To save society

By Bernard Cassen, Le Monde diplomatique, May 1997

Free markets (”laissez-faire”) and free trade (”laissez-passer”) : these are the two age-old articles of faith of the doctrine of ultraliberalism. And, as inevitably happens with articles of faith, they take precedence, whatever the circumstances, over other considerations or values at issue. The Financial Times, which is a firm believer, frequently provides examples of this.

For instance, the columns of the Financial Times describe as a “dilemma” of great significance the risks of a trade “war” between the European Union and the United States—this on account of the appallingly insanitary conditions in which poultry is slaughtered in the US and then exported to Europe. The “dilemma” is how to reconcile genuine public interest with free trade. Free trade—at best a means—is the only stable point of reference and is not open to discussion. It is for the public interest—an end—to adjust to free trade and, moreover, to prove that it is indeed a genuine public interest. And so the means becomes the end.

Reversing the order of precedence in this way does not bother the ideologists of free trade one jot. It is they who hold pride of place in the media, the universities, the major international economic and financial organisations. More particularly, since the conclusion of the GATT Uruguay Round in 1993 we have experienced truly global brainwashing designed to give credence to the notion that deregulation of trade and total market freedom are bound to produce a general rise in standards of living and societies that are fairer for all. These are allegedly the miraculous results of globalisation. The facts tell a very different story.

To begin with, instead of reducing inequalities, globalisation of trade exacerbates them and does so both between and within nations. In the so-called rich countries and above all the champions of free trade—the United States and the United Kingdom—no-one disputes the ever-widening income and poverty gap. Even the OECD puts on a show of concern from time to time. The fact is that this gap is no longer a matter of real concern for leaders, some of whom actually argue that inequalities are an essential factor for growth.

This polarisation is also typical of relations between countries themselves. As was clearly shown in a recent report by the United Nations Development Programme, the poorest countries are getting poorer, both in relative and absolute terms. There is, in effect, no correlation between need and investment. In Africa, where infrastructure of all kinds is cruelly lacking, direct investment fell by 27% between 1994-95 and accounts for just $2.1 billion, that is 3% of total world investment. It is no use counting on the international financial markets to fund new schools or dispensaries…

In deference to the structural adjustment policies of the World Bank and the IMF, which require countries to “open up” to the world market, public spending is slashed and consequently, and more particularly, the number of teachers is cut dramatically, and so we are back to square one. All the statistics show that, since the early 1990s, the percentage of poor people has increased in Latin America, the Caribbean and Africa. Who is going to sing the praises of globalisation to them?

We are told that wages and employment can only benefit from generalised liberalisation. That is not the experience of American workers, among others. Those who failed to leave their secondary education with a diploma have seen their average hourly pay fall by a third in 20 years: from $11.85 to $8.64 between 1973-93. Sociologists have had to invent a new category for them: the “working poor”, workers who get poorer as they work and whose numbers have been substantially swollen in the UK with the help of Mrs Margaret Thatcher and Mr John Major. In France we have five million unemployed, and in Germany, where industrialists have decided that their compatriots have become too expensive for them, the situation is scarcely any better.

The ultraliberals counter these situations with other ones—always the same: the “tigers” of eastern Asia with growth rates sometimes in two figures. But they completely fail to grasp that these examples dramatically undermine their theories. Neither South Korea nor Taiwan—still less China—founded their industrial and commercial power on the precepts of Adam Smith or David Ricardo. Massive US government aid—in the interests of the cold war—in the case of South Korea and Taiwan; absolute protectionism to preserve their developing industries; managed trade (the Chinese make no secret of this); and, generally speaking, an economically omnipresent state. These are the real ingredients of the much-vaunted and very real “export-driven growth” of these countries.

We also need to mention the political and social repression, from which Taiwan alone is now free in the region. The fact is that a totalitarian regime which bans free trade unions (China, South Korea, Singapore and Indonesia etc.) can achieve “miracles” and create a “climate propitious” to business. It is nonetheless astounding that “liberals” should assess fundamental freedoms in terms of profits and losses in this way and, more serious from their point of view, that they should close their eyes to the distortion of competition brought about by the daily intervention of police states that are often corrupt into the bargain. Indeed, they never stopped praising the Chilean “miracle” in the days of General Augusto Pinochet.

Instead of getting up in arms about the introduction of “social clauses” into international trade, the liberals should welcome it, in the interests of fair competition and “transparency” of price formation mechanisms. It seems perfectly natural that the “ticket” allowing goods or services access to an export market should take into account compliance with a minimum of the standards of the International Labour Organisation (trade union freedom, ban on forced labour and the exploitation of children etc.) that apply in the country concerned.

These social clauses are designed to improve the situation of workers in the newly industrialised countries. Failure to comply with them has an adverse effect on workers in the developed countries, and is not directed against the South. Far from it, in the South, the clauses are being called for by the NGOs and trade unions, and it is abundantly clear that they possess a quite different legitimacy to protect their own people than do the spokesmen for the multinationals.

What applies to the social sphere also applies to the environment. It is actually not possible to “green up” total free trade: it inevitably encourages the delocation of centres of production to those sites where environmental standards impose the least constraints and where, generally speaking, the least fuss is made about workers' rights. We cannot accept, as so many “comparative advantages”, the destruction of the natural environment, pollution of the air, water and the land. Instead of being “externalised”, that is to say borne by the global community in its entirety, the environmental cost must be fully “internalised” within prices. If not, then it must be incorporated into the “ticket” giving access to those markets in which the relevant standards are in force. Plainly, if we have the intellectual honesty to reject “liberalism” on the variable geometry model, that ignores all factors other than the right of “global” companies to be predatory, then the principles underlying the liberal theory provide excellent arguments for social and environmental clauses. In the final analysis, it is democracy itself which is the prime victim of free trade and globalisation. The way in which they operate actually widens the physical gap separating the centres of decision-taking and those affected by those same decisions: between producers and consumers of goods and services and of fantasy. Alienation in the extreme. Taking responsibility and being obliged to be accountable are the touchstones of democracy. On the assumption that it is their intention to work for the good of all their fellow citizens, what happens when elected representatives and governments are less and less in control of the real decision-makers, who have no direct link with their territory, that is to say the financial markets and the vast conglomerates? There is no need to seek further the main factor in the disintegration of societies. Moreover, it is becoming increasingly inappropriate to describe them as “societies”, since they are being subjected to the kind of treatment that is antithetical to the very notion of the common good.

Mrs Margaret Thatcher was fond of saying that she only knew individuals and had not the slightest idea of what a society was. It is high time to act to stop that cry from the heart becoming a self-fulfilling prophecy. And if we are to do to that, we need to have a radical rethink of the principles and practices of globalisation now under way.