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At the Edge of Chaos. Is Globalization the Root of all Evil?

Peter Boelke was economics editor of the weekly Der Spiegel from 1974 to 2001.
His essay that could help us see the ambivalence of globalization is translated from the German.
At the Edge of Chaos

Is Globalization the Root of all Evil?

By Peter Boelke

[This article is translated abridged from the German on the World Wide Web,  http://www.dgap.org/IP/ip0307/boelke_p.htm. Peter Boelke, 67, is a journalist living in Hamburg. He was economics editor of the weekly Der Spiegel from 1974 to 2001.]

What a fantastic world! Thanks to modern communication technology, people are united across all borders. Satellites at a height of 36,000 miles hover over the Equator enabling everyone even in the last corner of the earth to have access to the Internet. Businesses are in contact worldwide with their branches, customers and partners and settle their affairs over the Internet. Employees no longer need to be in the office but can finish their work at home on the computer. The unemployed find a job on the Internet. Everyone can access the total knowledge of the world with a few mouse clicks. The global village opens up unsuspected chances to people. The global marketplace allows the economy to flourish.

This fantastic world is a vision. Everything could be this way. The presuppositions exist. Many national borders, particularly in Europe, fall away or become increasingly permeable. The stream of goods and services often flows more easily. The incredible progress in communication technology has brought people, their institutions and businesses close together in a worldwide network. However the reality doesn't match the vision.

Americans and Brits quickly ended their war against Iraq and overthrew the dictator Saddam Hussein. The oil price shock feared by many has not occurred. The American economy seems to recover. Stock prices are going up. European economic experts also hope for an upswing. Still the world is by no means peaceful and well-organized.

What is fatal in globalization is not the fact that a liberal spirit advances through the world overcoming borders and oceans, opening markets, encouraging trade and making financial streams flow again. What is fatal is that the liberal spirit acts very one-sidedly so some may export but not others and money streams often only flow to please speculators. One of the most annoying problems that humanity drags along from the last century becomes more depressing: the poverty in countries of the third world.

More than a billion people live on only a dollar per day according to estimates of international financial institutions like the World Bank. Another two billion with two dollars daily are hardly in a better position. More than half in Africa with its 600 million people live ihn complete poverty.

The worldwide interlocking of the economy leads the way. The economy today must always be politics. Globalization causes disturbance and can produce changes. Globalization influences the economic and political genesis of a new world order after the turbulences of the last century. Will the upheavals develop in a benign way? May people hope that the world economy will be guided on tranquil paths and governments and institutions will agree on rational rules of the game for the cooperation and well-being of humanity?

This doesn't seem likely. Beyond all speculations and vague prognoses, facts and development tendencies are manifest that are not optimistic. Even a military superpower cannot remove the trouble-spots in the world (Middle East, Balkans and Africa). Industrial countries suffer under antiquated structures and high debts. The immense problems of the developing- and threshold countries of Africa, Latin America and parts of Asia are not solved at all.

The disaster of continuing environmental damage persists. Humanity has obviously accustomed itself and only shrugs its shoulders. The most grave environmental problem, the greenhouse effect, also has serious economic consequences. Climate researchers seem agreed that global warming increasingly causes extreme weather conditions through the massive output of carbon dioxide and other gases. The devastations that can arise through hurricanes, drought periods and floods alarm many insurers who calculate annual damage up to $150 billion.

Two elements of the germinating new worldwide economic order are very clear in the environmental problematic. One is the dominant role of the US. In the Kyoto protocol on the climate convention, states are obligated to reduce the output of CO2 by burning less oil, gas and coal. However the US has not signed the protocol. US emissions have risen around 18 percent since 1990.

The other element is the constantly widening gap between industrial- and developing countries. The largest part of CO2 emissions comes from the industrial countries. However the ecological consequences are borne by the poor countries afflicted by droughts and floods.

If globalization means that everything aims at the "one world", other rules of the game must be found in the economy and politics. Different elements and developments marking this new world order encourage new conflicts that will be harder to overcome than our present unsolved conflicts.

