Asia Times: To have and have not


	May 5, 2001	atimes.com

Global Economy

THE ROVING EYE
To have and have not
By Pepe Escobar

Almost four years after the beginning of the 1997-98 financial crisis, more than 900 million people in Asia still live on less than one US dollar a day, according to the Asian Development Bank. Millions of day workers on construction sites in Manila, Bangkok and Jakarta are still unemployed.

But the ADB - financed by Western countries and Japan - still believes poverty can be substantially reduced by 2015. Along with the International Monetary Fund and the World Bank, the ADB is now a convert to Christian socialism. During the 1980s, the ADB promoted policies of mass export and trade liberalism with gusto. This year, in its headquarters in Manila, it has decided that 40 percent of its loans will now go to the fight against poverty. Tadao Chino, the bank's president, acknowledges that "if Asia fails to fight poverty, the whole world will suffer the consequences".

The fight against poverty is not necessarily related to the reduction of global inequality. A series of recent studies demonstrates that world inequality is rising, and rising fast - contrary to the widespread mantra of globalization's cheerleaders. If globalization is capable of lifting millions out of poverty, it is also increasing the gap between the global workforce and the near-starving masses.

In the beginning of the 18th Century, Western Europe was almost three times richer than Africa. At the end of the 20th Century, it was more than 14 times richer. The richest 20 percent of the world's population have 75 times the income of the lowest 20 percent: it used to be 30 times in the beginning of the 1960s.

The top 200 multinational corporations have sales equivalent to 30 percent of the world's measured economic output - but they employ less than 1 percent of the world's workers. According to the Institute of Policy Studies, a Washington think tank, at least two-thirds of the world population are left out, hurt or marginalized by the globalization process.

No wonder the Institute of Policy Studies goes as far as to portray a new global economic apartheid - the real face of the Brave New World of the 21st Century. Thus we live in a world of only 24 rich countries, a dozen fast growing developing countries, and around 140 that are growing very slowly, or not at all. Someone included in the poorer 10 percent of the American population lives better than 4 billion people scattered around the planet.

Robert Wade, professor of political economy at the London School of Economics, is among the few academics stressing the inequality gap. According to Wade, measured by purchasing power parity (PPP), people in most of Africa, India, Indonesia and rural China have an average income of less than US$1,500 a year. North America and Western Europe have more than $11,500 a year. In between, lies most of the developing world, such as urban China, Russia, Brazil and Mexico. But there are practically no countries with annual incomes between $5,000 and $11,500.

According to Wade, global inequality is increasing due to a host of factors: rich countries are growing faster than the large group of developing countries; populations in developing countries grow faster than in rich countries (rural China, rural India and Africa grow very slowly); and there is a growing internal divide between rural and urban China, and rural and urban India (the same applies to Indonesia, Brazil or Russia).

And to make matters worse, the prices of industrial goods and services exported from rich countries increase much faster than the goods and services produced by developing countries, and much faster still than what is produced in poor countries with minimal global trade.

International institutions such as the IMF, the World Bank and the ADB hail as "progress" the only paradigm in town: market-oriented economic policies and the rule of law. But in real life this does not authorize the automatic transformation of the Ivory Coast into another Singapore. The World Bank may be a "world" institution but it does not think in terms of world income distribution, or the effects on the world environment produced by the degradation of the atmosphere.

International institutions tend to promote dubious growth strategies in many developing countries - China and Indonesia - which include widespread devastation of forests, overfishing, indiscriminate exploitation of mineral riches and land-poisoning by agrochemical products. Their immutable version of "progress" is a job in a global factory, access to the cash economy, and the inevitable purchase of a TV set and a video player.

For centuries, rural communities in many developing countries have been well-oiled social cells, assuring the well being of subsistence farmers and fishermen. Their people may not have had a lot of disposable cash, but they always had social peace, some form of education, and had enough to eat. For globalization's purposes, though, they are "unproductive" because their subsistence agriculture cannot support large urban populations.

