Oiling the wheels of globallisation

  • 14/09/1995

Oiling the wheels of globallisation DECISIONS taken in USA, under the guise of marine joint venture projects, are having a devastating impact on the livelihood of the fisherfolk of India. The fisherfolk are set against the deep sea trawling by increasing numbers of foreign collaborations being carried out with the blessings of the Indian government. With the extensive fishing of the fragile marine ecosystem by foreign fleets, the fisherfolk are finding the going tough.

This is illustrative of the changing order of things. With liberalisation, a new economic order is emerging, accompanied by growth in the interdependence of the world. The wheels of globalisation have started to churn as the interde- pen dance of the nation states and peoples for the survival of their environment, natural resources and livelihoods have increased. The world now needs a system of global governance, capable of ensuring the interests of the weakest of all nation states and local peoples. In pursuit of this goal, the Commission on Global Gover- nance brought out a report titled "Our Global Neighbour- hood". This is an attempt to bring in newer forms of international cooperation. The Commission co-chaired by Ingvar Carlsson (Sweden) and Shridath Ramphal (Guyana) draws from the experiences of other Commissions, viz, Brandt Commission on International Development Issues, Palme Commission on Disarmament and Security, Bruntland Commission on Sustainable Development and Julius Nyerere"s South Commission.

The report argues for global governance as it deals with issues such as development, economic trends, demilitarisation, a new vision, ecological crisis, leadership issues, ethics, international institutions, major global actors, international law and environment issues.

The process of globalisation, states the Commission, primarily describes key aspects of the recent transformation of world economic activity, viz, creation of a borderless state through financialliberalisation and transborder movement of money or information. The concept of global governance, the Commission states, emerges in this context and affirms that "there is no alternative to working together and using collective power to create a better world".

The Commission states that it is time to review the arrangements for the governance of our global society. It argues that till recently, "at the global level, governance has been viewed primarily as intergovernmental relation- ships, but it must now be understood as a15o involving non -governmental organisations (NGOS), citizen"s movements, multinational corporations, and the global capital market". Thtis the Commission sees an emergence of a whole range of new social actors on the global scenario, influencing global management. The Commission argues that global governance is not world federalism or world government. It says, "There is no single model or form of global governance, nor is there a single structure or set of structures. It is a broad, complex process of interactive decision making, constantly evolving and responding to changing circumstances".

For,example, it states, "Those with a role in bringing order to international trade in sugar and sweeteners include transnational firms, national and international authorities in charge of competition policy, a global group (the International Sugar Council) with a specific responsibility for trade, and a host of smaller private associations, including plantation workers, beet farmers, and dietitians".
Recommended global reforms By and large, the Commission views the policies of liberalisation and the latest market-led economic reforms as necessary to the development of the world and developing countries in particular. The Commission is aware of the seething poverty in Africa, Asia, Latin America and suggests that the latest trends of economic reforms, viz, free trade would help the economy of these countries. It hopes to ensure a harmonious integration of markets globally by suggesting that effective tools of governance be created -at a global level. Democratisation of the key international institutions is seen as a necessary step to meet the challenge posed by the new international economic order to achieve higher levels of international cooperation.

Reform in the governing structures within the United Nations in keeping with the changes in the post cold war scenario is suggested by the Commission.

AArding to its recommendation, the composition and the decisionmaking powers of the Security Council (ESC) should be changed to a more democratic one. Here the main proposal of the Commission is that the veto power of the 5 countries viz, USA, Russia, China, France and UK, be phased out by 2005.

