marginalization in an era of globalization
TRANSCRIPT
MARGINALIZATION IN AN ERA OF GLOBALIZATION
S. Mansoob Murshed*
Institute of Social studies (ISS) PO Box 29776
2502 LT The Hague Netherlands
This version: July 2nd 2003.
ABSTRACT
The central argument of the paper is that economic globalization in the 19th century created the present-day third world, and contemporary globalization perpetuates this marginalization of the developing world. The difference lies in the fact that global disparities and inequities are far more transparent in our virtually uncensored information age. Throughout the paper, I mainly refer to the trade aspect of globalization, particularly the policy imperative to engineer increased trade, which is so keenly advocated by economic development specialists from both the North and the South. I also stress the hegemonistic and coercive aspect of globalization, which governs the asymmetric and unequal economic interaction between the North and the South. I describe the nature of international inequality in our age of globalization. Global inequality can be shown to have risen in the present era of globalization, if we treat individual human beings as the unit of analysis, and not population weighted national per-capita incomes. Finally, the paper concludes by reviewing the backlash to globalization and the manner in which civil society is responding to the problems created by globalization.
Marginalization in an Era of Globalization S Mansoob Murshed
The term globalization is one of the most widely used terms in contemporary social
science. It has a variety of implications in different academic disciplines, and to
diverse individuals, making it a rather vague concept. In economics, which is the
focus of this paper, the term is mainly employed to describe the increase in
international trade and financial flows that have taken place since 1960, but more so
in the post-1980 period. Yet economic globalization has one historical precedent, as
explained in Murshed (2002b) for example. The period between 1870-1913 also saw a
comparable, if not greater intensity in the international exchange of goods and
finance, measured by the proportion of the value of trade to national income to give
one example. The two crucial differences between the two historical episodes of
economic globalization lie in the fact that at present free international migration is
severely restricted by Draconian OECD immigration controls, and trade is
increasingly in varieties of the same good (intra-industry trade) rather than in different
goods (inter-industry trade). The inter-war period (1919-39) especially, and the
immediate aftermath of the Second World War witnessed a marked retreat from
“globalization” and openness in the economy. The world became globalized once
more after 1960, a process that accelerated in the post-1980 period, culminating with
the ultimate triumph of capitalism with the demise of the Soviet Union in 1991.
Globalization also implies single-power cultural, political and economic hegemony,
British in the 19th century and American at present, see also Schäfer (2003).
The main argument of the paper is that economic globalization in the past created the
present-day third world, and contemporary globalization perpetuates this
marginalization of the developing world (see, also Murshed, 2002b). The difference
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lies in the fact that global disparities and inequities are far more transparent and
visible in our virtually uncensored information age; in the past information may not
have been transmitted with such speed, certainly visual images were less developed.
Throughout the paper, I mainly refer to the “increased trade” aspect of globalization,
particularly the policy imperative to engineer increased international trade, which is
so keenly advocated by economic development specialists from both the North and
the South. I will also emphasize the hegemonistic and coercive aspect of the
institutions of globalization, which governs the asymmetric and unequal economic
interaction between the North and the South.
Economic globalization is meant to be beneficial for the world’s poorer nations; the
proponents of globalization or unfettered capitalism (neo-liberals outside the lexicon
of economics) will have us believe. Participation in international trade and reforms
aimed at attracting foreign finance are meant to narrow the gap between rich and poor
nations, and the pull the world’s chronically poor up by their bootstraps. This process
is known as “convergence”, and means that the real income per-capita between richer
and poorer nations moves closer to one another. International trade is meant to be the
engine that achieves this.
In an even more influential paper, one that has gone through several iterations, Dollar
and Kraay (2001) argue that successful globalizers do better at poverty reduction. By
successful globalizers they refer to those countries, mainly in Asia, who have
achieved greater export expansion. The poor are defined as the bottom fifth (quintile)
in terms of income. By excluding the unsuccessful globalizers from their exercise on
the impact of globalization on poverty, they are guilty of sample-selection bias.
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Moreover, given that the world’s two most populous nations China and India have
been successful in globalization, their size biases the results in favor of globalization
with poverty reduction. Two remarks are in order here. First, the success of China and
India mask massive internal spatial inequalities, as some regions are the main
beneficiaries of recent national gains at the expense of laggard areas. Secondly, India
and China did not, and have not, liberalize in the sense of neo-liberalism (Milanovic,
2002b). In India controls were lifted steadily, and only after growth commenced.
