Hard-selling a fallacy
THE World Bank (WE) has made a strong plea for concerted action by the governments of the rich and poor countries alike, to "reverse the long-run trend of widening international inequality." In its World Development Report, 1995, it has argued that the rich countries must preserve open trade relations and control their fiscal deficits. This would lead to high growth rates in the rich countries, and maintain global demands as well. It has said, "Globalisation of capital is likely to usher in mutually beneficial capital flows."
In other words, the Bank has tried to demonstrate that the interests of the rich and poor countries are convergent. The data presented in the report, however, indicates that the rich countries are caught in a'no go'situation. Technology has set the limits to their growth and, hence, the scenario for the rich countries is quite dismal. In fact, the Bank is projecting a convergence of interests only as a strategy towards establishing the control of the Western multinationals upon the world's economy.
The major threat towards the achievement of this objective comes, surprisingly, not from the poor countries but from "a small but vocal minority" within the industrial countries, "who fear they will lose from the movement of capital and people across boundaries." The report, therefore, seeks to establish, despite all data to the contrary, that the workers of the rich countries stand to gain from the current phase of globalisation. The fallacies in the Bank's approach can best be appreciated by taking a look at what it had recommended a decade earlier in its 1985 report.
At that time, too, the Bank had made much the same recommendations for the rich countries as it has done now. It had said that reduction in deficits, reduced rigidities in the labour markets and reduced protectionism against imports from developing countries would enable the rich countries to maintain income growth rates as high as 3.7 per cent per year. The Bank had given 'high' and 'low' case projections. The 'high' case, was expected to take place if the rich countries followed the Bank's recommendations, while the 'low' case was expected to take place if it was otherwise.
It is clear from the above figures that the rich countries had been expected to grow at a minimum rate of 2 per cent per year but they managed to achieve only a 1.2 per cent growth rate. On the other hand, the developing countries had been expected to grow on the higher side, at the rate of 3.4 per cent, but there the achievement was in fact 3.7 per cent. Clearly, therefore, while the rich countries could not even achieve their 'low' case scenario, the poorer countries exceeded their 'high' case scenario!
Why have the Bank's projections failed so miserablyorder to appreciate the reasons it is necessary to take a short walk through history. The basic question is whether to nology can grow in a continuous upward trajectoryor there long periods of technological stability, somewhat plateau. The major technological innovations of the Age - copper and bronze smelting, wheeled carts, sad brick and stone buildings and ideographic signs- bar taken place early, may be within the first 500 yearsor so of the third millennia before Christ. Then, for nearly 2,000 years there wasLike by way advancement of technology.
Towards the begining of the Iron Age, largely in GreeceAnd India, major developments took place in iron smeltingAnd metal-working, shipbuilding and waterworks. In theDernaL -Me major contribution of the Roman" of mechanical toys and the architecture of theIbm once again followed a period of anotheriotachnologicall stability. The plateau was brokenboth the invention of the gunpowder by the Mongols. Only inthe modern tiams, perhaps, starting with the steam engine,technological advance once again took off in earnest."
Wheather such plateaus we inherent to the development oftechnology and industry or not is an open question. But wecan gain some ind&ts into the present economic developullsing them from this standpoint. If the advancedr aftbe developed countries cannot update itselfamirecommic: consequences follow. First, profitsplaulliteii. into the construction of new industries.0 saturation of production capacities in the richind so a fall in the rates of profits there. This is thealp investinent that we observe today. The returnskiligiloar in the poor countries, because there areno new emerging opportunities in the developed countries.
Second as noted in the WB'S 1995 report, "technologicalchange appears to be increasingly labour-saving." But thatdoes not seem to have happened with my of the recent stepsforward in ethnological development. Which means that theunemployment situation gets progressively worse in the richercountries.
The International Labour Organization has noted this inits Report on World Employment, 1995: "Between 1974 and1985, unemployment grew markedly in the countries of theEuropean Community. 1990-94 nullified all the improvements during the preceding period; in 1994, unemploymentreturned to 1985 levels." The 1995 report of the wB also notesthat the hours worked per person in the richer countries haddeclined from 52 per week in 1900, to 31 in 1986. This isanother indicator that fresh opportunities of employmentgeneration are not arising.
Third, businesspersons are not able to achieve competitiveness by the adoption of new technologies. As a result, theyare seeking investments in other countries, offering cheaperresources and labour to retain their competitiveness. This toois the logic of foreign investment. The consequence is that newjobs are actually being created in the developing countries.The Report on World Employment thus laments, "Five millionof the 8 million jobs created by the multinationals between1985 and 1992 were in the developing world."
The result will inescapably be that there will be a decline inthe growth of the rich countries. It can be asserted that someof the developments in world economy appear to beconsistent with such a prognosis. At the same time, the poorcountries may continue to grow, irrespective of the policiesfollowed by the rich countries. That is precisely what has hap-pened in the last decade, notwithstanding the wa's projectionsto the contrary.
The multinationals see opportunities arising mainly in thepoorer countries. They see their operations within their owncountries becoming increasingly complicated, with the greatest threat to their interests coming not from the poor countries but from the labour of the rich countries themselves. it isfor this reason that the WB, as their spokesorgan, tries to assurethe rich countries, especially their labour, that they have muchto gain from globalisation. Again, it is for this same reason thatthe wB harps upon the great beneficial impact of foreigninvestments, although it accounts for barely 11 per cent of theinvestments in the poorer countries. It is essential for themultinationals to continue to have access to the resources andlabour of the poor countries in their drive for the control ofthe world economy.
The game plan is simple. The multinationals have to relocate their facilities from the rich countries, where opportunities are limited, to the greener pastures of the poorer countries. For this purpose they have to keep the labour in theirown countries quiet by promising growth by globalisation.OThis 'no go' situation has to be kept under wraps.Cook rRSimultaneously, they have to pry open the economics of thepoorer countries for their entry. Actually, there is no synergybetween the rich and the poor countries. The latter will grow,no matter what the rich countries do. The rich countries willstagnate, no matter what anyone does. The game is the controlof the economics of the poor countries. That is the real battlethat is being fought today.