Does Globalization Help the Poor?
by Jerry Mander, Debi Baker and David Korten
IFG Bulletin, 2001, Volume 1, Issue 3, International
Forum on Globalization
During the past few years, we have heard steady proclamations
emanating from the advocates of economic globalization and leaders
of the Bretton Woods institutions - the World Bank, the International
Monetary Fund (IMF), the World Trade Organization (WTO), et. al.
- that their deepest purpose in pushing economic globalization
is to help the world's poor. More specifically, they contend that
removing barriers to corporate trade and financial investments
is the best path to growth, which they say offers the best chance
to lift the poor from poverty.
They also assert that the millions of people who have visibly
opposed the economic globalization model are harming the interests
of the poor. Everyone should please back off and leave it to corporations,
bankers and global bureaucracies to do the planning and solve
the world's problems.
Such claims are routinely replayed in the media. One prominent
national columnist, for example, says, "protesters are choking
the only route out of poverty for the world's poor." In other
words, if the protests would stop, the IMF, the World Bank, the
WTO, Nike and Monsanto would save the day. Is this true? Are the
interests of global corporations and bureaucracies really aimed
at helping the poor? Or do these institutions have other primary
WHO BENEFITS? So far, almost all of the evidence from the
past three decades (1970-2000) - the period of economic globalization's
most rapid ascendancy - shows that it is bringing exactly the
opposite outcome that its advocates claim. The evidence now comes
nearly as much from the proponents of globalization as its opposition.
Clearly, poverty and inequality are rapidly accelerating everywhere
on earth. A 1999 report by the United Nations Development Program
found that inequalities between rich and poor within and among
countries are quickly expanding, and that the global trading and
finance system is one of the primary causes.
Even the U.S. Central Intelligence Agency (CIA) confirms the
United Nations' (UN) conclusions, agreeing that globalization
brings massive inequalities. The benefits of globalization do
not reach the poor, says the CIA, and the process inevitably brings
increased global protest and chaos.
Robert Wade of the London School of Economics, wrote in The
Economist (2001), "Global inequality is worsening rapidly...Technological
change and financial liberalization result in a disproportionately
fast increase in the number of households at the extreme rich
end, without shrinking the distribution at the poor end...From
1988 to 1993, the share of the world income going to the poorest
10 percent of the world's population fell by over a quarter, whereas
the share of the richest 10 percent rose by 8 percent."
The ideologies and rules of economic globalization - including
free trade, deregulation, privatization, and structural adjustment
- have destroyed the livelihoods of millions of people, often
leaving them homeless, landless and hungry, while removing their
access to even the most basic public services such as health and
medical care, education, sanitation, fresh water, public transport,
job training and the like. The record shows that economic globalization
makes things worse for the poor, not better.
Economic globalization has only proved to be successful in
making global corporations and a few elites wildly wealthy. For
example, of the largest 100 economies in the world, 52 are now
corporations. In what the UN describes as the "staggering
concentration of wealth among the ultrawealthy," total wealth
controlled by people with assets of at least $1 million nearly
quadrupled from 1986 to 2000, from $7.2 trillion to $27 trillion.
Even with the dot-com crash and the current global financial slump,
Merrill Lynch predicts that wealth controlled by millionaires
will continue to increase by 8 percent a year, reaching $40 trillion
Contrary to its claims, wealth generated by globalization
does not trickle down. Rather, the rules lock the wealth at the
top, removing from governments and communities the very tools
necessary to redistribute wealth, protect domestic industries,
workers, social services, the environment, and sustainable livelihoods.
There are isolated instances where some improvement has been
achieved among Third World countries, over short periods. The
Bretton Woods institutions love to trumpet these examples. But
the truth is that the benefits of this "growth" have
been very short-lived. In any case, nearly all the benefits have
gone to the elites in these countries, and the chief executives
of the global corporations at the hub of the process; executives
whose annual earnings are now astronomical, often in the tens
or hundreds of millions of dollars. All figures show that these
discrepancies between top executives and ordinary workers are
Even among the so-called "poster children" of free
trade, the "Asian Tigers" like Taiwan, South Korea,
Singapore and Malaysia, improvement has not come by assiduously
following the dictates of the Bretton Woods regimes - the IMF,
World Bank, the WTO, etc. - but often by doing the opposite of
what the institutions prescribe. By at first resisting the economic
model pushed by Bretton Woods, some countries managed to stay
free of the volatility of export markets. But when they finally
succumbed to heavy pressures from the IMF and the World Bank,
they found their glory days quickly disappearing into the infamous
Asian financial crisis (1997-1998), rooted directly in the new
rules of free trade for finance and global corporations.
