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Al-Ahram Weekly 3 - 9 February 2000 Issue No. 467 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 3 - 9 February 2000 Issue No. 467
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Features Special Profile Travel Living Sports People Time Out Chronicles Cartoons Letters No retreat too far
By Mustafa Kamel El-Sayed *
Studies by credible international agencies, such as the United Nations Development Programme, have pointed out that in the past few decades inequality has grown worldwide, not only between developed and developing countries but within developed countries as well. The gap between the richest and poorest 20 per cent of the population in developed countries has increased almost threefold over the past three decades. Such deterioration in income distribution would not have mattered much had there been signs that this trend might be reversed in the near future. Unfortunately, available studies suggest that it will most probably continue. Nor is unbridled globalisation the key to a reversal of such trends, either in the South or in the North.
One factor that might have reversed the situation is easier access to the scientific knowledge and advanced technologies which gave rise to globalisation in the first place. However, instead of considering knowledge as a common good, a public asset -- the common heritage of mankind -- every trick is used now in order to restrict the use of scientific and technological advances to a tiny minority. Strategies include the protection of intellectual property rights in some cases, or perceived threats to the national security of those nations that already possess weapons that could destroy the world and its inhabitants 10 times over.
A more efficient transfer of resources from developed to developing countries, in the form of aid and capital flows, would also ease the problem. However, both the nominal and real values of aid have declined steadily since the early 1990s. Total official development assistance offered by OECD countries shrank on all counts in the last decade, according to the most recent figures in the Human Development report of the UNDP.
The volume of foreign direct investments (FDI) is also shrinking in favour of portfolio capital with the former standing at $61 billion in 1996 while the latter rose to $68 billion according to OECD figures. And while FDI is limited to a small number of developing countries, not exceeding ten mostly newly-industrialised nations, the rest are left prey to sharp fluctuations, as the countries of East Asia recently experienced. Nor is it certain that reliance on FDI as a major generator of growth will enable countries of the South to resolve the problem of deficits in their balances of payments or provide sufficient employment opportunities to job-seekers. In fact, the outflow of profits, interests and royalties on foreign investments might very well grow out of all proportion to the inflows of such investments. The advanced technologies used by transnational enterprises, the source of most FDI, could be labour-saving rather than labour creating.
It was hoped that globalisation would offer opportunities for the expansion of developing countries trade. These countries' share of international trade has remained constant, however, around 18 per cent for the last three decades -- a figure that, significantly, includes the share of oil exporting countries. Exclude them, and the share of developing countries would be much less. Improvement in the share of newly-industrialised countries notwithstanding, the terms of trade of all these countries have deteriorated in favour of advanced nations. Any access to the markets of advanced countries, expected after the signing of the WTO Agreement in 1994, turned out to be an illusion as new forms of protectionism -- including non-tariff barriers, health and environmental specifications -- have been placed in the way of developing countries' exports. At present, both the "social clause'' and implementation of labour standards are being invoked as new pretexts to limit exports from developing countries, with no regard to the particularities of their social structures.
Transnational corporations are instrumental in perpetuating such unfair business practices. Together with their governments they control almost 80 per cent of international trade in a great many commodities and a large portion of the flow of foreign investments. With the recent trend towards mergers and the acquisition of other enterprises, they have become the real economic empires in the new global economy, posing formidable challenges not only to the governments of developing countries, but to governments of advanced countries as well. And while there is no doubt that they could contribute to the increase of output in developing countries, help in the transfer of technology and make up for the shortage of investment and absorb part of the unemployed workforce in these countries, their contribution to development is in the end determined by global strategies conditioned only by the search for ever-higher profits.
Globalisation also impacts on welfare provisions in both the South and the North. Increased globalisation of markets and production structures has not allowed the advanced industrial countries to resolve their unemployment problems. More than 35 million people are unemployed, and 10 million more people have given up looking for jobs in countries of the OECD. The problem of unemployment is more acute in countries of the South where an estimated one billion people remain unemployed. And while some countries in East Asia managed to combine growth, under conditions of globalisation and employment creation, recent financial crises dealt a severe blow to such efforts.
Social safety nets in developing countries are subject to almost unbearable pressures as governments and society deal with the paradox of dwindling revenues, as a result of austerity measures, the requirements of stabilisation policies or government retreat from management of certain sectors of the economy, combined with expanding demand for social protection.
The responsibility of dealing with the consequences of globalisation must be shared between the countries of the North and South. Together they must reflect on ways to inject some elements of rationality into an irrational world economy. The countries of the South should not wait for an agreement with the North on such a course. They must do their homework by truly increasing South-South cooperation, mobilising their own domestic resources behind efforts to turn the oft-repeated slogans of development into reality.
In the meantime, their governments should realise that present trends towards globalisation of the world economy, increased use of market mechanisms and reliance on both the private sector and foreign capital as engines of growth should not be construed as implying any retreat by the state from its basic function of "economic guide" or its fundamental responsibility for ensuring the welfare of its citizens. The state remains an important economic agent. Skillfull use of the tools of macro-economic policy can only enhance economic growth; sound macro-economic policies can increase savings and mobilise investments via indicative planning methods.
Social safety nets must be strengthened in such a way that they can cope with the higher unemployment that could result from globalisation of the world economy. States must also ensure sound management of the environment by all economic agents and households in order not to impair the possibility of sustainable development.
* The writer is a professor of political science and director of the Centre for the Study of Developing Countries, Cairo University.