The Commission foresees a redefinition of the role played by 1 among the 6 principle organs Of UN, ViZ, the Trusteeship Council (TC). It states that the Tc has played an important role in the post-war process of decolonisation, overseeing the progress of the trust territories into independence. Having @tompleted its work, the Commission suggests that the TC be given the responsibility to act as a trustee to the global commons, which include the atmosphere, outerspace and oceans beyond national jurisdiction. It envisages the TC on becoming the chief forum on global environmental issues, administering the Environmental treaties in the field of climate change, bio- diversity, outer space and law ofthe sea. The Commission also suggests that the number of members on the council and their selection criteria be decided upon by the general assembly. Also suggested is multilateral governance systems and setting up an apex body called Economic Security Council (ESC) within the uN, which would provide linkages between economic, social, environmental and security issues through coordination with thqe multilateral institutions dealing with the above issues, and iA particular, the International Monetary Fund (IMF), the World Bank (W13), and the World Trade Organisation (WTO). This apex body, the Commission contends, would promote, consensus building on the evolution of international economic system and guide the global community. Further, it suggests that institutions like the Commission on Sustainable Development (CSD) should report to this body. The ESC, the Commission states will work by consensus, without vetos. The membership criteria suggested is"as follows:

Representation of the world"s largest economies adjusted according to the Gross Domestic Product (GDP) numbers based on the purchasing power parity.

Balanced representation between regions.

Flexibility to allow regional bodies like the European Council to participate on behalf of its member states.

The Commission also suggests that the proposed ESC should meet once a year at the level of heads of governments or finance ministers.

Towards global economic stability
The process of integration and easy movement of large financial flows, though it generates opportunities for more efficent use of capital, can also lead to financial instabilities for individual countries, the Commission contends. Disproportionate pressures are put on the weakest economies to adjust to the global markets. Painful structural adjustment, led by IMF con- ditionalities, for many of the seriously indebted African and Latin American countries could have been avoided by external financing through low conditionality compensatory finance, states the Commission.

The Commission also suggests a radical debt relief for heavy debt ridden low income countries. For example, the present value of the debt service for Mozambique, Sudan and Somalia is 10 times more than their exports. One of the important tasks of-the proposed ESC, it suggests, is to maintain overall surveillance and act in time against system failure, like for example in times of possible major global banking collapse due to escalated debt crisis in 1980s. The Commission, however, feels that many of the problems in the international monetary systems stem from under representation of the poor countries in global governance structures. It therefore suggests a reform in the decision making structures of the Bretton Woods Institutions.

The Commission calls for democratisation of Bretton Woods institutions like the WB and IMF and critiques the present structure of decision making which concentrates power in the hands of the G7 (ie USA, UK, Japan, France, Germany, Canada, Italy) by exclusive voting rights. Instead the Commission argues for decentralised and transparent decision making based on voting rights commensurate with a nation"s GDP figures based on purchasing power parity (ie adjusted for domestic purchasing powers, calculated through local currencies). It argues that such a reformed system will benefit the developing countries and ensure more voting rights for them since the world"s 10 biggest economies on a purchasing power parity basis would include China, India, Brazil and Russia, with Mexico, Indonesia, and Republic of Korea not far behind.

The Commission points out the deficiencies in the multilateral negotiating processes like the General Agreements on Trade and Tariffs (GATT), now replaced by World Trade Organisation (WTO) formed at Marakesh in April 1994, but contends that "despite these deficiencies, the multilateral negotiating processes at least let weaker members of the international community operate in a rule based system rather than one controlled by raw power". The Commission thus asserts the importance of the establishment of WTP as a forum for equitible dispute settlement, for further liberalisation, and for curbing the use of protectionist and discriminatory measures. For example, it states: "All who join the oretically have equal status (unlike in the Bretton Woods Institutions), though in the past the major economic powers have written the rules and dominated the negotiations". It asserts the need for greater transparency in its negotiating processes.

The Commission also O"kpresses concern about the conflict between environmental ofandards and sustainable development versus free trade, by certain trading partners in developed countries. It criticiseA, the threats of banning the products of certain developing countries by developed countries on the ground that they are environmentally unsustainable and states that such accusations are either based on ignorance of realities of poverty or in outtight protectionist self interest. The Commission suggests that1here is need for better methods of conflict resolution and suggests that WTO and the proposed Esc would be appropriate fora for this. Similarly, while the Commission shares concern over serious breaches of core conventions of the International Labour Organisation (ILO) and the bans on forced and child labour, it contends that it would be "quite inappropriate and potentially damaging for the wTo to become an enforcement agency of labour standards".