Trade may be free, but capital controls are still in place, just as in China. In China, a
huge state-owned sector survives to this day, property rights are unclear and
governance far from transparent, features that would make any proponent of
globalization and neo-liberal reform blush.
Be that as it may, the trump card in the hand of the pro-globalizers is that
globalization offers opportunities that must be seized upon. Ultimately, it is a failure
of the national policy regime that more open policies in a globalized context are not
made to work to secure growth and poverty reduction. This is akin to saying that the
poor are poor because they choose to be so, because they made the wrong choices.
Any episode of growth and expansion in a market (capitalist) economy inevitably
produces winners and losers, unless, of course, the winners are made to compensate
the losers. This potential inequity can be compounded if the losers did not have a fair
chance at the roll of the dice determining the outcomes in the first place. Is the
globalization game played on a level playing field? Or does greater power confer an
advantage? Who has greater voice in determining the rules of the game? My argument
is that 19th century globalization in a colonial context set the stage for the second act,
which is our contemporary experience of globalization, notwithstanding the fact that a
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Marginalization in an Era of Globalization S Mansoob Murshed
few actors or countries experienced role reversals (there is entry and exit from the
developed-developing nation categorization). The rules governing globalization are
fundamentally unfair to the developing world.
19th century globalization was preceded by an industrial revolution in the UK and
some other parts of North-Western Europe and the colonialization of the present-day
third world. Colonialization was accompanied by the de-industrialization of the then
industrialized part of the South. Moreover, the colonial contract, as Milanovic (2002b)
calls it, ensured trade policies favorable to the export of manufactured goods from the
colonial power to the colony, stifling any nascent indigenous manufacturing capacity.
Five other points in the creation of the proto-third world deserve mention, as they are
relevant to the discussion on the present (see Murshed, 2002b for further elaboration).
The first is the integration of the peasant producer into global primary product
markets. There was a switch from food production for domestic consumption to cash
crops for export. In other parts of the world, in Africa and Latin America minerals
production commenced, or was expanded. This shift in production patterns was, more
often than not, induced by 'subsistence adversity': the combination of debt, tax,
famine, drought, loss of common resources and the disappearance of traditional safety
nets. Secondly, the burden of taxation and debt. In India which was under British rule
the burden of taxation was succinctly summarized by the great nationalist economist
Dadabhai Naoroji in 1876 (see Naoroji 1901). He put the average tax burden in India
at twice that of contemporary England, although average income there was fifteen
times greater at that point in time. Thirdly, the burden of taxation was not
counterbalanced by expenditure on infrastructure or human development. Rather, as
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Davis (2001) and others point out taxes in India were used to finance imperial wars.
Fourthly, the operation of the international payments and currency systems under the
gold standard militated against developing countries. Much has been written on this.
Naoroji (1901) analyzed the famous colonial drain of resources from India to Britain.
Fifthly, there are the attitudes to free market forces that can explain the
marginalization of much of the third world from globalization both at present and in
the past. A good example to consider would be attitudes to famines that raged through
much of the tropical world in Africa, Latin America and Asia in the last quarter of the
19th century, extensively documented in Davis (2001). There was a marked
reluctance, in virtually all of the famine episodes in India and elsewhere, to interfere
with global grain markets for the sake of humanitarian relief.
In short, globalization in the 19th century did not benefit the South which became
poorer as the North grew richer. It, however, assisted the convergence of incomes
towards higher levels for the Atlantic economy: countries in North-Western Europe
and North America. Countries in Scandinavia were, for example, pulled up towards
the higher income levels prevalent in America and Britain.
