THE WISDOM FUND: News & Views
October 10, 2000
The Wisdom Fund

Corporate Globalization Threatens World's Poor, Middle Class

by Enver Masud

Beseiged by 9000 protesters, 14,000 of the world's financial elite met this September in Prague at the 55th annual summit of the International Monetary Fund (IMF) and the World Bank to propose schemes for furthering corporate globalization--a globalization that threatens the poor and middle class of both the developing and developed world say the protestors.

The demonstrations in Prague this September were the latest in a series of protests, which have targeted summits of the World Trade Organisation (WTO) in Seattle last December, and the IMF and World Bank in Washington in April.

Labelled anti-capitalist or anti-globalist, the protests are ultimately about free markets, democracy, and societal values. The protesters see themselves as a global movement for living democracy. Evidence and experts lend credibility to the protestors' arguments.

The divergence of views regarding the global economy has much to do with how success is measured by the IMF and World Bank, i.e. increases in Gross National Product (GNP)--the market value within a nation for a year of all goods and services produced as measured by final sales of goods and services to individuals, corporations, and governments plus the excess of exports over imports.

GNP falls short as the sole measure of successful development because it does not properly reflect the living conditions of the majority of the poor and middle class--the way in which it is computed sometimes leads to absurd results. For example, the costs of cleaning up the Exon Valdez oil spill counted as a plus to the GNP according to David C. Korten, a graduate of the Stanford Business School, faculty member at Harvard University Graduate School of Business, with stints at the Ford Foundation, and the U.S. Agency for International Development.

Created in 1990 by Pakistani economist Mahbub ul Haq, and advocated by Nobel laureate Amartya Sen, the Human Development Index (HDI) measures a country's achievements in terms of life expectancy, educational attainment, and adjusted real income. The HDI is a recognized tool of development evaluation at the United Nations Development Program (UNDP).

The UNDP "Human Development Report 2000" ranks countries by HDI as being high, medium, or low in human development.

Of the 174 countries ranked, 46 belong in the "high" human development group. These include Canada, Norway, and the U.S. ranked 1, 2 and 3, and five Muslim countries: Brunei Darussalam--32, Kuwait--36, Bahrain ranked 41, Qatar--42, and United Arab Emirates--45.

The "medium" human development group includes 93 countries including Cuba--56, Malaysia--61, Libya--72, Kazakhstan--73, Saudi Arabia ranked 75, Lebanon--82, Oman--86, Jordan--92, Albania--94, and Iran--97, Indonesia--109, Egypt--119, India--128, Pakistan--135.

The "low" human development group includes 35 countries including Sudan ranked 143, Bangladesh--146, Yemen--148, Tanzania--156, and Sierra Leone--174.

Saudi Arabia stands out as an example of the shortcomings of GNP as a measure of successful development. Despite an average annual growth rate of 5.6 percent from 1965 to 1997, on human development Saudi Arabia ranks behind Libya which has suffered under a U.S.-backed, UN embargo since 1992, and Cuba--virtually isolated for 40 years!

As any competent manager knows, you get what you measure. The IMF/World Bank use GNP as the primary measure of success, whereas HDI measures real improvement in the lives of human beings.

Their achievements, according to Mr. Korten, bring the real functions of the IMF, the World Bank, and the WTO--established by the General Agreement on Tariffs and Trade (GATT), and which plays a crucial role in the further liberalization of the world economy--into sharp focus.

Mr. Korten, says Archbishop Desmond M. Tutu, provides "a searing indictment" of the unjust international economic order in his widely-acclaimed book "When Corporations Rule the World." Klaus Schwab, President, World Economic Forum says Mr. Korten's book creates "an intellectual framework for the entry of humankind into the 21st century."

Mr. Korten writes: "The World Bank has served as an export-financing facility for large Northern-based corporations. The IMF has served as the debt collector for Northern-based financial institutions. GATT has served to create a corporate bill of rights protecting the rights of the world's largest corporations against the intrusions of people, communities, and democratically elected governments."