The Commission also suggests that anticompetitive restrictive policies and monopoly practices should be restrained and that a strong set of competition rules be adopted by the WTo and thus suggests setting up of a global Competition office to strengthen global competition.

To confront possible corruption and other malpractices that corporate sectors may engage in, the Commission suggests that governance be strengthened through multilateral agreements that define minimum standards for corporate behaviour so that tragedies like Bhopal do not occur again. Perspective on environmental issues
The way key resources are used are critical factors in determining environmental impact. Seen as the commission points out that the industrial countries account for a disproportionate use of non-renewable resources and energy. It states that, on one hand, the industrial countries (including Eastern Europe and the former Soviet Union) with less than a fourth of the world"s people, consumed 72 per cent of the world"s fossil fuels in 1986-90. On the other, the Commission points out that in developing countries, the main environmental pressure is linked to poverty. It says "poor people press on the land and the forests, overexploiting them to survive and undermining the resource base on which their well being and survival depend". The Commission concludes that the poor countries "must have access to technologies that use fewer resources, such as energy saving technologies" and argues, "to keep global resource use within prudent limits while the poor raise their living standards, affluent societies need to consume less".

The Commission calls for implementation of Agenda 21, a programme adopted by the various national governments at the world Earth summit in 1992 to achieve environmentally sustainable development. It points to the examples of unsustainable development where the consumers and producers do not pay the full economic and environmental costs of what they use. For example, the massive waste of water in subisdised irrigation schemes in the United States, the low logging and license charges that encourage over-exploitation of tropical forests; the price support for European farmers that encourage energy intensive and chemical intensive agriculture, the failure to charge adequately for ocean fishing rights, the move to keep the energy cheap, which leads to wasteful transport and industrial systems contributing to excessive carbon emissions. It thus suggests that all governments should adopt policies that make maximum use of environmental taxes and the polluter pays principle" of charging.

The Commission asserts that a contribution to allievating the global warming problem can be made through energy or carbon taxation as envisaged in the European Union (EU) and the United States. It argues that the aim of such taxes will be to give a specific incentive to use less carbon intensive fuels, in contrast to the present, where most countries tax gasoline quite heavily but not other oil products, and often subsidise coal. It suggests that such a tax would be a step towards the radically different system--one that taxes the resources use rather than employment (for example, payroll taxes). Further, based on the system of tradable permits followed in USA, it also suggests creation of globally tradable permits to help limit the greenhouse emissions. For example, in USA, the government decides on target pollution levels and issues permits that companies must obtain in proportion to the emissions they generate. Permits can be traded between companies in this system. Such mechanisms, the Commission feels, would combine effectiveness, equity and market efficency. For example, the more a firm cuts back emissions, the more can it earn by selling unused permits.

The most direct challenge to global, governance in the environmental field, according to the Commission, is that presented by the "tragedy of the Commons" : the overuse of common environmental assets because of the absence of a sufficently strong system of co-operative management. It also adds that the Commons present a tragedy, but also a great opportunity, viz, the unrealised potential, such ent as tapping deep sea currents, from aquaculture, and from space research and exploration. It , expreSses concern over the fragmentation created out of holding different global environmental conventions, viz, climate, biodiversity, forests, leading to governing systems which do not function in an integrated way. It suggests that the Commission on Sustainable Development formed at the Earth Summit to monitor the implementation of Agenda 21 as also the proposed Economic Security Council by this Commission give all these initiatives a coherence.

The Commission suggests that user charges and taxes should be agreed globally and implemented by treaty, the pro- posals for which could be initiated in the United Nations (UN) systems-in the Commission proposed Economic Security Council when established and approved by the General Assembly. It suggests several poSsibilities of revenue genera- tion through user taxes:

A surcharge on airline tickets for use of increasingly con- gested flight lanes.