Globalization at present (the post-1980 period) has also marginalized much of the
third world and low-income developing countries. Table 1 attests to that fact. Apart
from East and South Asia, all the world’s less-developed regions grew faster during
the relatively less globalized era of the 1950s and 1960s. Yet all regions have
expanded their exposure to international trade. While it is true that some middle-
income developing countries as well as the most populous countries, India and China,
are doing well out of globalization, the benefits of globalization are far more being
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widespread in the South (Murshed, 2002b). The best example of that is the pattern of
foreign direct investment (FDI) flows. Three nations, China, Mexico and Brazil
receive 50 per cent of total FDI flows to the developing world as a whole. Some
eleven nations account for two-thirds of all developing country exports. Low-income
countries account for only 2.5 per cent of world merchandise exports, and 1.4 per cent
of FDI inflows. The corresponding figures for all developing countries are 19.7 and
21.6 per cent respectively. These are prima facie evidence that many developing
countries are truly marginalized from the globalization of recent times. In Africa, in
particular, the era of globalization is associated with huge development failure. Not
only have incomes declined, but also other indicators of inclusion and well-being
have deteriorated. This includes the return of old diseases such as tuberculosis, the
AIDS pandemic, stagnating maternal mortality and literacy rates.
TABLE 1A
GDP PER CAPITA (1995 CONSTANT US$) GROWTH RATES
Area/Country Annual average
GDP growth %
1960-1970
Annual average
GDP growth %
1970-1980
Annual average
GDP growth %
1980-1990
Annual average
GDP growth %
1990-2000
Low & middle
income
3.1 3.3 1.2 1.9
Least developed
countries (UN
classification)
- - - 1.1
East Asia & Pacific 2.9 4.5 5.9 6.0
South Asia 1.8 0.7 3.5 3.2
Latin America &
Caribbean
2.6 3.4 -0.8 1.7
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Sub-Saharan Africa 2.6 0.8 -1.1 -0.4
Source: World Development Indicators (2002), World Bank, CD-ROM.
TABLE 1B
GDP PER CAPITA LEVELS (1995 CONSTANT US$)
Area/Country GDP per
capita level in
1995 US$
1960
GDP per
capita level in
1995 US$
1970
GDP per
capita level in
1995 US$
1980
GDP per
capita level in
1995 US$
1990
GDP per
capita level in
1995 US$
2000
Low & middle
income
535 725 999 1129 1356
Least developed
countries (UN
classification)
n.a. n.a. n.a. 264 293
East Asia & Pacific 194 256 396 705 1252
South Asia 186 221 236 332 456
Latin America &
Caribbean
1983 2549 3548 3275 3856
Sub-Saharan Africa 473 609 658 587 564
Source: World Development Indicators (2002), World Bank.
As far as the instruments of hegemony within a globalized context are concerned,
three points deserve mention. They are the modern day counterparts of earlier
colonial arrangements.
First, there is the experience of structural adjustment programs in many developing
countries in the post-1980 period. These were instituted following the macroeconomic
difficulties encountered by non-oil producing developing countries after the two oil
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price shocks of the 1980s. Structural adjustment was not confined to macroeconomic
issues but an entire raft of reforms were imposed and instituted under its guise. It
provided an opportunity to force the tenets of the Washington Consensus (economic
conservatism)1 down the throats of hard-pressed developing countries in dire need of
financial assistance. These measures included unilateral trade liberalization, the
reduction of subsidies and fiscal exigency, amounting to the reduction of social-sector
expenditure. Also, as Stiglitz (2002) has emphasized that the response proposed by
the IMF following financial crises in Latin America, the former Soviet Union and
East Asia was decidedly pro-international financial markets, which had exposure in
these countries. In many cases interest rates were increased in developing countries
afflicted by financial crisis, which made matters worse for them but may have been
helpful to Western creditors. Clearly, all of these measures had an adverse impact on
poverty and raised inequality. Table 2 shows that poverty outside Asia has been
growing, even if it has stabilized in Latin America and the Caribbean.
Table 2: Absolute poverty
(millions)
Region 1987 1990 1998
East Asia and the Pacific 417.5 452.4 267.1
(excluding China) 114.1 92.0 53.7
Eastern Europe and Central Asia 1.1 7.1 17.6
Latin America and the Caribbean 63.7 73.8 60.7
Middle East and North Africa 9.3 5.7 6.0
South Asia 474.4 495.1 521.8
Sub-Saharan Africa 217.2 242.3 301.6
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Total 1,183.2 1,276.4 1,174.9
(excluding China) 879.8 915.9 961.4
Note: An international poverty line criterion used: a person living on less than one dollar a day (in 1993 PPP
terms) is considered to be living in poverty.
Source: Global Economic Prospects and the Developing Countries 2001.
