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Globalization versus localization
by Patricia Pitchon

Studies show the need for politicians to promote small-scale, locally interdependent production and trade of goods in order to create self-sufficiency and reverse the damaging effects of globalization.  

Many recent studies, including a United Nations report and various analyses in The Case Against The Global Economy (abbreviated here as CAGE), examine some of the damaging effects of an increasingly globalized economy. All authors referred to here are from the latter study unless otherwise stated.

Globalization is a process which entails the free movement of capital, goods, services and labour around the world. Currently both capital and goods do move freely, and services such as banking, telecommunications, media and advertising will do so increasingly. Labour mostly moves freely either in the managerial category or, sadly, at the increasingly desperate end of the scale with illegal migration. The vast majority of working people in the world, however, stay put.

The engines which drive the globalization of the economy are multinational companies. There are some 37,000 multinationals, and between them they account for four-fifths of world trade. About 75 per cent of all trade in the world is between multinational economies. Many of them are wealthier than entire nations. Of the 100 richest companies in the world, 60 are nations and 40 are multinational companies. They drive trade and investment policies, and have powerful social, economic, political, environmental and cultural impacts.

The latest agreements on trade and investment to which 100 nations now adhere, the so-called Uruguay Round of the General Agreement on Tariffs and Trade (known as GATT), include profound changes which speed up the globalization process, particularly in services, and weaken the powers of individual governments. Countries participating in GATT used to have the power of the veto. Now they do not. Decisions used to have to be unanimous. Now a majority decision is sufficient. What this means is that the power of multinationals to determine trading and investment activities is greatly increased, whereas the power of governments to mediate between competing interests and needs in society, such as social and environmental needs versus corporate needs to expand and increase profits, is severely diminished. This is deemed a "victory for free trade", for "unfettered markets" free at last of cumbersome government regulation, and the promise is prosperity for millions of people.

A democratic deficit

The way in which the 500-page GATT document passed muster is shocking. Ralph Nader points out (in CAGE) that he offered any congressman in the United States $10,000 for the charity of his choice if he would answer 10 basic questions about the new GATT agreement. Only one congressman took up the challenge, and read the full text, after which he changed his mind and voted against it. But it seems, from Nader’s account, that most did not read the full text before voting. There is no reason to imagine that Europeans in various parliaments were more diligent in this regard. Many read summaries, but not the full text, before voting. In Japan, members of the Japanese Diet received the full text in Japanese only after voting.

The Press had no access to the deliberations, and consumer and citizens’ groups were denied representation in the process which culminated in the final document. But powerful corporations had both access and influence. There is nothing wrong with corporate aims, which include expansion and growth to increase profits, and whose primary duty is to shareholders, as they so often state. But the real question is how far corporate aims should replace the aims of the nation state or even regions or federations, or local governments. As James Goldsmith points out in his book, The Trap, a nation is not a company. Its aims must take account of the common good, it must consider the public interest, and social, cultural, environmental and political considerations cannot be excluded. The corporations seem to have emerged as a new, unaccountable, unrepresentative and unelected powerhouse, with the consent of governments but with inadequate representation of many sectors in society.

Unfavourable impacts

Many phenomena we are suffering today are effects of what many analysts now think is a combination of excessive and unnecessary corporate activity and inadequate governmental control.

We can see some of these effects in greatly increased air pollution, as more and more goods travel ever further, even to regions able to produce these goods themselves but unable to compete with powerful conglomerates on price. Mongolia, for example, has 25 million animals from which butter can be produced locally, but currently it is helpless against conglomerates which can transport it from far away and sell it more cheaply there. This is deemed "a victory for consumers", although many prospective Mongolian consumers have become impoverished as a result of this type of competition, and the true cost of the extra pollution created by transporting the goods is not counted either.

We are witnessing the poisoning of rivers and lakes due to harmful chemicals; the thinning of the ozone layer; the ghostly and abandoned town centres with the disappearance of small, local shopkeepers and the drive to lower workers’ wages; the shocks caused by the sudden unemployment of thousands of people at a time; the furious pace of new technologies applied constantly to the workplace to replace ever more workers; the massive displacement, by giant agricultural concerns, of local farmers who then drift to the cities to become urban paupers; the pressures that this drift to the cities places on already stretched services such as electricity, water and sewage disposal, particularly in many Third World cities; and the disappearance of precious forests at an irreplaceable and therefore unsustainable rate. The loss of local products is accompanied by the appearance of dreary, standardized food worldwide. The disappearance of local culture and local diversity is accompanied by the appearance of the same mediocre and often violent films worldwide, and so on.

Case studies

Mander and Boston (in CAGE) looked at the effects upon local communities of the activities of the giant US food retailer Wal-Mart. They maintain that Wal-Mart usually locates itself just outside a town centre and manages to take customers away from the commercial centre by keeping prices as low as possible, moving sector by sector to undercut the local competition. Because of its size it is able to sustain losses for a long time. Local businesses start to disappear and the town centre becomes a ghost town. The authors claim that several studies indicate that for every job Wal-Mart provides, as many as 1.5 jobs are lost. The Wal-Mart jobs are at the low end of the economic ladder; it rarely pays more than the minimum wage. Dating is forbidden among employees, who until recently, at least, also had to pass lie-detector tests. Workers have to work long and irregular hours for no extra pay; these hours are called "free hours". No labour unions are permitted.

