ESSAYS

GLOBAL POVERTY AND THE CORPORATIONS

by Harry Throssell

Wayne Goss's comments on globalisation and the reduction of global poverty in his piece 'People and knowledge are key elements in our changing world' (Courier-Mail 5 May 2001) should not go unchallenged.

The Goss definition of globalisation is 'the ongoing economic, technological, social and political integration of the world that began after World War II,' and he comments 'I think the evidence is that it [globalisation] has been overwhelmingly positive,' because 'Globalisation has seen a dramatic inflow of private financial capital to developing countries with economic opportunity in much of the Third World far greater, and poverty reduced, as a result.'

Globalisation, meaning the coming together of all regions and peoples of the world, is inevitable and can have very positive consequences, if based on a philosophy of sharing and cooperation rather than the current western values of dominance, competition and individual acquisition. However, the term globalisation usually refers to globalised capitalism, the hegemony of large corporations, market forces unfettered by national borders or government in its pursuit of low-cost labour and new sales outlets.

Has global poverty been reduced by global capitalism since World War II? Examination of World Bank, United Nations and other sources reveals no evidence to support this comforting thesis.

World population increased from two billion in 1927 to three billion in 1960 thence to six billion in 1999. But while the population at the end of the 20th century was 3.5 times that of 1900, annual global wealth increased sixteen-fold in the same period. 'Overall, people are consuming more in food, energy, education, transportation, communication and entertainment than ever before,' [my italics] according to the UN Human Development Report. In spite of the sharp rise in population there was, and is, theoretically, no need for anyone to go hungry, and all authorities have predicted that food production can meet the needs of even further rises in total population for another two or three decades at least, as long as it is distributed to those who need it. This is the nub of the problem.

Overall global figures give a very inadequate account of real poverty in today's world. The explanation is that wealth continues to be cornered by the wealthy, and any extra global wealth continues to flow to the already wealthy. In 1950 the income of the richest countries (defined by Gross National Product per person per year) was 35 times that of the poorest countries, increasing to a factor of 44 in 1973, and 72 in 1992. The gap between the average income in the richest 20 countries and that in the poorest 20 has doubled in the past 40 years.

While obesity is at epidemic proportions in Australia and the USA, a person dies from hunger every 3.6 seconds somewhere in the world. While the proportion of world population existing on less than one United States dollar a day (the international measurement of extreme poverty) declined from 28 per cent in 1987 to 24 per cent in 1998, the absolute number rose by 16 million people in that time due to the rise in population, and in spite of global wealth rising 2.5 per cent a year in the same period. Currently 1.2 billion people (20 per cent of world population) live on less than one dollar a day and some three billion - half the population - on less than two dollars a day. And if we didn't have such a harsh, unrealistic definition of poverty the figures would be even more dramatic.

Currently the poorest region on the globe, measured by GNP and by the UN Human Development Index, is sub-Saharan Africa, whose great natural wealth was for many years shipped to European colonial powers who are still among the richest economies in the world, and which continues to be transferred overseas by private companies and in efforts to repay overseas debts to the International Monetary Fund, World Bank and national creditor governments. The proportion of the region in poverty has remained the same at 46 per cent for more than a decade but the total number of people in poverty has increased from 217 to 291 millions due to increase in population. The combined number in poverty in sub-Saharan Africa, South Asia and Latin America rose by 136 millions between 1987 and 1998. In Eastern Europe and Central Asia, the poverty increase in this period was 20-fold, with Russia replacing the USA as the developed economy with the highest proportion of its children in poverty.

While rich countries have seen a fall in reproduction rates to 1.7 births per woman in 1998, in the poorest countries it was still at the rate of 3.1. It is well established that economic increase produces a fall in birth rates.

Money and birth rates are by no means the end of the story however. While low income communities often have spiritual, cultural, and social qualities envied by many in the rich world, most effects of poverty amount to suffering in anyone's language, and grossly violate human rights. Extreme poverty also means too little clean drinking water, poor sanitation and inadequate food supplies, major causes of killer diseases like cholera, tuberculosis, malaria, chronic diarrhoea, HIV-AIDS. Poor nutrition can lead to permanent disabilities like blindness, deafness, stunted growth - often preventable or curable at little cost. People are killed or maimed by poverty-based conflict, slavery, child labour, prostitution, crime. Dire poverty means being subject to natural disasters, civil wars, economic colonialism. Consequently many are unable to make a working contribution to the family's survival and instead remain dependent. Many children in the world are regarded as slaves or expendable. The average child mortality rate of 107 per 1000 live births in poor countries compares with six in rich countries, the maternal mortality rate of 748 per 100,000 live births compares with 17, average life expectancy of 45 years in sub-Saharan Africa compares with 78 years in Australia (but 58 for Aborigines).