Moreover, structural adjustment programs set developing countries well and truly on
the route to indebtedness to multilateral and bilateral donors. It also inculcated the
culture of dependence on aid for budgetary support. This is the second instrument of
coercion. The crippling debt burden of most developing countries precludes much
needed expenditure on social protection to promote an inclusive society. In many
nations debt servicing is a quarter or more of the value of annual export earnings. In
many instances this debt was incurred by leaders who had no intention of using the
funds for development, but for self-enrichment instead (this is referred to as odious
debt). Debt forgiveness will cost the ultimate creditor, the ordinary taxpayer in OECD
countries very little. It is not fully forgiven, despite the HIPC initiatives, as it will
release a major lever of power on developing countries.
Lastly, there is protectionism in the North, which prevents the South from gaining
market access in the North. Much has been written on this subject, see Murshed
(2002b) for a brief survey, and Murshed (1992) for an outline of the macroeconomic
effects of Northern protectionism towards the South. But it is worth emphasizing that
protectionism in the North towards the goods of the South is selective and invidious,
as it covers those areas where the South has greatest competitive advantage such as
agriculture and textiles. At a more fundamental level there is a growing concern in the
North (particularly, the United States) for fair as opposed to free trade. This
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particularly depends very much on the USA's perception of fairness and what is in her
interests. WTO rules incorporate areas where the South is most vulnerable, such as
the transfer of technology and the openness to entry by the OECD service sector.
Restrictions on technology transfer via TRIPs (trade in intellectual property rights)
greatly hamper development prospects. It means that the experience Of South Korea
and Taiwan cannot be replicated any longer. It also has humanitarian consequences.
For example TRIPs, as enforced by its principal proponent, the USA is still
precluding the production of generic drugs to treat AIDS. Furthermore, there are
dangers of unfair environmental and labor standards incorporated within the WTO
framework that will seriously disadvantage the South. The process of WTO
negotiation and rule setting is also very excluding to the South; that in an organization
committed to the notion of one country one vote.
The non-globalized eras of the inter-war period and the immediate post-war era offer
interesting contrasts. As Milanovic (2002c) points out income convergence between
the richer countries of the world continued unabated. Moreover, there was a different
economic ideology current at that time: one that extolled national autarky, and not
trade dependence. In the inter-war period protection, bilateral trade agreements,
currency non-convertibility and capital controls were rife. Even after the Second
World War they continued to prevail and were gradually relaxed after the 1960s. The
1950s and 1960s, a non-globalized era, was an extraordinary period of growth and
progress for all countries and human beings.
Globalization is meant to reduce the gap between richer and poorer nations according
to some. Our experience, both at present and historically, is to the contrary. To see
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this, it is worth examining historical income gaps between the richest and poorest
nations. UNDP (1999) reproduces figures to show that this gap was only 3:1 during
the dawn of the industrial revolution in 1820, rising to 11:1 by the end of the first
episode of globalization in 1913. More recently, it grew to 35:1 in 1950, rising
slightly to 44:1 by 1973. More recently, after the commencement of the present round
of globalization, this figure has acquired a staggering magnitude of 72:1. This is the
most conclusive evidence of the process of marginalization of developing countries
during the two great phases of globalization.
Reverting to our contemporary era, there are three different concepts that may be used
to measure inter-country inequality, see Milanovic (2003). All three methods arrive at
the Gini coefficient, the most commonly used measure of income inequality.2 The
Gini coefficient ranges from perfect equality (0) to perfect inequality (1), or in
percentage terms from 0 to 100. The population whose relative inequality is being
measured is categorized in several groups of equal size, five groups (quintiles) or ten
groups (deciles) and so on.
The first concept used to measure international inequality treats all countries, large or
small, equally. This is known as category 1 inequality. According to this concept all
countries for which data is available are arrayed according to per-capita income in
comparable purchasing power parity (PPP) dollars. If, for example there were a total
of 150 nations, we would be effectively measuring the inequality across 150 different
individuals. This is because each nation consists of a representative individual, whose
income is that country’s average or per-capita income. Category 2 inequality is the
same as category 1 inequality with the important difference that each national per-
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capita income is weighted by its population size (national population relative to the
world). Thus, China is given a weight of about 0.2 as it accounts for a fifth of
humanity. This may appear to be a reasonable procedure, but a serious flaw in
category 2 type inequality measures is that most changes are accounted for by the
alterations in populous countries such as China and India, and downwardly bias
events elsewhere, as in many poor but smaller African nations. Moreover, when
nation states are the unit of analysis, each state should be treated equally, as each
nation is an independent entity and represents a unique policy experiment. Equal
treatment for all nations means that each unit’s income should not be population
weighted, rather there should be equal weighting, which implies no weighting at all.