A new era began when the wall in Berlin fell, the Soviet Union collapsed and the eastern block disintegrated into its earlier elements. The attempt to build socialism and then communism in a fifth of the earth ran aground in the inadequacy of human nature. The utopia of the classless society had no chance against an open system that accepts people with all their weaknesses. Capitalism impressively gained acceptance.

The dramatic end of a battle of two social systems over decades didn't only immediately affect oppressed people. The whole world political situation was suddenly changed. While the two superpowers long faced one another in a balance of terror, only one still remains. The counterpart is absent. The world finds itself in an unstable balance which is always dangerous since extreme fluctuations are possible.

The United States of America has already shown that it is conscious of its new role. Its economic strength and its military superiority seem to make everything possible. Many things that should hot be allowed according to traditional American ideas are allowed. The US is beginning to betray its own ideals.

Rivals of the US

The UN will not resign amid US attempts to order the world economically and in power politics according to its own rules of the game. The balance of terror ended with the ruin of the Soviet Union. However other balances will arise according to the same dialectic that enabled these superpowers to arise. China and India are the candidates because of their size amid their resources. Russia also shouldn't be simply dismissed. All three are nuclear powers. China, a member of the World Trade Organization since the end of 2001, plays an increasing role in world trade.

The Chinese government has discovered enormous powers through its cautious liberalization of the economy and encouragement to individual responsibility. The economy grows ten percent a year on average, only temporarily diminished by the outbreak of the lungs sickness SARS. Millions of new businesses arise. Foreign capital streams into the country invested above all in joint ventures. In 1990 only eight billion dollars in private capital flowed to China. Ten years later the amount has risen to 40 billion.

What about the old continent? Will there be a united states of Europe in the foreseeable future counted as a superpower alongside the US and probably China? Will the world find a new balance in the tension of these power centers?

For a long time the European Union (EU) that developed out of the original European Economic Community founded by six states was a loose alliance of states, hardly more than a gigantic free trade zone with one important characteristic: a kind of government that calls itself a commission with astonishing powers though not democratically legitimated. There is a common agricultural market that is less a market than a disguised planned economy and a bureaucracy contributing to complexity rather than harmonization of the many national peculiarities. No uniform economic policy or tax policy exists, let alone a common foreign- or defense policy.

In monetary policy, most of the 15 member countries have taken a step toward a genuine union. In 12 states the Euro is the common legal currency. The European Central Bank watches over this currency. Moving 15 members of a community to common action is nearly impossible. The British minister of the Exchequer prefers not to accept the uniform currency. Danes and Swedes also remain with their own currencies.

Hesitation is understandable. Whether a common currency of so many different national economies can function as long as every country makes its own economic policy and taxes are not harmonized is unclear. The constitutional "convention" drafted by former French president Valery Giscard d'Estaing will not change this.

Giscard's constitutional draft doesn't design a democratization of the European Union. Whether a genuine government with an elected parliament can ever be formed is uncertain. Too many different interests collide in the community. The EU is hardly governable now. The word union loses its meaning in the admission of other countries that must reach the level of present productivity.

Europeans cannot play a strong independent role in the world because they are not united. They are helplessly handed over to the US militarily despite NATO and friendship declarations. In the economy, Europeans depend on the interest policy of the American central bank, the dollar and spending spree of American consumers. It is not only the stock exchange on Wall Street that pushes the Dax or the French CAC40 up or down. No upswing can arise in Europe if the American economy is paralyzed.

Prosperity on Credit

The American economy isn't growing as dynamically as customary. However conditions look much worse in many European countries. The strongest European economy, the German economy, will hardly grow in 2003. For the whole Euro area, a growth in the gross domestic product of 0.4 to 1.0 percent is expected. In the US, by contrast, growth in the second half of 2003 according to estimates of Treasury secretary John Snow will be 3.5 percent. For the next five years, 5 to 5.5 percent is expected.

Nearly everyone expects the American economy will gain new impetus and then drag along the European economies. Many economists doubt this. They point out that Americans have long lived above their means. The so-called balance of payments is negative. Imports are increasing.

