Backlash against globalisation

By Prem Shankar Jha

More than a month after the debacle at the World Trade Organisation conference in Seattle, participants are still wondering what went so badly wrong as to lead to its ignominious collapse. Newspaper reports from Seattle, especially those appearing in the "international" press, laid the blame at the door of the various pressure groups and non-governmental organisations - the AFLCIO (the U.S. umbrella trade union organisation), the steel workers unions, and various labour and environmental NGOs, that laid siege to the meeting, swearing to abort it. The Republicans in America and the neo-liberal establishment put the blame on the President, Mr. Bill Clinton, who took the lead in sabotaging it by giving the green light to the demonstrators, saying that they had a right to protest in the streets on these issues.

More discerning commentators concluded that Mr. Clinton did this because America had gone into its pre-election mode and the administration had suddenly woken up to the fact that the opponents of trade liberalisation had votes, lots of votes. By their reckoning, which was aided by twenty-twenty hindsight, it was a monumental mistake to have held the conference in Seattle in the first place. Developing countries also blame Mr. Clinton for the failure. However, he sabotaged the conference not when he invited street demonstrations but at a press conference he gave on the second night of the WTO meet. At this press conference he announced that the U.S. would impose trade sanctions unilaterally upon countries that did not adopt labour standards. The promise was so blatantly driven by domestic American politics and, given the utter failure of its other unilateral sanctions, so utterly cynical that, according to an UNCTAD observer at the conference, "the developing countries closed their files and began packing to go home that same night.''

What none of the participants and commentators has been able to explain is why there was such a convergence of anti-WTO sentiment in Seattle in the first place. Clearly no one either in the U.S. administration or in the WTO secretariat had anticipated it. On the contrary, the U.S. had lobbied for holding it in Seattle because the administration believed that it could be presented to the American people as one more feather in Mr. Clinton's cap. This expectation was based on the extraordinarily strong performance of the American economy throughout Mr. Clinton's second term in office.

This expectation seemed well founded. America is in its third year of four per cent growth. The high growth has swelled tax revenues to the point where the Federal budget is now showing a consistent surplus and the surplus is reducing the national debt. The cessation of government borrowing has reduced the supply of bonds in the market and pushed up their prices. This has made it more profitable to hold savings in shares. Not surprisingly stock market prices are at record highs with the Dow Jones index staying around the 11,000 mark. Unemployment too is at a record low of 4.1 per cent. Indeed the growth and employment indices are the best they have been in 30 years. And all this has been achieved with a virtually zero rate of inflation. If there is any country that has emerged a clear winner from globalisation, it is America. Why then should there be such a huge backlash against the very development that has propelled America decisively to the top?

The answer is that the Clinton administration has become a victim of its own propaganda. It has begun to believe all the good news that comes out of the statistics that it routinely collects and chosen to ignore the bad news. The bad news is that even in America, globalisation is tearing society apart in a manner that the world has not witnessed since the early years of the industrial revolution two centuries ago.

In a much discussed book "The Age of Diminished Expectations," the MIT economist, Dr. Paul Krugman, captured the change that globalisation has wrought to income distribution in American society in a single graphic image. Between 1947 and 1973 a graph of the rise in American real, family incomes for different segments of society looked like a picket fence. Between 1974 and 1994 - the period in which markets became globalised - it looked like a staircase.

What Dr. Krugman was referring to was the fact that in the first period, the annual growth of real income for every quintile of society was the same. In fact, the income of those who fell in the middle quintile - between the 40 per cent and 60 per cent mark - recorded a slightly higher annual growth of real income than the rest, clear proof of a burgeoning middle class. In contrast, between 1974 and 1994, the real income of the poorest 40 per cent of the families actually fell in absolute terms. At the other end of the spectrum, the income of the top 20 per cent rose fastest, while the incomes of the top one per cent of American families rose by 3.6 per cent per annum or 1.1 per cent faster than in 1947 to 1973.

These figures are for family income and not individual earnings. Another authoritative estimate shows that during the same period the average earnings of 60 per cent of Americans fell in real terms while those of a tiny fraction of income earners, almost entirely to be found in trans-national corporations and finance companies, rose like an express elevator. Average family incomes remained static or rose marginally only because more women joined the workforce and salary and wage differences between them and men narrowed. The widening income gap in industry is reflected in the fact that while the average chief executive earned 35 times as much as the average worker in 1973 he earns 120 times as much today.

What America's growth figures are hiding is the long tail of workers in distress that has emerged. Two examples will illustrate this point: in 1995, there were more jobs created than destroyed in Long Island, New York. But while the average annual income in the jobs that were destroyed was $42,790, the median income in the new jobs created was $18,000 per year. This was $5,000 less than what a single mother with two pre-school children needed to keep her job and sustain her family. In the same year the Chicago Urban League calculated that only one in every 227 jobs that was being created in the city met the above criterion.

Most Americans believe that in some obscure way, this disappearance of the middle class and the emergence of a poverty tail is the result of a de-industrialisation of America, which is a direct result of globalisation - more specifically of the export of capital by trans-national companies to low wage countries to produce what was previously being produced at home. But this misgiving has been kept at bay by a brain washing exercise carried out by a coalition of big business, the U.S. administration and the media, that has few parallels in history.

For the whole of his second term in office Mr. Clinton has kept assuring the American people that globalisation is a win-win development for all Americans; that their pains were the pains of transition, and would soon be over. During the past three years as the American recovery turned into a boom, and the budget deficit into a surplus, he told them that the benefits of globalisation had finally arrived.

But American workers know differently. The most recent data show that family incomes have still not increased, mainly because female participation in the workforce and wage rates have ceased to rise. Unemployment has declined but the jobs that are being created are more and more demeaning - a far cry from the secure blue-collar work that has vanished. And they are asking themselves, 'if this is all we get from the longest boom and strongest growth in U.S. history, then what will happen to us when the boom ends?' Underlying today's seeming prosperity, therefore, is a rising undercurrent of fear. That is what crystallised at Seattle in the beginning of December.

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