If globalised capitalism since World War II were really reducing poverty you would expect the number of migrating refugees (including asylum seekers, displaced persons, 'boat people') to have decreased accordingly, as poverty is virtually always a direct or indirect reason why people leave their homeland and seek an uncertain future elsewhere. But the figures show the opposite. From 1950 to the mid-1970s there were fewer than three million under the protection of the United Nations High Commission for Refugees, followed by a very sharp increase to 27 million in the mid-1990s and still at over 20 million. And these figures are certain to be underestimates. Statistics show wealthy countries are far from bearing their share of the burden of care, with only five per cent of the total seeking to make their home in Europe and North America and less than 0.2 per cent finally living in wealthy countries. (Australia's share is so little as to be off the global statistical map of destinations for refugees). The UN High Commissioner for Refugees, Ruud Lubbers, is reported in Le Monde Diplomatique as commenting "On the one hand, they [wealthy countries] won't fund programmes to help refugees return home or to improve refugees' lives in places where they face major threats. And on the other hand, every year they make it harder for peoples under threat to find asylum and safety on their territories." In year 2000 wealthy countries gave only 0.01 per cent of their Gross National Product to the cause of refugees.

Even in countries like the USA, Britain and Australia, free market forces have not led to any diminution of inequality in the past quarter century. No less a neo-liberal than Prime Minister John Howard said at the Liberal Party's national convention last year his party had rejected the view that an unrestrained market would somehow deliver a 'miracle of trickle-down economics' which would solve every problem. There is no reason to believe there is any greater likelihood of a trickle-down effect globally than there has been nationally.

The globe cannot produce enough for everyone to live at the high standard of living we have in Australia, where we consume a disproportionate amount of the world's resources, one of the features, if not causes, of global inequality. There are no signs at present that market forces will do anything other than continue this pattern. It is difficult, therefore, to see how change can come without government exerting some control over these forces to ensure the well-being of the population at large. Which is where the will of the people, especially the victims of market forces, comes in.

The global economic situation is nothing for those of us living 'comfortable and contented' lives to feel complacent about.

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The above was posted to the Courier-Mail, with a copy to Wayne Goss, on 9 May 2001. At today's date (16 May 2001) it has not been published in that newspaper, and is now distributed as the latest in the Levellers Essays series, with additional material below from new sources.

According to Sian Powell's 'Sen and sensibility,' (Weekend Australian 12-13 May 2001) Indian Nobel laureate economist Amartya Sen, a supporter of globalisation, believes 'globalisation of the market has its benefits but the global market, with its emphasis on efficiency rather than equity, can leave some groups out in the cold unless there are strong safeguards.' He sees globalisation as a 'potential tool for reducing the glaring inequalities apparent in the world' but also comments "the great champions of globalisation cannot mean what they say when they claim to be great removers of global barriers. Removing barriers to the movement of goods and services, yes, but of people, even of mere tourists...definitely not." The last point is particularly apposite for the millions of refugees who struggle to survive in their own countries but if they attempt to move to wealthier regions of the world to better their prospects are hindered and punished.

The industrial revolution of the early 19th century was also a potential tool for reducing glaring inequalities but failed to do so until those impoverished by it, both initially and periodically later, protested and were eventually supported by more enlightened legislators, new political parties and social movements.

Noreena Hertz, author of The Silent Takeover: Global Capitalism and the Death of Democracy strongly makes the point that currently globalised economics means the assumption of governmental control of nations by unelected private corporations. Commenting on low voting turnouts in recent elections in UK, USA, and Europe, she writes ('We must stay silent no longer,' The Guardian Weekly, 10 May 2001) 'People have lost faith in politics, because they no longer know what governments are good for. Thanks to the steady withdrawal of the state over the past 20 years from the public sphere, it is corporations that increasingly define the public realm.'

As far as poor countries are concerned, Hertz sees 'a race to the bottom: multinationals pitting developing countries against each other to provide the most advantageous conditions for investment, with no regulation, no red tape, no unions, a blind eye turned to environmental degradation. It's good for profit, but bad for workers and local communities...host governments are left with little alternative but to accept the pickings. Globalisation may deliver liberty, but not fraternity or equality.'