A hole of around $400 billion gapes in the American state budget that posted respectable surpluses under president Bill Clinton. The costs of the Iraq war alone are estimated at $70 billion. No one even dares calculate the follow-up costs. The budget deficit could rise to $1.8 trillion in the next ten years since George W. Bush must finance his imperial ambitions, his missionary struggle against "rogue states" and the promised tax cuts with new debts. He must raise an additional $380 billion this year.

The prosperity of the US is largely financed on credit. This can continue as long as investments are made in dollars all over the world. Like the Asian states, the states in the Middle East that mainly sell their oil for dollars have invested their money in US government bonds. For example, Japan's central bank is the greatest creditor of the US with more than $360 billion.

Creditors will remain calm as long as the United States enjoys confidence worldwide. However the American economy could suffer if Saudi Arabia sells its oil in the future in Euros or if the Japanese withdraw their funds in a panic reaction.

For a long time the enormous debts didn't alarm either the government or the citizens. American consumers also live above their means. Altogether they have accepted more than eight trillion dollars in credits. On the average they presently spend 14 percent of their income on interests and servicing charges. Now president Bush wants to relieve his compatriots of $350 billion through tax cuts in the next ten years.

Bush incurs new debts. A consumer push of the economy could be given an impetus. Interest rates are low. In addition the dollar was relatively weak against the Euro in the second quarter of 2003. American businesses have better export chances since their products are cheaper abroad and imports are diminished.

This also means that the strong Euro hardly helps Europeans and in particular the export nation Germany. Businesses can buy oil more inexpensively while many exporters have problems with a rising Euro price. Whether a strong growth push from the US can help countries like Germany in solving their structural problems is dubious.

That the strongest economy in the European Union has vexing problems preventing its skid into recession alarms the community. "The aggregate picture is rather depressing" in all of Europe, a current EU analysis concludes. The greatest worry among all member states is the German economy.

In fact the budgets in France and Portugal show deficits that exceed the limits agreed in Maastricht. Reforms in the social system provoked loud protests in France, Austria and Germany. The future appears depressing because the country once beheld with amazement no longer gives its people enough work and saves its social system.

German Conditions

German chancellor Gerhard Schroder is learning how executing changes is hard or almost impossible in Germany. These changes indispensable if the number of unemployed shouldn't increase to five or six million could prevent the social state from completely collapsing where the truly needy cannot be helped any more.

Germany has special burdens through the mistakes made in the reunification. These mistakes like the complete deforestation in central German industry can only be corrected laboriously over a long time. That other mis-developments were known and yet were not corrected is even more annoying...

The EU in the future will not only be occupied with itself. This is necessitated by the increasingly severe hegemonial policy of the US and the obligations toward the third world with the struggle against terrorism and projects in embattled regions like the Balkans, Afghanistan and Iraq. The idea that peace will return after an orderly high-tech bombardment and the stationing of soldiers from different countries surely rests on a fallacy.

Industrialized countries helping developing countries find a connection to the world economy is more important than ever. For most, globalization has not brought any advantages. The International Monetary Fund (IMF) policy has not been a convincing success. The IMF forces developing countries needing its assistance to open their markets in the interests of industrialized countries. On the other hand, the poor countries cannot supply the largely screened markets of industrial states.

The rapid introduction of the market economy is often a mistake because the most important prerequisites of the infrastructure are lacking. Countries like China or Vietnam that only gradually adopted the market economy have managed far better than countries that bowed to the demands of the IMF.

For years, there were furious protests whenever representatives of leading industrial nations deliberated on the state of the world economy. While some demonstrators may have only vague reasons for their protest, uneasiness about the consequences of economic globalization is certainly widespread. That all countries must participate in development of globalization should be accepted and understood positively as a fact.

The summit of the G8 in June 2003 hardly brought more than the usual family photos of heads of state and heads of government. In the French Evian, new impulses for the dull worldwide economy and clear signals to developing countries that globalization would now help them were absent. Developing countries wait for solid promises on dismantling European agricultural subsidies that make importing agricultural products from less developed countries difficult or impossible.

