Future Questions: Corporations and Globalization

Future Questions: Corporations and Globalization

On Realizing the Necessary Balance between the Environment, the Economy and Employment

By Professor. Riccardo Petrella

[This article originally published in: “Hessen im Dialog: Zukunftsfragen” is translated from the German on the World Wide Web.]

The first part – the analysis of present problems and the causes of an unacceptable imbalance – will be relatively brief.

The main focus will be on solutions. The solutions must be different and represent alternatives to what the dominant powers are introducing today. According to those determining the agenda, their solutions are the only possible and realistic ones. In truth, other solutions must be introduced. The forms and themes of current globalization are not the only possible solutions. They are in no way inevitable or irreversible. What we need is a contract for another globalization as explained in the second part.

Analysis: The Unacceptable Imbalance

The welfare society established in countries of the western world after the Second World War successfully guaranteed full employment and greater equal social rights regarding real incomes and access to public goods and services (housing, health care, education, transportation, water, gas, electricity…). The goal – full employment and the right to work for everyone – was the basic element and motor of the relative balance between social goals, economic growth and technological progress. This was clear in the United States.

At the beginning of the 70s, the welfare state tottered on the national planes. The following causes and reasons can be named:

a) People were aware that an excessive economic growth oriented in production and consumption on which the welfare state was grounded had disastrous effects on the environment. Structural imbalances arose between economic growth and the commands of ecology. The conception of a “sustainable” economy was developed with an apparent contradiction between the goal “employment” and the goal “sustainable development”.
b) The socio-economic and conservative political forces of the United States and Western Europe were anxious about low capital profits owing to a new equal redistribution of incomes allowed by the welfare state. In the course of the 80s and 90s, these forces succeeded in gaining decisive cuts in taxes on profits, tax allowances and different tax deductions like the liberalization of markets and international capital mobility, state deregulation and the privatization of whole economic sectors.
c) Technical advances were realized in transportation, telecommunications and information technology. Thanks to these measures, technological innovation promoted economic exchange on the international plane and the multinationalization of production and corporations, the globalization of markets and capital.
d) Technology and technological change play an important role in relation to competitiveness. The more the liberalization of capital markets as a reaction to the satiation of the economy and the first `oil crisis’ became the dominant goal of governments and elites of western countries, the more the principle of competitiveness became the driving force of industrial, economic and financial strategies of private and public powers. Technology became an instrument completely serving the competition of businesses and capital gains. Technology’s functions consist predominantly in lowering prices (production costs, particularly labor costs), improving the quality of products and services (especially those with high added value), increasing supply variety (strategies of diversification and specialization) and flexibility within the work organization and in relation to suppliers (“zero stock”) and customers (“just in time”…).

The technological machinery for competitiveness has changed into a logic of a systemic, permanent and inexorable replacement of production processes, products, services and “human resources” which from the view of competitiveness are less efficient, less useful and less profitable.

The globalization processes of the past 20 years according to the principles liberalization, state deregulation, privatization and permanent technological competitiveness have not only intensified the uncoupling of economic development and employment (in the US) but prevent restoring a greater balance between economic growth and sustainable development (The low unemployment rate in the US in no way means a success of employment policy for the United States. The high number of prisoners, 2.8 million persons, the highest worldwide, means that many people do not appear in the unemployment statistics because they are serving prison sentences.). They have also contributed to worsening the situation.

Obviously there are advances. Through continued pressure from environmental movements and politicians sensitive to the environment, farming and industry were forced to change the most ecologically harmful production processes and introduce new products and methods that are more ecological. Still this was not enough. The developed world has not changed its “direction”. (Changing course is the title of a book published by the MIT Press, Boston 1981 by an environmental group founded by a Swiss chemical company and confirms that the laws of the market alone are unable to promote a sustainable development.) The underdeveloped world cannot efficiently, consistently and commonly fight against poverty, misery, social injustice, the chaotic growth of the cities, the pollution of waters, the cutting down of forests and corruption…

The ecological condition of the world has deteriorated according to the latest annual reports of the World Watch Institute. The results attained in the last years are modest and far from the goals fixed in 1992 in Rio de Janeiro with Agenda 21 and signed by 130 heads of state of the whole world.

The richest countries of the world only represent 18% of the world population but this 18% devoured 86% of global consumption in 1996. Thus the more than 5 billion people who constitute the remaining 14% of worldwide consumption are not the main cause for a world economy that is ecologically unacceptable.…

In the last 20 years amid the acceleration and intensification of the globalization process, the inequalities between 20% of the richest population of the world and 20% of the poorest population which gradually declined between 1960 and 1975 increased again in the 80s. In 1995, the daily income of more than 2.6 billion persons was under $2. Today 1.4 billion persons have no drinking water and 1.7 billion have no housing fit for human beings.

The imbalance between social justice, freedom, the economy and the environment is still unacceptable. The current globalization must be radically changed.

The Proposal: A Contract for a Different Globalization

Contrary to the prevailing theses on the inevitability of globalization and the irreversibility of the processes of liberalization, state deregulation and privatization, other developments and goals could be considered and realized.