When developing countries are unable to repay their debts, the World Bank and IMF impose "economic reforms" on the country. Under the label of "structural adjustment" even more of the country's resources are channeled to debt repayment, and laws are rewritten to open national economies to the global economy in which the developing country cannot compete. Such programs are declared succesful when GNP growth rates increase. Yet country trade deficits, and debts are seldom reduced, and social conditions usually worsen.

Veteran British journalist Graham Hancock, author of the "Lords of Poverty: The Power, Prestige, and Corruption of the International Aid Business," says that "official" development organizations administer the West's aid and deliver it to the poor of the Third World in a process that has been described as "a perversion of the act of human kindness." His book gives many examples of failed projects, and their impact on the people and the environment. In country after country economic growth has been accompanied with decreases in the quality of life for the poor and middle class.

When the World Bank was created to facilitate capital investments in "backward and underdeveloped" regions of the world, "little note was taken of the evident contradiction," writes Mr. Korten, "that if maintaining the U.S.-style economy required access to most of the world's resources and markets, it would be impossible for other countries to replicate that experience. Nor is it evident that much thought was given to the contradiction of financing industrial exports to low-income countries with international development loans that could be repaid by these countries only if they developed export surpluses with the countries that had initially extended the loans."

Indeed, every $1 contributed to the World Bank, claims the U.S. Treasury Department, returns $2 to the U.S. economy. Meanwhile, the gap between the rich and the poor continues to grow--not only in the developing countries, but also in the U.S.

A new survey by the U.S. Federal Reserve found that the nation's poor are not just falling further behind the more fortunate--they were worse off, in absolute terms, in 1998 than in 1995.

Mr. Korten writes: "In 1950--about the time the commitment was made to globalize the development process--the average income of the 20 percent of people living in the wealthiest countries was about thirty times that of the 20 percent living in the poorest countries. By 1989, this ratio had doubled to sixty times.... "The argument that globalization increases competition is simply false. To the contrary, it strengthens tendencies toward global-scale monopolization."

According to James K. Galbraith, professor at the LBJ School of Public Affairs, the University of Texas at Austin: "The success stories of the developing world in the years since 1979--China, Taiwan, and India above all--have in common insulation from the global capital markets and freedom from major private debt."

The true purpose of foreign aid was revealed by George Ball.

In his memoirs, "The Past Has Another Pattern," published in 1982, Mr. Ball, undersecretary of State in the Johnson and Kennedy administrations, wrote: "Our foreign aid, small as it is, has become largely a selective instrument of political coercion."

Unlike the protestors gathered in Prague, much of the world has yet to wake up to the dangers of corporate globalization--an erosion of national sovereignty and democracy, and the promotion of consumerism at the expense of traditional and/or family values and social justice.

Unchecked, the juggernaut of corporate globalization will lead to ever more repressive societies as corporations rewrite laws to protect their priveleges, and governments increase budgets to enforce those laws at home and abroad.

The U.S. military, whose $288 billion annual budget dwarfs that of the rest of the world, has called for additional spending of more than $50 billion a year through most of this decade to better serve its corporate masters.



[Enver Masud is an engineering management consultant, author of "The War on Islam," and founder of The Wisdom Fund--www.twf.org. This article was published in England in Impact International, November 2000.]

[". . . and above all to see the lowering of the British flag which was raised there in 1842, following the defeat of China. Acting in the name of 'free trade,' the British decided to punish China for outlawing the lucrative dope traffic, instigated by British and American merchants. (China seized the British opium and burned it, much like the patriots dumped the imported tea into Boston harbor).