The magnitude of these subsidies alone shows that farmers in the eyes of eurocrats and American representatives are much more needy than the billions of people in underdeveloped countries. The subsidies that keep alive the agricultural industry at $350 billion are seven times as great as all aid to developing countries. As IMF head Horst Kohler recently declared sarcastically, "A subsidy of $2.50 per day is given to the German cow." This is the amount with which an individual in the poorer part of the world must live daily.

After all the catastrophes of the past century, the world only seems to adjust laboriously and with pains to a new order, not only on account of the constant threat by terrorism. In any case, the model enforced by the superpower USA doesn't function. Religious and nationalist fanaticism can flow into a violent slash of cultures. News troops are sent to the Congo. Who fights seriously against the hunger of millions? Who puts aid to developing countries on a sensible course? How can the worldwide economy come alive again?

This will be a hard century, hardly easier than the past century. The world has often lived at the edge of chaos. Now globalization insures that the chaos is quickly manifest even in far removed regions in the affluent centers. Guidelines for a new order are nowhere clear.

homepage: homepage: http://www.mbtranslations.com
address: address: http://www.globalexchange.org


hmm... 27.Aug.2003 13:48

this thing here

>The prosperity of the US is largely financed on credit. This can continue as long as investments are made in dollars all over the world.<

how does the u.s. government insure that investments are made in dollars all over the world? what if u.s. power, or the power of any country, is simply the primacy of it's currency?

then think about PNAC and it's statements proclaiming that "there can be no rival to u.s. power" and those in "second place" will be forced to remain in second place even if that means military conflict. of course, they never say WHY they believe this should be so. once i think about it, not saying why is like missing the elephant in the room. maybe this point about "prosperity on credit" and the primacy of currency is the reason (or one of the reasons) they dare not speak...

for more info... 27.Aug.2003 18:29

GBF

Hey, "this thing here" (and anyone else who is interested), read GREAT POWER POLITICS by John Mearsheimer for the answer to your question.

Not sure Mearsheimer has the answers, but 27.Aug.2003 23:48

madman mcmoony


on parity 28.Aug.2003 07:28

wilken, walters (via piet)

Think "BIG"... ... Focus "SMALL" (piet: nothing 'clear' about that????)
Some thought provoking basic principles of Raw Materials Economics(Quoted from writings of Carl Wilken the leader of the team of economic analysts that identified these principles, and from Charles Walters Jr. from his thought provoking book, "Raw Materials Economics")