In less than twenty-five years in 2020, the world population will be 8 billion (5.8 billion in 1995) even though epidemics, famines and wars counteract this development. The real question for the world economy is not integrating local economies but discussing what principles, rules and institutions must be created within the next twenty-five years so these 8 billion persons can satisfy their basic needs – drinking water, housing, food, energy, health care, education, information, transportation, communication, artistic expression and participation in the development of the general public.

Where should one begin?

First of all, the basic principles and priorities of the dominant economic mode must be questioned. The principle of privatization of public goods and services like education, health care, water and the essential infrastructure must be contested. Accepting the privatization of these goods means depriving our society of all principles of social citizenship, solidarity, equality and brotherliness among people and the world population. A society in which everything is privatized has no common property. Such a society no longer needs to know “how to live together and in common”.

As a second action, the influence of the capital market must be limited. Power must be withdrawn from the capital market and returned to a politics that must be transparent and legitimate. The parliaments must set the priorities and deadlines, not the financial markets. Nevertheless the dominant system tells us that the future European Central Bank should be independent of political power including the European parliament. If the bank should be independent, what is the purpose of electing European parliamentarians who will have less power than this institution? Electing the 7 directors of the European Central Bank would also be absurd. That would be a parody of democracy. After the elections of June 13, 1999, the European parliament should be given a control function over the European Central Bank. This is one of many possibilities through which the political powers – assuming they agree – could again “set the agenda” which at the moment is in the hands of the financial markets. The success of individual citizen initiatives like resistance against the MAI (Multilateral Agreement on Investments) envisioned by one of the most neoliberal “churches” of the world, the OECD, shows that taking the initiative is not an impossible idea.

The unions can and must play a decisive role. However they often lag behind today. Disappearing from the stage or jointly shaping the agenda are the alternatives facing unions. If they are now weak or vanish, the citizens themselves are the ones who become weaker and weaker (see for example Great Britain). Therefore solidarity in the organization and formation of the global labor market is the most important point that must be set on the agenda by the unions in restoring social and political cooperation on the global plane.

The following concrete measures must be taken to disarm the world of finance:

· Introduction of a tax of 0.5% on worldwide financial transactions. This measure was proposed in 1983 by Nobel Prize economist James Tobin (Tobin tax). Such a tax would make possible a world fund for the population in the annual amount of billions upon billions of dollars for the development of the welfare society (for example, a worldwide agreement on water for all people). Levying such a tax is technically possible. However this decision must be made on the G7 plane to counter the alibi brought by every country that such a tax cannot be introduced on the national level without risking capital flight abroad.
· Removal of tax havens. In the world, there are thirty-seven tax havens or shelters which can be described as a form of legalized criminality increasing more and more in the economy (tax flight, speculation, drug trade, illegal weapons trade). Thanks to the tax paradise, the financial world accustoms itself more and more to predatory principles. The industrial enterprises that create the real wealth are among the first victims.
· End banking secrecy. Respect for the freedom of property and the right to secrecy can be preserved without maintenance of banking secrecy. In addition, a progressive financial policy on the foundation of social justice and solidarity (between individuals, generations and countries) is only possible through the abolition of banking secrecy.
· The interplay of these measures on the background of the creation of a world council for economic and financial security. The preeminent challenges of such a council will be defining a new global financial system (the Bretton Woods of the 21st century) and controlling fair use of resources for the well-being of the whole world population.

The third action concerns science, technology and technological innovation. The role of science and technology today must be changed. Scientists must resist the monopolization of their activity for the economic and financial interests of corporations. This is also true for the goals and priorities of technologies. Technological innovation must satisfy the basic needs of the 8 billion people who will populate our planet in the year 2020 and not be a main instrument for strengthening the competitiveness of corporations in a kind of global economic war. Exact proposals on "science and technology for eight billion people" were worked out by European research groups financed by the commission of the European Community in the FAST program (forecasting and assessment in science and technology).

In a word, the publically legitimated government must be strengthened. Local and global productivity must be promoted in the interest of the general public. This leads us to the fourth and last action with high priority, the reorganization and redistribution of wealth.

Capital enjoys the best health. Tax pressure is reduced considerably. Capital can wander about unrestricted and unlimited all over the world. With gifts, states entice capital into their own countries. They offer them possibilities of fixing priorities in using available resources. Human resources are tendered which become cheaper, more flexible and more recyclable.

On the other hand, labor has a hard time. Tax pressure intensifies. Greater and greater long-term mobility without guarantees is demanded. All possible and conceivable statutes are enacted to raise their flexibility. They are told that they will be replaced mercilessly by technology and must fight for the short-term protection of their position against the others. Labor becomes impoverished while capital becomes rich. Labor loses its negotiating power and no longer shares in forming the agenda. Incessantly labor is forced to react to decisions made on the other side.

All this cannot continue. We may not wait for the market economy to “implode” but must quickly find a new distribution of profits between capital and labor in favor of people (citizens) on the worldwide plane.

This redistribution of profits could occur through a new full employment policy of technological innovation (with the help of reduced working hours in the already economically satiated developed countries). A worldwide tax on international financial transactions, a rigorous sustainable organization of technology and human resources (worldwide eco-tax), reform of agricultural policy and renewal of cooperative organizations based on solidarian community on the local level are vital.