"Cheering the British, John Quincy Adams accused China of being 'anti-commercial,' unneighborly, and violating the Christian precept 'to love your neighbor as yourself' -- meaning free trade among equals. The Treaty of Nanking set the pattern for a series of unequal treaties which effectively reduced China to a semi-colony until 1949. While Western powers exploited China's resources, the average life span of Chinese hovered around 30."--L. Ling-Chi Wang, "The Closing Chapter of the Opium War," Jinn, June 25, 1997]

[In the 1980s capitalism triumphed over communism. In the 1990s it triumphed over democracy and the market economy.--David C. Korten, "The Post-Corporate World," Kumarian Press, 1999]

["As people in Seattle were saying, the international institutions go around the world preaching liberalization, and the developing countries see that means open up your markets to our commodities, but we aren't going to open our markets to your commodities. In the nineteenth century, they used gunboats. Now they use economic weapons and arm-twisting."--Interview with Joseph Stiglitz (Nobel Prize-winner, Chairman, President's Council of Economic Advisers, Chief Economist, World Bank), The Progressive, June 2000]

["In the second extract from his eagerly awaited new book, Will Hutton reveals why the American economic miracle is not all it seems."--"What Europe can teach Uncle Sam," Guardian, April 29, 2002]

["There's an Assistance Strategy for every poorer nation, designed, says the World Bank, after careful in-country investigation. But according to insider Stiglitz, the Bank's staff 'investigation' consists of close inspection of a nation's 5-star hotels. It concludes with the Bank staff meeting a begging, busted finance minister who is handed a 'restructuring agreement' pre-drafted for his 'voluntary' signature.

Each nation's economy is individually analyzed, then, says Stiglitz, the Bank hands every minister the same exact four-step program."--Gregory Palast, "The Globalizer Who Came In From The Cold," The Wisdom Fund, September 3, 2001]

["Here, the distinguished Indian writer Arundhati Roy argues that it is the demands of global capitalism that are driving us to war."--"Not Again," Guardian, September 27, 2002]

["James D. Wolfensohn, president of the World Bank, accused wealthy countries of 'squandering' $ 1 billion a day on farm subsidies that often have devastating effects on farmers in Latin America and Africa."--"Rich Nations Are Criticized for Enforcing Trade Barriers," New York Times, September 30, 2002]

["For the last twenty years the United States has been promoting throughout the non-Western world raw, laissez-faire capitalism--a form of markets that the West abandoned long ago. . . . It is striking to note that at no point in history did any Western nation ever implement laissez-faire capitalism and overnight universal suffrage at the same time--the precise formuala of free market democracy currently being pressed on developing countries around the world."--Amy Chua, World on Fire: How Exporting Free Market Democracy Breeds Ethnic Hatred and Global Instability, Doubleday, 2002]

["Underlying the US drive to war is a thirst to open up new opportunities for surplus capital."--"Too Much of a Good Thing," Guardian, February 18, 2003]

["Former Secretary of State George Shultz is on the board of directors of the Bechtel Group, the largest contractor in the U.S. and one of the finalists in the competition to land a fat contract to help in the rebuilding of Iraq."--"Spoils of War," New York Times, April 10, 2003]

["Rather than rebuilding, the country is being treated as a blank slate on which the most ideological Washington neo-liberals can design their dream economy: fully privatised, foreign-owned and open for business."--Naomi Klein, "Bomb Before You Buy," Guardian, April 14, 2003]

["Because foreign aid is welfare for governments, the Iraqi project's success will largely depend on how little aid is given."--Jude Blanchette, "Foreign Aid, Foreign Disaster," Ludwig von Mises Institute, April 23, 2003]

["Taking advantage of the debt crisis, the World Bank and the IMF began to dismantle the developmental states in the Periphery. In 1994, shortly after the collapse of Soviet Union, Core capital created the World Trade Organization in order to deepen and police the neoliberal, open-door regimes it had imposed on the Periphery. After a hiatus of some three decades, power was once again centralized in the Core states."--M. Shahid Alam, "Pauperizing the Periphery," CounterPunch, June 7, 2003]

["Demonstrations were held at Tehran University dormitory on Tuesday and Wednesday nights in protest against a plan to privatize the universities."--"Iran protest rally at student dorm turns violent," Payvand's Iran News, June 13, 2003]

