Feb/Mar 2002

A New Contract With The Planet

Healing After Terror
Michael Lerner

Indifference
Don Kyhote

The Globalization of Poverty
Antonia Juhasz

World Bank President's Secret Plan For Argentina
Greg Palast (Available after Mar. 1)

Letters From Argentina

The Trade Towers Without Tears
John Darling

Passcode "Redwood:" Keeping Repression in Perspective
Starhawk

The Uncooling of America
Kalle Lasn

Frankencorn Fight
Ronnie Cummins

Oil Company Advisor Chosen to Represent U.S. in Afghanistan
Patrick Martin

The Next Technology Revolution
Steve Wallis, MA

Man of Occasional Two Braids
Antoinette Nora Claypoole

The Ecology of Community
Jesse Wolf Hardin

Love and Leadership
Michele LeBien

Fearful Feelings
Peter Moore, MFCC, CGP

Cosmic Calendar
Salina Rain

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The Globalization of Poverty

Antonia Juhasz

The U.S. government can control the funds that go to a country through the International Monetary Fund by linking conditions to the loans. These conditions have historically benefited corporate and elite interests over those of the populations of the countries in question. It is time to recognize that economic globalization does not serve the poor, it serves the wealthy.

United States Trade Representative Robert Zoellick has begun to use the horrific tragedies of September 11, 2001 as a rationale to push an aggressive free trade agenda, arguing that we must “counter terrorism with trade.” An expansive economic globalization agenda is one of the four policy priorities President Bush asked Congress to address immediately following the attacks of September 11. The administration is arguing that we will end terrorism through trade because economic globalization is the solution to poverty. But all evidence shows the contrary, that economic globalization is a cause of global poverty and inequality, not a solution. Furthermore, this evidence is increasingly coming from within the institutions of economic globalization itself.

For example, the Central Intelligence Agency itself warned in a December 2000 report that economic globalization would increase inequality and poverty, thereby fostering violence: “The rising tide of the global economy will create many economic winners, but it will not lift all boats. [It will] spawn conflicts at home and abroad, ensuring an even wider gap between regional winners and losers than exists today. [Globalization’s] evolution will be rocky, marked by chronic financial volatility and a widening economic divide. Regions, countries, and groups feeling left behind will face deepening economic stagnation, political instability, and cultural alienation. They will foster political, ethnic, ideological, and religious extremism, along with the violence that often accompanies it [emphasis added].” (Global Trends 2015, United States Central Intelligence Agency, 2000).

The most reliable data available, predominantly from supporters of economic globalization, demonstrate how economic globalization has caused the most dramatic increase in global inequality and poverty in modern history. Furthermore, this outcome is intrinsic to the economic globalization model. Arguments that economic globalization allows “fragile democracies” to “overcome poverty and create opportunity,” as Trade Representative Zoellick wrote in the Washington Post, are seriously mistaken. If such policies are pursued, the world could find itself in even worse circumstances in the future than those we find ourselves in today.

The administration has already begun to move ahead with IMF loans to Pakistan and Indonesia in the name of fighting terrorism. If we wish to help these countries with their economic problems, why are we providing loans instead of direct aid? Why are we using the IMF, an institution that has failed miserably in this region (as former World Bank chief economist Joseph Stiglitz wrote, “All the IMF did was make East Asia’s recessions deeper, longer, and harder.”) instead of alternative funding sources, such as the United Nations, that historically represent the interests of developing countries? The answer may be that the U.S. government can control the funds that go to a country through the IMF by linking conditions to the loans. These conditions have historically benefited corporate and elite interests over those of the populations of the countries in question.

The CIA is not alone in its assessment of the catastrophic impact that the policies of economic globalization have had around the world. For example, the World Bank—one of economic globalization’s leading institutions—reports that “Globalization appears to increase poverty and inequality … The costs of adjusting to greater openness are borne exclusively by the poor, regardless of how long the adjustment takes.” (The Simultaneous Evolution of Growth and Inequality, The World Bank, 1999).

The United Nations echoes these words in its 1999 Human Development Report, “The new rules of globalization—and the players writing them—focus on integrating global markets, neglecting the needs of people that markets cannot meet. The process is concentrating power and marginalizing the poor, both countries and people … The current [globalization] debate is … too narrow … neglecting broader human concerns such as persistent global poverty, growing inequality between and within countries, exclusion of poor people and countries and persistent human rights abuses.”

The policies of economic globalization such as free trade, financial liberalization, deregulation, reduced government spending, and privatization concentrate wealth at the top, removing from governments and communities the very tools needed to ensure equity and to protect workers, social services, the environment, and sustainable livelihoods. In this way, economic globalization and its institutions—including the International Monetary Fund (IMF), the World Bank, the World Trade Organization, and the North American Free Trade Agreement, have created the most dramatic increase in global inequality—both within and between nations—in modern history and have increased global poverty.