Most poor countries, however, have not enjoyed much benefit
from globalization. After three decades of heavy IMF and World
Bank medicines and less than a decade of WTO policies, they have
understood that globalization is selling a false promise. The
policies of the Bretton Woods institutions are not designed to
benefit them, but to benefit rich industrial countries and their
global corporations. The question is this Do these globalizing
institutions know what they're doing? Or do they just blindly
follow a failed ideological model?
The worst case conclusion, which many now believe, is that
the institutions surely do know what they're doing and always
have. They have an assignment to remove all impediments to the
free flow of global capital as it seeks to pry open the world's
last natural resource pools, markets, and cheap labor (and, to
keep it cheap). To suggest they do all this to help the poor is
THE CREATION OF POVERTY
Economic globalization policies as enforced by the World Bank,
IMF, and the WTO actually have far more to do with creating poverty
than solving it. Free trade requires that all countries adopt
the same economic model, thus eliminating variations that might
slow down the smooth global operations of major corporations as
they seek new resources, markets and cheap labor. It is not efficient
for global corporations when individual nations are permitted
their own expressions of what is best for their people via their
own democratic laws. These laws might be designed to protect resources
and the environment; or social services for the poor; or the rights
of local workers; or they might help struggling small businesses;
or require foreign investors to keep their investment in place
for a time; or require that foreign investors include domestic
partners. All such laws are viewed as pesky impediments to corporate
freedom. They have got to go.
The specific role of the WTO is to set homogenized global
rules for all countries-one size fits all-and to specifically
challenge national environmental and social laws viewed as obstacles
to corporate free trade. Given that it was granted draconian enforcement
powers, the WTO can now impose harsh punishments on democratic
nations that stray from its rules. A past president of the WTO,
Renato Ruggiero put it bluntly in 1998 The WTO will be "the
new constitution for a global economy." (Since Seattle, such
statements have not been repeated.)
STRUCTURAL ADJUSTMENT PROGRAMS
The World Bank and the IMF have their own powerful and dangerous
instrument Structural Adjustment Programs (SAPs). The infamous
SAPs of the IMF, and so-called "development" loans from
the World Bank routinely come with harsh conditionalities that
require developing nations to abandon important domestic programs
that serve the population. These include education, health services
and environmental programs, which don't produce revenues to repay
IMF and World Bank loans or interest. As the IMF forces countries
to downsize government agencies, the ranks of the unemployed grow
faster than the private sector can absorb them. IMF policies raise
interest rates, preventing small businesses from obtaining capital
needed to expand or stay afloat, which leads to further unemployment.
Meanwhile, removing barriers to foreign investment and trade,
insisted upon by the IMF and enforced by the WTO, makes it harder
for local producers to compete against bigger, richer foreign
This system leaves countries utterly dependent upon market
and pricing systems over which they have no control. Meanwhile,
they have given up the ability to determine their own destinies.
The greatest mystery of course is how any of the promoters of
such rules and conditions (among others) could possibly argue
that these rules could help nations rise from poverty. Clearly,
this is a blueprint for dependency and poverty creation.
Probably the most traumatic impacts of globalization policies
- both in terms of poverty-creation, and environmental devastation
- have come with the forced shift of local economies away from
small-scale diversified agricultural models to the industrial
export model, directed by global corporations.
Nearly half of the world population, even today, lives directly
on the land, growing food for their families and communities.
They emphasize growing staples and a mix of diverse crops, and
they replant with indigenous seed varieties that their communities
have developed over centuries. They have perfected their own fertilizers,
crop rotations, and pesticide management, and their communities
share all elements of the local commons, including seeds, water,
and labor. Such systems have kept hundreds of millions of people
going for millennia.