"Geography is destiny" is another mantra now being brandished in the United States to explain social inequality. In the apex of social Darwinism in the 19th Century - during the expansion of European colonial powers - geography was used as a way to justify the supremacy of the white man. No wonder intellectuals in the developing world today consider the notion of "geography is destiny" as racist and determinist.

Some of the facts, though, are graphic. Among the 24 rich countries, none is situated between the Tropics of Cancer and Capricorn. Only Brunei, Singapore and Hong Kong - a Special Administrative Region of China - are tropical, and thrive on trade because of their privileged geographic location.

Income levels, female education and life expectancy are lower in tropical countries, compared to countries in temperate zones. Countries far from a coastline are usually even poorer. This would spell trouble for the ex-Soviet republics of Central Asia (although it does not take into consideration their riches in oil, gas and minerals). If a country is tropical, far from any coast, and landlocked - like many in Africa - its prospects are definitely hellish. This would also apply to vast regions of China and India.

It is possible to wonder what are the benefits of a market-oriented policy and the rule of law if a country has low agricultural productivity, not a lot of market access, and is prone to endemic diseases - all because of its geographic location (like many countries in Africa). The answer - according to the "geography is destiny" crowd - would be more investment in transport infrastructure, and new technologies for agriculture and public health. And no more borders. Development banks like the ADB usually grant loans to national governments, following national priorities, instead of supporting projects that would benefit a whole region.

So, according to the "geography is destiny" crowd, the solution to poverty forced by geography is ... more globalization.

By some sort of reverse-engineering, AT Kearney and the Carnegie Endowment for International Peace even came up with a Globalization Index. Some of its results are quite obvious, but some go completely against the grain.

The index suggests that "global economic integration has wound down to something of a crawl", although techno-globalization is still growing fast. It comes as no surprise that small countries are the most globalized. Their small domestic markets and highly educated workforce lead to the formation of globally competitive companies - such as Philips, Ericsson or Nokia.

Singapore, according to the Index, is Globalization No 1, followed by Holland, Sweden, Switzerland, Finland, Ireland, Austria, the United Kingdom, Norway and Canada. The index gives the best marks to Singapore based on criteria including trade volume, telephone traffic and international tourism. But it is slightly schizophrenic: it criticizes Singapore for "low progress in privatization", "failure to win endorsement for a regional free trade agreement" and "tight controls over Internet development". Translation: Singapore is not as free a market as it should be.

The United Nations is so worried about the digital divide these days that it even established an Information and Communication Task Force. The index shows there is not only a digital divide between the 24 rich countries and the rest of the world, but different divides between North America, Scandinavia, Western Europe and a cluster of developing countries.

North America - with 40 percent of the population online - is only twice more wired than Scandinavia, but five times more wired than Western Europe. The real digital abyss is between North America-Scandinavia, and the rest of the world. Developing world efforts are usually plagued with problems. Malaysia spent $4 billion - so far - and will spend another $6 billion on its Multimedia Super Corridor, an area larger than Singapore itself. But there are no computers in most of its primary schools. Most of Kuala Lumpur still has no broadband access. It's a major headache to attract multinational corporation staff to work in Cyberjaya - one hour's drive from Kuala Lumpur: It is described as boring, desolate and with no social life. So far, the Multimedia Super Corridor has not benefited Malaysia as a whole.

The index is adamant: small developing countries already inserted in globalization, in Eastern Europe (Hungary, Poland, the Czech republic), and in the case of Israel, have less inequality than less globalized countries - such as Russia, China, Brazil and Argentina. But this does not explain why Malaysia is more globalized than the Eastern Europeans - but with more inequality. The problem with the index, for all its scientific marvels, is not to consider fundamental cultural factors. The index blindly insists on a pattern of more globalization equals more equality.

Rich countries, the elites of the developing world, and the so-called international institutions seem to be mired in some heavy-metal wishful thinking. They perceive no relation between widening world inequality and poverty. And they cannot acknowledge the fact that poverty simply cannot be fought without a profound change in the modes of production and distribution of wealth. They forget that growing inequality in the end is a menace to political stability in the rich countries themselves.

Is a country poor and ravaged by inequality because of globalization, or because it has not globalized as it should? The $1 trillion question remains.

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