A charge on ocean transport with special fees or auctions of licences for maritime dumping of waste where the level of toxicity does not require outright prohibition.

User fees for ocean, non coastal fishing.

Parking fees for geostationary satellites.

Charges for user rights of the electromagnetic spectrum.

The Commission lauds setting up of the Global Environmental Fund (GEF), a joint undertaking of UN Environmental Programme (UNEP), uN Development Programme (UNDP) and the World Bank, as a new form of governance which has attempted to combine representativeness with efficiency by developing a new constituency System. GEF funds only global environmental issues, defined as protection of ozone layer, reduction of emissions of greenhouse gas protection of biodiversity and international waters. It states, "GEF has more than 100 member states, but the Governing Board has only 32, each representing a constituency. There are 16 constituencies for developing countries, 14 for industrial ones and 2 for Eastern Europe. The countries in each constituency choose a board member and an alternate. New members join an existing constitutency. Documentation is sent to all member-countries. Each constitutency determines its own process of consultation and decision making".

The GEF"S funding pattern which meets only incremental costs of the projects having global environmental benefits has an important underlying philosophy, asserts the Commission. It says "One important underlying element in its philosophy is the idea that environmental aid to developing countries helps the donor as much as the recipient." The voting structure of GEF, it asserts, represents a move towards the mutually beneficial "contractual" approach to aid.

Global governance: to be or not to be
The Commission has undoubtedly dealt with a whole range of diverse issues with a foresight which is sensitive and committed towards building of a more just world. The Commission"s commitment to widen the democratic processes by insisting that the global governance mechanisms be more transparent and participatory speaks for itself. However, what remains disturbing is the assumption of the Commission that the uiReashed economic reforms (liberalisation processes) are inherently good and inevitable. What is required are proper checks and balances within the global governing systems so that the liberalisation processes would neccesarily lead to a more sustainable and equitible world.

This assumption opens up several questions. The main question is: Would the economic reforms (liberalisation processes) and the accompanied political reforms lead us to a more sustainable world? The Commission seeks to bring in the dimension of "equity" while addressing the issues involved in achieving sustainable development by proposing taxation systems broadly based on the "polluter pays principle" and by suggesting that the rich cut down on their consumption while the poor increase their consumption to stay within ecological limits. Its position criticising the developed nations for their proposal to ban the products of poorer countries on the ground of their being environmentally unsustainable, shows its pro-poor bias and its firm grounding iii the principles of equity in the context of an unequal world. lHowever, what remains unexplained is its silence on deve@6ping an adequate framework which would ensure"i, that rich countries indeed cut down on their conis6niption while the poor develop. The Commission reliesion its moral appeal to the rich countries to achieve this, i4stead of developing clear guidelines on the implications of such demands on the patterns of trade and governing systems. ThJs then leads to a paradoxical positioning of the Commission on the question of sustainable development.

The paradox is brought out clearly by the former World Bank economist, Herman Daly, who while reviewing the international trade policies to accelerate sustainable development, criticises assertions which assume that greater international trade and global economic integration are self evidently good and that the result is development and even "sustainable development". He adds caustically that such asserters hope that, chanting of such mantras will free them from the obligation to define it, and absolve them from their addiction to robbing the future".

Daly argues that asserters of economic growth theories hope that liberalisation will bring about a much needed foreign investment which in turn will induce growth in the domestic economy and the wages of the domestic working class. However, he feels that such a thought is in total conflict with the ecological limits that are already stressed beyond sustainability. He argues that growth for the poor is neccesary but without making ecological room for it, by reducing the growth of resource consumption by the rich, it cannot happen. As stated earlier, although the Commission has urged for reduction of resource consumption by the rich, it has not developed tentative guidelines to achieve the same. In these circumstances, the Commission"s advocacy of totally market-led free trade economic reforms, whose logic is that of unlimited growth, can only lead to an unsustainable world.