•Raw material income is the first part of our economic equation and the foundation that governs the balance of our economy. Fully 70% of all economic activity is geared to answering the wants of the population - food, clothing and household goods. •Farm production at parity (that is, at equal exchange value between farming and the various income-producing sectors of the economy for finished goods) governs earned national income and therefore its maintenance supports national income on an earned basis. •Parity prices for raw materials automatically gives us a price level which permits the nation to operate as a solvent business with a normal profit as determined by the competitive market on finished goods. •A parity price level automatically creates the income from production to exchange sufficient goods and services to maintain full employment. •For each one-percent prices for raw materials are below parity, we will have one percent unemployment, one percent loss in factory production and one percent loss in national income. •The number of people engaged in raw materials production divided into the total labour force, times the raw material income, is the national income of the nation (which can therefore be predetermined.) •For each dollar that we lose in the way of farm income, our nation will lose approximately seven dollars of national income. If the ratio of all raw materials alone is used, we will lose five dollars for each dollar of loss in raw material income. •With proper price levels, we need not experience depression. (Under the U.S.A. War Stabilization Act of 1942, and the Steagall Amendment, farm prices were maintained at relative parity for approximately ten years, by the market. There were war years, and there were years of peace involved. This means it was economic stupidity that kept the United States in a depression during the 1930's.) Also consider: A 5% increase in domestic buying power is generally equal to the benefits of all international trade. Continued over page 15
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Page 2
Think "BIG"... ... Focus "SMALL"COPYRIGHT © BOB NEVILLE - Future Heritage Network Pty Ltd June 2003 www.futureheritage.net •When exports as a percent of national income exceed 6.5%, the trade process presides over out-migration of companies and jobs, effecting mounting unemployment, underemployment, homelessness and social programs to deal with the result. When imports as a percent of national income exceed 3.5%, the same result will occur. •Under conditions of full parity, it would require possibly 50% less in exports to return the same dollar in terms of payment balance. •Raw material inputs in operating the economy determine the number of jobs in manufacture and distribution. •One dollar of raw materials income will result in the creation of one dollar of factory wages and five dollars of national income (under conditions of normal debt use.) Similarly, every dollar that is lost to the economy due to underpricing of raw materials in the marketplace would have the reverse multiplier effect, denying the creation of one dollar of factory wages and five dollars of national income. Further, quoting the writings of Carl Wilken from the early 1940's: •"A free trade mirage has no basis for existing. A 5% increase in domestic buying power is generally equal to all foreign trade. Our domestic price level, therefore, becomes the first order of business. Furthermore, our domestic population must consume those imports taken in payment for exports. As a result, both our domestic and foreign trade depend on the income of a domestic population." Finally, further quoting Charles Walters Jr. from his book, "Raw Materials Economics:" •"Name any single economic problem in the United States today and it can be traced back to the Farm Act of 1953, and its predecessor, the Farm Act of 1948 when we "sovietized" the American agriculture economy in the name of economic freedom. What a tragic blunder this has turned out to be." •"If common citizens understood what parity prices meant to the economy and not just to farmers, they'd be out at the farm gate with shotguns and prevent the farmer from letting his production go to market at less than parity." •"Par exchange is a natural economic requirement. The only way to conquer a natural law is to obey it." *Raw Materials Economics - A NORM Primer, by Charles Walters Jr. Published by Acres U.S.A. Box 91299, Austin, Texas (78709) USA. email:  info@acresusa.com ISBN: 0-911311-32-7 or in Australia, visit www.acresaustralia.com.au under the heading of eco agricultureFootnote from Bob Neville: The principles and laws of "Raw Materials Economics" are as real and accurate today as they ever were. They are based on the fact that all sustainable wealth comes only from the food we grow, the oceans we fish, the forests we harvest , the water we drink, the air we breathe and the minerals we mine. Failure to apply them has been the direct cause of the decimation of the family farm, and with it the foundation of sustainable natural economics. All sustainable wealth (and subsequent value adding) comes from these sources. If we destroy these (which we are doing at an unsustainable rate) sooner rather than later, the "casino" economy based on sustaining and perpetuation of debt, will come crashing around us. If we have then destroyed the only true source of wealth, we have nothing left. The "experts" so called, will try to tell you that this formula is "out of date" and can't work. While it is true that it can't work in today's debt and greed based economy, nothing changes its truth which can be open-mindedly proven. Without the political will or without imminent self-destruction of our total environment, there will be no will go back to the laws of economic that have existed since the first tree was harvested and traded. Perhaps by then it will be too late? By the way, I am an optimist but also a realist...are you?

Comments:  bobneville@futureheritage.net Food for thought

"The Future Heritage Network Pty LtdEmail:  inquiries@futureheritage.net www.futureheritage.net PO Box 41 Kilkivan Qld Australia 4600 Telephone: 0407734384 Facsimile: 0407734285 ACN 093 693 139 ABN 49 093 693 139

For yet better effects use (in combination with - though one follows from the other):  http://www.chelseagreen.com/Money/EssentialReading.htm

ambivalence????? 28.Aug.2003 07:45

piet

the ambivalence lies in the fact that the mechanisms allowing greater freedoms to be an individual yet also more international and the ones for socalled playing field levelling are a mere guise and dagger hiding cloak and deceptive tag in service of the same old opportune, mercantile tricks in service of group strenghtening exterritorial ultra crossborder and across the board group formations and nationalisms, not suprisingly forming fronts along the ethnic and cultural branding faultlines.

Just like location deceives away from the precedent if not primacy of allocation so does the schizo disposition hype a belief in some miracle for all which works out to be an excercise of greedily private benefit.