Both category 1 and 2 type inequality indices do not take into account within-country
inequality. In any nation there are income differences between inhabitants of town
and country, the capital and places in the hinterland. Within larger states such as
China and India there are huge regional disparities in economic performance and
socio-economic conditions, consequently income levels differ. It would be far better
to focus on individuals rather than nations as the unit of analysis even for assessing
international inequality. This measure, known as category 3 international inequality,
however, represents a tall order in terms of comparable international data collection.
Since the late 1980s, household surveys have become more common across the globe,
in Africa, China and other former socialist countries. Moreover, the surveys
themselves have become more comparable in coverage and scope. The pioneering
paper on category 3 type global inequality is by Milanovic (2002a).
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What do the 3 types of international inequality measures show us? Category 1
measures indicate a rise in inequality in the globalized era. From about 46 in 1978, the
Gini coefficient has risen to over 54 by 2000. In contrast, during the less globalized
period of 1960 to 1978 the Gini remained fairly stable between 48 to 46, Milanovic
(2002b). Clearly, this shows that globalization produces winners and losers and does
the converse of achieving income convergence. It also captures the collapse of output
and national income, lowering income per-capita in Eastern Europe and the former
Soviet Union following the demise of socialism. The decline in income in those
regions may be likened to the fall in output brought about a prolonged and intensive
war. Moreover, while within region income differentials within OECD nations
continued to decline in the 1978-2000 period, it rose in all regions in the developing
world except Latin America and the Caribbean.
Recall that category 2 inequality is the same as category 1 except that it is population
weighted. Category 2 measures will show a fall in international inequality in the
highly globalized era, because of the impressive growth in China’s real per-capita
income. Using this method the Gini for the world declines from 54.4 in 1978 to 50.1
in 2000 (Milanovic, 2003), indicating a decline in inter-country inequality. But
category 2 measures are based on per-capita income as the unit of analysis. Thus, not
only are category 2 indicators biased by what happens in China and India (large
countries), but also any country’s income growth success in overall terms masks
within country income variations along spatial or socioeconomic lines.
The category 3 measure is based on household surveys, with households as the unit of
measurement. Category 3 measures do not, unfortunately, allow us to go back farther
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than 1988. We would expect globalization to have already produced winners and
losers by 1988, intensifying inequality. Milanovic (2002a and 2003) shows a rise in
inequality (Gini coefficient) during the globalized phase from 62.4 in 1988 to 66.0 in
1993, falling back slightly to 64.6 in 1998. Moreover, these figures would be higher,
implying greater inequality, if instead of PPP dollars ordinary dollars based on market
exchange rates were used. It therefore, captures the huge rises in inequality amongst
citizens inside the former communist bloc. The urban-rural divide in inequality inside
China and India are also explained, and indeed this particular factor greatly explains
the gap in the measured Gini coefficient using category 2 and 3 methods.
It can be argued that the category 3 Gini coefficient is the superior indicator of global
inequality, but that the category 1 Gini is still the best measure of international
differences in income, and especially whether there is convergence between incomes
of poor and rich nations. This has patently not occurred, see Milanovic (2003).
Whereas in 1960 there were 22 upper-middle class nations, contending to join the
wealthy group with two-thirds or more of the average income in the poorest OECD or
rich country, by 2000 there were only 8 such nations. The number of countries with
between a third and two-thirds of the poorest OECD country income declined from 39
to 25 during the same period, indicating that the lower-middle classes too have been
squeezed. The numbers of rich (OECD type) countries also fell, from 41 to 31; the
rich man’s club is much more exclusive nowadays. Most importantly, the number of
really poor nations (the fourth world or the lower classes) defined as having an
average income less than a third of the lowest OECD national average income rose
from 25 in 1960 to 67 in 2000. This is conclusive evidence that the world is becoming
polarized into rich and poor nations since the beginning of moderate globalization in
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1960. We are also living in a world where there is a vanishing middle class in the
sense of inter-country differences (Milanovic, 2003).