One would have also liked to see a framework developed to address the falling prices of primary commodities, an export trade, on which many Southern countries are dependent upon for foreign currency. The Commission could have explored the deployment of ecological taxes for pricing these commoditities, so that the commodities get a fairer price. As suggested by the Centre for Science and Environment (Down To Earth, September 15, 1993) fairer prices for the primary commodities of the South can be given by adding the ecological costs borne by the nation selling that commodity.

The other question is: Were economic reforms (liberalisation processes) inevitable and would they with "proper" checks and balances lead to a more equitible world? The circumstances under which the liberalisation processes have taken off need careful examination, even before we can decide whether the liberalisation processes will yield pro-poor results or not.

For example, the poor and the common persons were not consulted in the initiation of the liberalisation processes. No referendum was held in any of the debt ridden countries on the question of whether their country should be a part of the liberalisation processes or not. It was the IMF and the governing elite in these respective debt ridden countries which took the decision on behalf of all its citizens. The collective wisdom of the nation was sacrificed to the experts" opinion to decide for all. This example shows an un-willingness on the part of most national governments and international institutions to seriously listen and learn from the poor and common person"s views on how to achieve sustainable development. This, inspite of the well accepted understanding among most development analysts over the main reason of the failure to acheive sustainable development, viz, the non consultative processes followed by the development planners, vis a vis the local people.

The Commission, however, has not critiqued this undemocratic emergence of the liberalisation policies, but accepted it as a necessity. While accepting the wisdom of reforms suggested by the Commission, to make the adjustment arising out of liberalisation processes less painful for the poor (for example, suggestions of radical debt relief to the heavily indebted low income countries), one would have liked to see a more attentive treatment of these processes, given the Commission"s own insistence on developing more transparent and participatory decision making processes in forms of global governance.

The checks and balances, proposed by the Commission in the present governing systems to make it more equitible, call for concern. For example, the Commission argues for a more democratic functioning of the UN and the Bretton Woods Institutions by suggesting a system of voting rights that would make it more representative (North-South), a system which would possibly include Southern economies of scale, viz. China, India, and Brazil. Here, again, perhaps there is a need for caution, before we celebrate this form as a "more" representative mode of decision making.

In the last General Agreements on Trade and Tariffs (GATT) negotiations at Marakesh, India along with the other textile exporting countries like Thailand and Indonesia were arguin@ for free trade in textiles, by suggesting removal of the present quota system of textile exports. Smaller countries Re Bangladesh opposed this move, as they feared a total loss of market for their textile products, being unable to stand up to the international competition that free trade would bring in. Indet"d while accepting the importance of the notion of a "Southern" bloc, it is important that we be aware of the imminent dangers of such homogenisation and the possible exclusion and marginalisation of certain perspectives that representative democratic systems may bring in.

Another point of concern is the Commission"s evaluation of the governing processes initiated through the formation of GEF. The Commission applauds the principles of governance underlying GEF as being repective of "a move towards the m4tually beneficial contractual approach to aid" between the aid donor and@lthe aid recipient country. However, a closer analysis of the voting patterns and the governing system of GE9,tells us otherwise. As pointed out by Anil Agarwal and Sunita Narain (1988) in Towards a Green World, the-division of issues into global/ local is intensely political and "is an uAsguised attempt to define what are global environmental issues". In the case Of GET, it leads to a donor defined model of sustainable development.

Even a much publicised, supposedly more democratically Testructured GET in July 1994 turned out to be a damp squib with the donor countries still having a decisive say in policy matters. For example, if a consensus among the participating members (which includes donors and other member countries) over a proposal can"t be reached, then the proposal has to be approved by the simple majority of the membership (GET has a membership of 174 countries) as also by the majority percentage of the donor countries, where voting rights of each donor nation is decided according to the system followed by Bretton Woods Institution, (ie percentage number of votes according to the amount of dollars contributed).

In practice, all this means that no proposal can be passed without the approval of the donor countries. Thus inspite of all the slogans of "one country one vote", the restructured GEF too emulates the Bretton Woods Institutions" voting model by giving a fixed percentage of voting rights to the donor countries on the basis of "dollars" donated by them.

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