What is needed is the large-scale promotion of the small scale

There are other serious effects. Mander and Boston quote an Illinois study which found that the increased cost of roads, water and sewage as well as security, telephone communications and other services outweighed the sales and property tax revenues the new giant stores generated. When surrounding businesses go bankrupt, regional income and the community’s tax base both decline, together with funds required to maintain adequate municipal services. Wal-Mart’s profits do not benefit the local community, since profits are repatriated to the head office elsewhere. Disastrously, the new trade rules (both NAFTA and GATT agreements) allow corporations to repatriate money from anywhere in the world. Yet one study by the University of Massachusetts quoted by Mander and Boston (Wal-Mart Watch, December 1994) indicates that every dollar spent on locally owned business had "four to five times the economic spin-off of a dollar spent at Wal-Mart", because traditional, local businesses usually channel their profits back into the community in various ways.

This particular study leads to an important conclusion, namely that the real issue is not "free trade versus protectionism", but rather "globalization versus localization". Specifically, in the United States citizens are beginning to mobilize to find ways of keeping money in the local community and of having a greater say over what happens in their communities. In the case of Wal-Mart, small businesses are fighting Wal-Mart in legal battles in 20 states, as are some church groups, unions, manufacturers and municipal governments. In 1993, for example, a court in Arkansas awarded around $300,000 to three local pharmacists because Wal-Mart had sold merchandise below cost to drive them out of business. At the beginning of the decade, Wal-Mart was growing at a dizzying pace, with a new North American store opening somewhere every three days, and with Wal-Marts planned around the world.

Plant breeding and patents

Vandana Shiva and Radha Holla Bhar, in a study entitled ‘Piracy by Patent’, describe a major calamity for the countries of the South, because new rules allow commercial plant breeders to make often very minor alterations of genetic structures of plants, after which the seeds are patented by the companies concerned and sold back to the communities which first provided them freely. The true cost of hundreds of years of work and accumulation of local knowledge in constant and gradual improvement of seeds (something farmers have done traditionally over the centuries) is never acknowledged, much less paid for. In effect, freely given genetic resource materials are "returned" to the South as a commodity with a price tag. The main culprits in this form of piracy have been large corporations who argue that they must have free access to what is the common heritage of mankind, but the benefits, when the materials are technologically altered, often in ways which are not significant, suddenly become corporate property and must be protected by patent. The United States government has been in dispute with countries such as India because they have not wanted to recognize these so-called "intellectual property" patents, and it complains about the loss of some $200 million by its corporations per year in royalty payments for agricultural chemicals. However, a study by the Rural Advancement Fund International of Canada found that the plant-breeding work of Third World farmers over thousands of years, together with the discovery by them and care of medicinal plants, would mean that the United States should be paying them some $300 million per year for royalties on farmers’ seeds that the United States uses, and some $5 billion for pharmaceuticals now sold in American drug stores.

Some champions of this commercialization of life forms (which includes micro-organisms such as yeasts, algae, bacteria and viruses, many of which are patented by large multinational companies) have even suggested that the farmers’ rights to save seeds should be abolished. Instead, the farmers should pay royalties when the seeds are used to grow crops which they sell. The obvious long-term consequence of this alarming trend is the steady impoverishment of millions of farmers.

Farmers who developed seed and animal breeding stock and natural pesticides will lose their independence since they will have to pay high prices to corporations for products they were once able to provide for themselves. The new GATT rules make the monopoly of life forms and processes easier and threaten farmers everywhere. In effect, they protect corporate agribusiness from already vulnerable farmers.

The long haul

Many forms of dislocation result from indiscriminate globalization, where the imperative is ever greater, more predatory and unsustainable growth, with an accompanying and often dreary standardization of many aspects of life as well as the loss of political and cultural self-determination. Essentially, the process has many worryingly undemocratic aspects, such as growing wealth, and hence ever greater political influence, concentrated in the hands of comparatively few, and massive social dislocation as its logical consequence. Many studies point to an ever-widening gap between rich and poor. Wealth appears to be rushing upwards into the hands of powerful shareholders and corporate moguls, rather than trickling down. (In the United States, 40 per cent of the nation’s wealth is currently concentrated among one per cent of the population.)

As Helena Norberg-Hodge (writing in CAGE) points out, what is needed is not the large-scale promotion of the large scale, but the large-scale promotion of the small scale. This represents a shift away, in her words, from global dependence and towards local interdependence. One consequence would be that many people could remain on their land as self-sufficient smallholders in many Third World countries. The whole world cannot live in cities and many would not want to if they could survive on their land. Another would be less pollution as fewer goods are transported across long distances around the world to places which can provide them locally. A third would be an increase in locally accountable entities and therefore a corresponding increase in local responsibility.

This implies the need to reverse many of the present trends and policies, to stimulate local production and local trade and decrease global trade. This, in turn, implies reform of corporations as they now stand and reform of major trade and investment rules.

Politicians made these rules, and they can change them. There is nothing inevitable about "unfettered" free markets which unfetter some and fetter so many others, consigning millions to a loss of local self-sufficiency, cultural diversity and political autonomy. The logic of corporations cannot become the logic of nations. Markets have the power that they have, and corporations who benefit from these markets have the power that they have, because politicians everywhere have acquiesced in this project.

(Sources and further reading: States of Disarray, United Nations Research Institute for Social Development, 1996. The Case Against the Global Economy, ed. Jerry Mander and Edward Goldsmith, Sierra Club Books, San Francisco, 1996. Globalization in Question by Paul Hirst and Grahame Thompson, Polity Press, Cambridge, 1996.)

From the April 1997 issue of Share International.

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First published April 1999, Last modified: 15-Oct-2005