Is rising global inequality, or inequality for that matter, cause for concern? Or should
we only worry ourselves with absolute levels of poverty whether based on national
standards or the international dollar a day measure of abject poverty. Clearly, this
depends on our notion of justice. The current development-donor focus is on poverty
alleviation. While this is a lofty ideal, citizens of the globe, including those residing in
poor nations are more aware of the differences in their own circumstances and
capabilities compared to those of fellow human beings in rich nations. This is all the
more so in a digital age, where satellite television and the Internet are widespread. A
Gini coefficient of 66 (category 3 inequality) means that the expected difference
between two random individuals income is $9200 based on an average world income
of $7000.3 It also implies that accidents of birth, in terms of nationality, not social
class can cause a $9200 earning difference. The same figure would be $7560 with a
Gini coefficient of 54 (category 1 inequality). Such levels of inequality are truly
staggering; they would be intolerable in most Western democracies. Countries with
national Gini coefficients around 60 such as Brazil and South Africa are ridden with
strife, usually taking on the form criminal violence.
I have argued elsewhere, Murshed (2002a) that a viable social contract with agreed
upon rules for redistribution is necessary to contain dissent, open conflict and civil
wars in developing countries. Moreover, excessive inequality is incompatible with
democracy. This concept of the social contract has its international counterpart too,
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one which we might refer to as the development contract, that is needed to sustain
world peace.
This paper has argued that the two historical waves of economic globalization have
continually widened the gap between developed and developing countries. Indeed,
19th century globalization can be argued to have created the proto-third world of the
present, and late 20th century globalization can be said to have cemented the process
of marginalization of the third world. Thus, globalization has increased international
inequality and the disparity between nations. Therein lie the seeds of conflict. Even
within developed countries, especially in the Anglo-Saxon world, inequalities and
wage dispersion have risen. All of this coincides with the demise of the earlier
development contract governing North-South interaction since about 1980, the
beginning of the current phase of accelerated globalization. It has been replaced
instead with a strategy of containment. This strategy is reflected, inter alia, in the
donor obsession with poverty reduction and the convoluted PRSP (poverty reduction
strategy papers) as opposed to an equal emphasis on reducing global disparities.
Poverty reduction policies are laudable. True development, however, comes from the
parallel reduction of global inequalities, without which the process of exclusion
cannot be halted, in a globalized digital age. Evidence that a strategy of containment
is not working comes from developments such as transnational terrorism,
international crime and illegal migration.
Globalization necessarily produces winners and losers. Both historical episodes of
globalization resulted in a backlash, involving both intellectual opposition as well as
direct action. The intellectual critics of globalization mainly came from the radical-
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left, then and know. The alternative ideology a century ago was socialism, something
no longer viable. Islam is the only truly self-contained ideological opposition to
counter the forces of globalization and hegemonistic Anglo-American capitalism, see
Milanovic (1999). Other movements, environmentalism for example, oppose
globalization on single issues. This is not to say that the leadership in Muslim states
(except Iran) resist the economic and political forces of globalization. Yet Islam,
particularly Shia Islam, has a very long tradition of direct action against injustice and
oppression, and this continues to motivate systemic dissent and resistance to
globalization amongst Muslim groups worldwide.
Crucially, the marginalization of the third world during 19th century globalization
produced nationalism and rebellion. At present we can witness a great deal of internal
conflict in the developing world. We are used to viewing war as something that
happens between nation states. Today’s wars mostly occur between groups within
the same country, and in the developing world.4 Inter-group differences, as well as the
breakdown of the rules governing inter-group redistribution are major factors
contributing to these conflicts. Domestic conflicts are not the only form of new war.
Transnational terrorism, and the strategy of war on terrorism to combat it, is another
form of “new” war. Here intrinsic motivation, which often takes the form of the
collective sense of humiliation and impoverishment in an age of globalization, plays a
greater role; therefore deterrence against terrorists may backfire if it hardens their
resolve to resist. The other type of war is associated with aggressive unilateralism, on
the part of the USA and other regional powers such as India and Israel, which allows
them to pursue strategic aims through force in a manner unthinkable in the days of
non-globalized superpower rivalry.