Local self-sufficiency systems are anathema to global corporations
and the bureaucracies that serve them. In a global economic system,
corporate profits primarily come from increased processing activity,
and global trading. So now we find corporations including Archer
Daniels Midland, Monsanto, and Cargill, among others, spending
tens of millions of dollars in public relations and advertising
campaigns arguing that small farmers are not "productive"
enough to "feed the hungry world."
These campaigns run hand in hand with the investment and trade
strategies and rules of the WTO, the IMF, the World Bank and the
U. S. government. All of these strongly favor the entry of global
corporations, which replaces local, diverse farming for self-reliance
with monocultures run by corporations.
An export-oriented system of agriculture favors high priced,
high margin luxury export items - flowers, potted plants, beef,
shrimp, cotton, coffee, exotic vegetables - to be sent to the
already overfed countries. As for the people who used to live
on the lands, growing their own foods for their communities and
for local markets, they are rapidly being driven off their lands.
People who once fed themselves become landless, jobless, cashless,
homeless, dependent and hungry. Self-sustaining communities disappear;
still intact cultures are decimated. This is as true in the United
States as in the Third World.
The situation is absurd. Dependency and starvation replace
self-sufficient livelihoods and self-reliant nations; meanwhile
global corporations get wealthy by shipping luxury foods thousands
of miles. Clearly, these corporations are not concerned about
feeding the hungry. That is only an advertising slogan. They are
concerned about feeding themselves.
THE ROOT OF THE PROBLEM: A FAILED IDEOLOGY
The IMF, World Bank and the WTO are pursuing what some have
labeled "market fundamentalism," an ideological commitment
to two basic false principles:
* Economic growth and increased trade achieved through deregulation
and privatization automatically increases the wealth of communities
and humanity, and contributes toward a better future for all.
In other words, what benefits corporations benefits all.
* Increased foreign investment in Third World countries increases
productive capacities and development, adding to the well being
of the poor. Neither of these has proved true. What is true is
that the system has added to the well being of the corporations
that have perpetuated it.
Most measures of "economic growth" such as Gross
Domestic Product (GDP) and Gross National Product (GNP) tend only
to measure increases in the market value of economic production,
i. e., the rate at which resources are converted to commodities,
and that other paid services and activities are performed. By
such standards of measurement, expansion of military hardware,
prisons, wars, crime (and its prevention), as well as the clear-cutting
of forests, or building of toxic dumpsites are all made to seem
positive as they increase GNP and GDP. Meanwhile, unpaid household
labor, care for the sick and elderly, or self-sufficient food
growing and distribution are not deemed positive results because
they don't get counted.
Such standards also contribute to the depletion of social
and natural capital (nature) which, as former World Bank economist
Herman Daly has suggested, is the foundation of all real wealth.
In fact, export-driven globalization is the greatest single contributor
to the massive ecological crises of our time. Its emphasis on
exponentially increased trade and transport activity requires
corresponding expansion of infrastructures - airports, seaports,
roads, rail-lines, pipelines, dams, electric grids; many of these
in pristine places, often on indigenous lands. Increased transport
also uses drastically increased fossil fuels adding to the problems
of climate change, ozone depletion, and ocean and air pollution.
And an ever expanding economy requires the depletion of the last
resources on the planet; under free trade these are nearly always
located in the global South. One of the greatest injustices against
southern countries is that they are net resource exporters to
the already rich North.
Indeed ecological degradation-forests, rivers, biodiversity-has
the most devastating impact on the poor; and resource depletion
reduces livelihoods and creates poverty. So economic growth is
certainly not a measurement that benefits the poorest parts of
the world. In any case, depleting nature cannot serve anyone for
much longer, even the rich, who may be, as the late British financier
James Goldsmith put it - "enjoying champagne on the deck
of the Titanic."
One can only conclude from this that the present system is
fundamentally flawed, and cannot be corrected by reforms at the
margin. It must be changed to a very different system, based on
values and institutional relationships that place human beings
and nature above percentage returns on investment.
Jerry Mander and Debi Barker are co-directors of the International
Forum On Globalization. David Korten is a former economist with
USAID, author of When Corporations Rule the World, and an associate
of the International Forum On Globalization.