The World Trade Organisation, she writes, makes rulings in the names of the free market that limit states' abilities to safeguard their people's interests.

'In Germany, where revenue from corporate taxes has fallen by 50 per cent over the past 20 years despite a 90 per cent rise in corporate profits, a group of [large] companies...thwarted an attempt in 1999 by the finance minister, Oskar Lafontaine, to raise the tax burden on German firms. The companies threatened to move investment or factories to other countries if government policy did not suit them...As one of Chancellor Gerhard Schroder's senior advisers in Washington commented, "Deutsche Bank and industrial giants like Mercedes are too strong for the elected government in Berlin."

In the United States, 'the quid pro quo being exacted by George Bush's corporate backers is becoming all too clear...The interests of the US people have been subordinated to those of the energy giants that bankrolled him: $47m was all it cost. This is the world of the Silent Takeover, a world in which governments can no longer be relied on to protect the people's interests. Blinded by the allure of the market, they now put corporate interests first.'

Hertz argues that while consumer and shareholder activism can be a form of protest, it favours the interests of the middle classes rather than the whole population. What we should never do, she writes, is expect corporations to take responsibility for society's needs: 'social investment and social justice will never be their core activity.'

In Japan's Mitsubishi Villages, Nissan Towns and Toyota Cities the keiratsus - trading companies - used to provide school vouchers, housing and health care. Hertz reports that in the wake of the Asian financial crisis, the firms are withdrawing support from the community. The head of Toshiba says they are no longer "a charity". Entire communities are suffering. The suicide rate in Japan rose by a third between 1997 and 1999, a testament to the social strain. 'If this move by Western corporations towards greater responsibility and care is predicated solely on the continuing strength of the global economy, on the fact that philanthropic acts are essentially tax write-offs against balance sheets firmly in the black, is it not likely to be reversed when times again become difficult?...

  'Corporations are not society's custodians: they are commercial entities that act in the pursuit of profit... Often their business interests happen to coincide with society's, but this is by no means always the case. Governments, on the other hand, are supposed to respond to citizens...And governments that stand back while corporations take over, without being willing to set the terms of engagement or retain the upper hand, are in danger of losing the support of the people, whose feeling of lack of recourse or representation is showing itself in a wave of protest...All over the world people are beginning to lash out against corporations, governments and international organisations alike. In a world in which politicians now all sing from the same hymn sheet, people who want to change the hymn have to go outside the church.'

The question is: Can protest put people back into the forefront of politics? Hertz argues that it can - 'perhaps the political corpse is beginning to twitch,' first citing Cochabamba, Bolivia's third-largest city, where in 1999 the water authority was privatised after recommendations by the World Bank. 'At once the price of water tripled, which meant that a typical worker was spending almost a quarter of his or her monthly wage on water charges. People gathered on the streets and protested, there was a four-day general strike, payments were boycotted, and 30,000 people marched through the city centre. Finally, in April last year the water supply privatisation was revoked.'

She also cites a developed economy, New Zealand, which 'embraced free-market fundamentalism with enthusiasm in the early 1980s,' but the current Labor administration is 'implementing changes that for the past 20 years would have been considered heretical. Workplace accident insurance has been renationalised, a state-run People's Bank will open soon in which personal banking fees will be 20-30 per cent lower than those charged by private banks, tax cuts for high earners have been reversed, and trade union rights boosted. As Prime Minister Helen Clark has said, New Zealand's experiment in market fundamentalism has failed.'

In California the privately owned power distributors have struggled 'to deliver electricity at a fair price, or often to deliver it at all, experiencing their first statewide blackouts since the second world war [so] Californian politicians are contemplating a once unthinkable change of course: to regain control of the very power transmission system they privatised five years ago.'

Noreena Hertz sees these small signs as revealing small cracks in an ideology which has become dominant over the past 20 years, the beginnings of a recognition that there has to be new thinking.

ends 16 May 2001

This essay is in the Levellers Series on aspects of global poverty. The Levellers were a politico-religious revolutionary group in 17th century Britain, along with Diggers, Ranters, Anabaptists, Seekers and Quakers. Previous essays have found their way round the world and been published in numerous periodicals.

Permission, indeed encouragement, is hereby given by the author to copy, distribute, publish, or forward this essay by e-mail or any other means.

Harry Throssell, freelance journalist, is a former social worker and academic. Address: [email protected]