For example, the income gap between the fifth of the world’s people living in the richest countries and the fifth in the poorest doubled from 1960 to 1990, from thirty to one to sixty to one. By 1998 it had jumped again, with the gap widening to an astonishing seventy-eight to one. Poverty trends have worsened as well; there are 100 million more poor people in developing countries today than a decade ago. The assets of the three richest people on earth are greater than the combined Gross National Product of the forty-eight least developed countries. Even in the United States, where median earnings of workers more than doubled from 1947 and 1973, the past two decades have seen median earnings fall by almost 15 percent, with the earnings for the poorest 20 percent of households falling the furthest behind. In fact, the only segment of the U.S. population that has experienced large wealth gains since 1983 is the richest 20 percent of households. The net worth of the top 1 percent of U.S. households now exceeds that of the bottom 90 percent.

As Professor Robert Wade of the London School of Economics wrote in The Economist, “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 richest 10 percent pulled away from the median, while the poorest 10 percent fell away from the median, falling absolutely and by a large amount.”

It is time to recognize that economic globalization does not serve the poor, it serves the wealthy. It actually adds to the numbers of poor while concentrating greater amounts of wealth among an ever-dwindling number of people. As Thabo Mbeki, the president of South Africa, said, “We believe consciousness is rising, including in the North, about the inequality and insecurity globalization has brought about the plight of poor countries.”

For the U.S. Trade Representative to argue that expanding the World Trade Organization, signing the Free Trade Area of the Americas, and granting the President “Trade Promotion Authority” (formally Fast Track) to side-step Congress in the creation of national legislation will address the root problems of global instability is opportunistic, disrespectful, and cynical. It is time to reject failed models and embrace new alternatives.

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Trading Democracy

Bill Moyers’ Trading Democracy (which premiers February 5, 2002 on PBS ) reveals how an obscure provision hidden in the North American Free Trade Agreement (NAFTA) can cost taxpayers millions of dollars when multinational corporations sue the government over environmental and health laws that threaten their profits. The documentary exposes how NAFTA’s Chapter 11 has become private justice for foreign companies.

When California banned a gasoline additive that had contaminated drinking water throughout the state, a Canadian company (Methanex), the world’s largest producer of the key ingredient in the gasoline additive MTBE, sued the U.S. government to force citizens to pay nearly 1 billion dollars for its potential lost profits. 

In 1995 MTBE, a known carcinogen, began turning up in wells throughout California, and by 1999 had contaminated thirty public water systems. The state ordered that the additive be phased out. Methanex filed suit under NAFTA’s Chapter 11, seeking $970 million in compensation for loss of market share and future profits.

Environmental attorney Martin Wagner tells Moyers, “They’re saying that California either can’t implement this protection or that they get a billion dollars. People should be outraged by that.” People are indeed outraged, but they are helpless to do anything. The NAFTA tribunal that will decide the Methanex case—like all the tribunals hearing Chapter Eleven-based cases—is closed to the public. Yet, it is the taxpayers “who will foot the bill if the tribunal decides in favor of the Canadian company,” says Moyers.

The ramifications for the public go well beyond the loss of taxpayer dollars, explains journalist William Greider, “If Methanex wins its billion dollar claim over California environmental law, there ain’t gonna be many states enacting that law, are there?” he says, adding that the NAFTA provision “hobbles the authority of government to act in the broader public interest … which was the idea in the first place. Governments are already being intimidated by the mere threat of a claim being filed against some regulatory action. If you’re a civil servant, or even a political leader, you’ve got to think twice when a corporate lawyer comes to you and says ‘we’re going to hit you for a half a billion dollars if you do this.’”

Challenges being mounted under Chapter 11 are also successfully overruling jury decisions in civil courts of law. In what one attorney called “an end-run around the Constitution,” corporations are using a little-known provision of NAFTA to challenge public laws, regulations and jury verdicts not only in the United States, but in Canada and Mexico as well. And, they are arguing those cases not in courts of law, but before secret trade tribunals.
How can this be happening? And why do so few people know about it? Multinational corporations have acquired the power to demand compensation if laws aimed at protecting the environment or public health harm them financially. 

“Since NAFTA was ratified, corporations have used Chapter 11 to challenge the powers of government to protect its citizens, to undermine environmental and health laws, even attack our system of justice,” notes Bill Moyers. The treaty that was supposed to promote democracy through free trade now appears to have given deep-pocketed corporations the means to undermine democracy across international borders. This startling realization prompts Moyers to ask, “Are we promoting democracy—as we claim—or trading it away?”