Larry Elliott, "The lost decade: They were promised a brighter future, but in the 1990s the world's poor fell further behind," Guardian July 9, 2003

Stephen Moore, "Welfare for the Well-Off: How Business Subsidies Fleece Taxpayers," Hoover Intitution, Essays in Public Policy

Paul Blustein, " Free Trade's Muddy Waters," Washington Post, July 13, 2003

"The Rigged Trade Game," New York Times, July 20, 2003

"The Great Catfish War," New York Times, July 22, 2003

M. Shahid Alam, "The Global Economy Since 1800," CounterPunch, July 26, 2003

"Book Says Rich Nations Use Bribery, Fear In WTO Negotiations," UN Wire, September 4, 2003

Tony Benn interview, "Capitalism: the case against," HARDtalk, October 15, 2003

Maxine Frith, "Global trade keeps a billion children in poverty, says Unicef," Independent, October 22, 2003

Joseph Stiglitz, "America preaches free markets, but at home it's a different story," Guardian, October 29, 2003

[There is no evidence that Islam restricts economic growth, according to new research that casts doubt on the widely-held belief that Muslim societies are intrinsically less conducive to capitalism than those dominated by other religions.--Alan Beattie, "ISLAM NO BAR TO ECONOMIC GROWTH: U.S. STUDY," Financial Times, December 7, 2003]

David Cay Johnston, "Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich - and Cheat Everybody Else," Portfolio, December 25, 2003

Randeep Ramesh, "Monsanto's chapati patent raises Indian ire," Guardian, January 31, 2004

David Moberg, "Plunder and Profit The IMF and World Bank continue to push privatization, in spite of its massive failures," In These Times, March 4, 2004

[Over the past 10 years, the number of people under the dollar-a-day line has fallen by about 100 million, from 1.2 billion to 1.1 billion.--Editorial: "Good News on Development," Washington Post, April 23, 2004]

J. K. Galbraith, "A Cloud Over Civilisation: Corporate power is the driving force behind US foreign policy - and the slaughter in Iraq," Guardian, July 15, 2004

"Human Development Report 2004: Cultural Liberty in Today's Diverse World," UNDP, July 15, 2004

[We loaned it billions of dollars so it could hire our engineering and construction firms to build projects that would help its richest families. As a result, in those three decades, the official poverty level increased from 50 to 70 percent, under- or unemployment increased from 15 to 70 percent, public debt increased from $240 million to $6 billion, and the share of national resources allocated to the poorest citizens declined from 20 percent to 6 percent. Today, Ecuador must devote nearly 50 percent of its national budget simply to paying off its debts --John Perkins, "Confessions of an Economic Hit Man: How the U.S. Uses Globalization to Cheat Poor Countries Out of Trillions," Berrett-Koehler Publishers (November 9, 2004), p. 203]

[It found that 61% of aid flows were "phantom" rather than "real" - rising to almost 90% in the case of France and the United States.--Larry Elliott, "Scandal of 'phantom' aid money," Guardian, May 27, 2005]

John Perkins, "The Secret History of the American Empire: Economic Hit Men, Jackals, and the Truth about Global Corruption," Dutton Adult (June 5, 2007)

[The worst financial crisis since the Great Depression is claiming another casualty: American-style capitalism.--Anthony Faiola, "The End Of American Capitalism?," Washington Post, October 10, 2008]


"23 Things They Don't Tell You About Capitalism," The Real News, April 24, 2011

[Will the 830 million people living on Rs.20 a day really benefit from the strengthening of a set of policies that is impoverishing them and driving this country to civil war?--Arundhati Roy, "I'd rather not be Anna," thehindu.com, August 21, 2011]

Lynn Stuart Parramore, "How Piketty's Bombshell Book Blows Up Libertarian Fantasies," alternet.org, April 27, 2014

Statistics come to life when Swedish academic superstar Hans Rosling graphically illustrates global development over the last 200 years.--"200 Countries, 200 Years, 4 Minutes," flixxy.com

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