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Globalization also produces a democratic deficit. The decline of the powers of the
nation state may be a good thing, but not inasmuch as it reflects the democratic
aspirations of peoples. Instead of national control we have rule by the hegemonist
behind globalization (the USA), institutions that govern globalization (the IMF,
World Bank and the WTO) and the corporations that profit from globalization. This
has been described as the “silent takeover” by Hertz (2002). Corporations have
inordinate power in determining the rules of the game, something they also had in the
earlier colonial era of globalization. Colonies were established by the British and
Dutch East India companies for profit. Colonial trade policies were in favor of exports
from the colonial powers to the colonies. Commodore Perry forcibly opened up Japan
to free trade.
Today powerful pharmaceutical firms prevent the manufacture of cheaper generic
drugs hiding behind WTO rules. The IMF serves the interests of financial markets
foremost in designing its responses to financial crises, bitter pills that developing
countries are forced to swallow (Stiglitz, 2002). There is an asymmetry there, as these
same policies cannot be pursued in the North.5 Structural adjustment policies
conducted through the World Bank resulted in the reduction of social sector
expenditures, hurting the poor and engendering greater inequality. Contrast this to
developed countries, where social sector expenditure is mandatory within the context
of established social policies. This means that during an economic downturn counter-
cyclical government expenditures prevent the unemployed from sinking into poverty.
Above all, social policy is democratically determined in national legislatures, not by
international institutions dominated by conservative economists.
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Reform of the international institutions that govern globalization is essential. As
Nayyar (2002) has pointed out there needs to be a greater balance in voting rights
enjoyed by creditor and debtor nations inside international institutions with clout,
such as with the twin Bretton institutions, the World Bank and the IMF. At the
moment the creditor nations in the North enjoy inordinate power in the governing
boards of directors of the Bretton Woods institutions. Yet debtor nations contribute
considerably to the share capital of these organizations when they service their debt
and repay loans. Also, there needs to be a greater recognition of developmental goals
in fashioning the WTO agenda, and designing the operations of the IMF (the World
Bank as well, one suspects). Kanbur (2001) has also pressed the case for greater
dialogue between those who believe in the greater optimality of markets and those
with a more humanitarian agenda, which ought to be facilitated by their common
objective to development.
There are many hopeful signs, however. Civil society, and action by it, is filling the
democratic deficit in many ways. One is encouraged, particularly by the activities of
development non-governmental organizations (NGOs) and other philanthropic
organizations in the North operating in the spheres of debt, trade, the environment,
poverty reduction, human rights and conflict resolution. To give but one example, the
Jubilee 2000 movement managed to place the need for debt reduction for the poorest
nations on to the agenda of G-7 summits. In the final analysis the problems of global
poverty and inter-national inequalities are a problem for everyone in an age where
isolationism is no longer viable. The North, acting in its own self-interest, has to
abandon the strategy of the containment of the third world for a truly development
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Marginalization in an Era of Globalization S Mansoob Murshed
compact, in the interests of world peace. This has implications for the entire polity in
the North. But the signs are that development NGOs and philanthropic institutions are
leading the way in persuading governments in the global North to act in areas such as
human rights, conflict resolution, trade policy, debt relief and poverty alleviation.
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Marginalization in an Era of Globalization S Mansoob Murshed
BIBLIOGRAPHY
Davis, Michael (2001) Late Victorian Holocausts: El Niño Famines and the Making
of the Third World, London: Verso.
Concerned with the colonial experience of the integration of much of the
contemporary third world into the international economy in the 19th century.
There is special emphasis on the role of famines in weakening resistance in
colonies, and in compelling the peasantry to switch to cash crops and
pastoralists to paid labor in mines.
Dollar, David and Aart Kraay (2001) Trade, Growth and Poverty,
www.wider.unu.edu.
This paper argues that successful globalizers (the top one-third of countries who
managed export expansion in an age of globalization) also reduced poverty.
Hertz, Noreena (2002) The Silent Takeover: Global Capitalism and the Death of
Democracy, London: Arrow Books.
This book argues that there is a tendency for a quiet takeover by corporate institutions
aided by policies in international institutions leading to a concentration of
production by a few firms worldwide.
Kanbur, Ravi (2001) Economic Policy, Distribution and Poverty: The Nature of
Disagreements, World Development, 29 (6), 1083-94.
