ Won acceptance from South,
□ Uruguay Round redefined food security as best provided
through smooth-functioning world market
□ Placed small farmers at comparative disadvantage
□ Food security “governed” through the market by
corporate, rather than social, criteria

World Trade Organization
(WTO)
□ Created January 1, 1994
□ Governs member states via liberalization
□ Sets rules to guarantee movement of goods, money and production
across borders
□ Privilege corporate rights
□ Guarantees treatment for TNCs equal to domestic firms
□ Integrated dispute settlement mechanism, e.g. sanctions
□ Challenges national democratic processes
□ Removed decision making in nontransparent tribunals in Geneva
□ Integrated dispute settlement mechanism
□ Threat of complaints against “trade-distorting measures” dilutes
national laws protecting human and environmental health
□ Depoliticizes social impact of market reforms
□ Challenges national laws and regulations regarding environment,
health, preferential trade relations, social subsidies, labor legislation

Agreement on Agriculture
(AoA)
□ 1995: Advocated universal reductions in trade protections,
farm subsidies and government intervention
□ While Southern farmers face 30% collapse of world prices, U.S.
and European states retained subsidies
□ 20-30 million people lost land
□ Liberalization consolidates a corporate food regime
□ AoA: “Comparative disadvantage” for unprotected farmers
in the South
□ Self-sufficiency not viable as a national strategy
□ 88 low-income, food deficit countries spend half their foreign
exchange on food imports
□ Oxfam: “How can a farmer earning US$230 a year (average per
capita income in LDCs) compete with a farmer who enjoys a subsidy
of US$20,000 a year (average subsidy in OECD countries)?”
□ 40% of Kenya’s children work on export plantations supplying Europe’s
food, but 4 million Kenyans face starvation

Trade-Related Investment
Measures (TRIMs)
□ Aim to reduce “performance requirements” on
foreign investment by host governments
□ WTO uses TRIMs to:
□ Manage cross-border movement of goods and services, to
secure investor rights as if they have no political impact
□ Arguments in favor of TRIMs:
□ They reduce domestic content requirements that
misallocate resources, raise costs, penalize
investment, burden consumers, slow technology, etc.
□ They enhance conditions for transnational investment
by reducing friction of local laws
□ Effects of TRIMs:
□ Meant to favor “integration” of investors with local
economy but rather push integration of local
producers into world market© Sage Publications, 2011.

Trade-Related Aspects of Intellectual
Property Rights (TRIPs)
□ Intellectual Property Rights: Rights given to persons over
the creations of their minds
□ TRIPs Protocol: Protection of intellectual property by WTO
□ Advocates: TRIPS simplifies protection across borders, promotes
innovation by guaranteeing profits from technological
development
□ Critics: Biodiversity and generic knowledges should remain
available to humankind as global “commons”
□ Examples: frog secretion for painkiller, rosy periwinkle for childhood
leukemia and testicular cancer, , sweetener from West African berry,
Indian neem tree, etc.
□ Global south contains 90% of global biological wealth but northern
scientists and corporations hold 97% of patents
□ Biopiracy: Appropriation and commodification of genetic material by
foreigners without payment or obligation; threatens livelihoods

Intellectual Property Rights
Regime
□ Privileges governments and corporations and
disempowers villagers by disavowing indigenous,
collective knowledge rights
□ 1992 Convention on Biological Diversity
□ Confirmed national sovereignty over genetic
resources and nations’ entitlement to fair and
equitable sharing of benefits
□ How states interpret this right and obligation is
controversial
□ Possibility of sui generis system to recognize and
secure collective rights for biodiversity

General Agreement on Trade in
Services (GATS)
□ 1994: Opened markets for trade in services with rights
for delivery of finance, telecommunications and
transport
□ 2000: Far-reaching protocol to force governments to
provide market access to foreign service providers
□ Restricts government funding of public works,
municipal services, and social programs
□ Every service imaginable: drinking water, health
care, education, social security, transportation,
postal delivery
□ Applies to government measures such as labor
laws, consumer protection, subsidies, grants,
licensing standards, etc.
In other words, GATS threatens to replace the
social contract between corporation and
consumer. © Sage Publications, 2011.

Ingredients of the
Globalization Project
□ Washington-based consensus among global
managers/ policymakers favoring
□ Market-based rather than state-managed development
strategies
□ Centralized management of global market rules by G-7 states
□ Implementation of rules through multilateral agencies (World
Bank, IMF, and WTO)
□ Market power concentrated in TNCs; financial power in TNBs
□ Economic discipline (trade, financial) for states, varying by
geopolitical position, global currency hierarchy, debt load,
resource endowments, etc.
□ Global development realized via new class, gender, race and
ethnic inequalities
□ Resistance at all levels: marginal communities, state managers,
and factions within multilateral institutions

Soc 222, 6th class

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Soc 222, 6th class