On the nature of disagreements between economists and others concerned with
development based on the unit of analysis (aggregate economy versus
individuals), the short versus the long-run, and over the efficacy of markets.
Milanovic, Branko (1999) ‘On the Threshold of the Third Globalization: Some
Historical Angles’, unpublished manuscript.
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Marginalization in an Era of Globalization S Mansoob Murshed
Argues that there were three historical phases of globalization: during the Roman
empire, resisted by Christianity; in the 19th century opposed by socialism; and,
contemporary globalization, which is effectively challenged only by Islam.
Milanovic, Branko (2002a) ‘True World Income Distribution, 1988 and 1993. First
Calculations Based in Household Surveys Alone’, Economic Journal, 112.
This paper reports on rising world inequality with individuals rather than nations as
the unit of analysis, based on global household surveys since 1988.
Milanovic, Branko (2002b) ‘The Two Faces of Globalization: Against Globalization
as We Know It’, www.worldbank.org/reseearch/inequality.
Various measures of global inequality are considered showing that inequality has
gone up. Moreover, globalization marginalizes in a variety of other ways such
as the return of old diseases in Africa.
Milanovic, Branko (2002c) ‘Unexpected Convergence: Disintegration of the World
Economy 1919-39, and Income Convergence Among Rich Countries’,
www.worldbank.org/reseearch/inequality.
Shows that economic convergence within the developed world continued in the inter-
war period despite a sharp decline in international trade and free market
economics contrary to conventional economics.
Milanovic, Branko (2003) Notes on Inter-National Inequality.
A summary of the data on global inequality.
Murshed, S. Mansoob (1992) Economic Aspects of North-South Interaction. London:
Academic Press.
This book considers a variety of macroeconomic interaction between the North and
South, leading to the debt crisis, the effects of protectionism in the North and
the integration of the former East bloc into the global economy.
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Marginalization in an Era of Globalization S Mansoob Murshed
Murshed, S. Mansoob (2002a) 'Conflict, Civil War and Underdevelopment', Journal
of Peace Research, 39, 387-93.
Outlines how violent internal conflict is caused by the decline of the social contract.
Murshed, S. Mansoob (2002b) ‘Perspectives on Two Phases of Globalization’ in S
Mansoob Murshed (ed), Globalization, Marginalization and Development,
London: Routledge.
Historical comparison of two episodes of economic globalization: 19th century and at
present.
Naoroji, Dadabhai (1901) Poverty and Un-British Rule in India, London: Swan
Sonnenschein.
Describes the poverty inducing consequences of the drain of resources from India to
Britain through a variety of charges and the operation of currency arrangements.
Nayyar, Deepak (ed) Governing Globalization: Issues and Institutions, Oxford:
University Press for UNU/WIDER.
A collection of papers arguing for the need for reform of outmoded United Nations
and Bretton Woods institutions that are not geared to equitably manage
contemporary globalization.
Schäfer, Wolf (2003) ‘Mapping the Road to Globality’
Considers historical phases of globalization along with European and American
hegemony.
Stiglitz, Joseph (2002) Globalization and its Discontents, London: Allen Lane.
A seminal critique of the management of the world economy and economic crises in
the third world and transition economies by the IMF (International Monetary
Fund) especially.
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Marginalization in an Era of Globalization S Mansoob Murshed
UNDP (1999) Human Development Report-1999, New York: United Nations
Development Programme.
A report and a database on human development indicators (HDI).
* I am grateful to conference participants for their comments. 1 Low inflation and minimal state intervention and ownership. 2 There are other measures of inequality such as the Theil index. 3 This figure is obtained by multiplying the Gini coefficient of 0.66 by 2 times the mean world income, $7000. 4 There have been over 40 conflicts in developing countries, which led to at least 1000 deaths in any one year in the 1990s, see Murshed (2002a). 5 Interest rates are reduced, not increased, following financial crises in developed countries.
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Marginalization in an Era of Globalization S Mansoob Murshed
Dr Murshed’s career highlights include a Research Fellowship at UNU-WIDER (World Institute for Research in Development Economics), Helsinki, Finland, 1999-2001, Associate Professorship at the Institute of Social Studies, The Hague, Netherlands. He was the first and current holder of the Prince Claus Rotating Chair in Development and Equity, University of Utrecht, the Netherlands in 2003.
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