You are on page 1of 18

People Over Profits:

Fixing the Flaws of Globalized Capitalism for More Sustainable Societies

By: Martin Emerson Suffolk University December 12, 2011

Emerson 2 Abstract Humankind has arrived at a crucial point in history now that the worlds population is rapidly approaching seven billion people. By 2050, the United Nations estimates that approximately 9.1 billion people will inhabit the Earth; therefore governing authorities worldwide must acknowledge that an aggregate global population of such size will undoubtedly encourage ruthless competition for the acquisition and control of all finite resources. Thus said, shortages in food, drinking water and housing are imminent; poverty will plague nations and individual sentiments toward national governments will sour. This potential reality in which the dangers of overpopulation, coupled with ineffective national governments and a failure of the international institutions to address these challenges, will ultimately manifest increased human selfishness, societal chaos and the absolute triumph of anarchy. Despite this alarming premonition, the global community lacks a comprehensive policy that elucidates a collective response in preparation for these universal challenges accelerated by neoliberal economic globalization. Even more alarming, however, is that in the United States, Americans recognize the social grievances and perpetual inequality consistent with free-market capitalism, yet the Republican Party stands united in opposition to any measure seeking to rectify these flaws. Unsurprisingly, the Washington consensus continues to advocate the same neoliberal-market principles that provoke poverty, homelessness and hunger as the solution for poverty eradication and all other quality-of-life issues. This conundrum thus represents the defining oxymoron of domestic and international security concerns in contemporary times, as globalized free-market capitalism is both the problem and apparently the solution. How, then, can the negative externalities associated with globalized capitalism be rectified?

Emerson 3 The primary issue at hand is the unfair and arbitrary distribution of wealth. Those who support uninhibited globalized capitalism are fighting to continue it, while those who oppose it either refrain from acting or perhaps lack the capital resources and technologies necessary to campaign their case. In the U.S. furthermore, particular stigmatisms are associated with the anti-globalization camp: isolationists, communists, and socialists, are a few of the terms used to discredit any attempt at reform. Perhaps the intent of American Cold War-era propaganda, each of these terms has considerably negative connotations given that each term opposes neoliberal market economics. Conversely, those who support economic globalization are labeled as imperialists, inhumane, selfish, and greedy. It should be clear then, that the debate regarding neoliberal economic globalization is not only contentious within the United States, but among the entire world. In order to revolutionize the worlds present economic system to be more egalitarian and sustainable by default, the global community must adopt the goal of universal social welfare as fundamental to all collective policy. A departure from the status quo of increasing privatization, speculative market volatility and rising income disparities among the rich and poor, to a reformed capitalist system that emphasizes sustainability at the community level, is in fact the best option moving forward.

Introduction

Emerson 4 Following World War II and even more so after the collapse of Soviet communism in 1991, American capitalism has triumphed to almost every corner of the globe as the dominating approach to the global political economy. As a result, the United States has since enjoyed an unrivaled hegemonic status, which it has fought relentlessly to preserve from the inevitable tides of change. For this reason capitalism is still exported by the United States to any and every country that may serve a strategic economic interest. Facing coercion by the United States and other major economies, it is almost impossible for nation-states to reject neoliberal economic policies (Machida). Capitalism is first and foremost an economic institution. The transactions of goods, services and assets happen through markets, which are embedded in a social infrastructure of governments, civilians and international institutions. Each of these entities plays to some degree a role in the wealth redistribution process (Dunning). The theory behind capitalism suggests that controlling the major factors of production; land, labor and money, will always produce economic advantages to an individual, enterprise, and government (Machida). Global markets and social infrastructures are closely interconnected with each other through a web of transnational commercial activities, which represents the essence of globalized capitalism (Dunning). As an ideology, capitalism objectifies the private acquisition of money when premised that life is ultimately a competition: one that produces winners and losers. Under this theoretical framework an entity lacking adequate access to capital resources, therefore, will undoubtedly suffer grievances. Whether cognizant of this fact or not, the majority of the worlds population is subjected to neoliberal economic globalization and its various facets and mechanisms (Dunning).

Emerson 5 According to Raab et. al., neoliberal economic globalization refers to heightened levels of international trade and investment coupled with high levels of deregulation. In the global economy, neoliberal market principles, also known as invisible hand economics, is the driving mechanism (Raab). This system is now global as the coercive influence of the United States glorifies neoliberal economic policies in the world economy. Moreover, as America continues to exerts her tremendous influence, neoliberal economic globalization will continue to widen the income gap between the wealthy and the poor (Makki). As a consequence, the global population is socially stratified on a vast scale of socioeconomic classes. This fact of inequality stems from a nations relative position within the global political economy. To explain, the world is divided into three separate zones: core, semi-periphery, and periphery (Machida). Nation-states located in the periphery, like Indonesia, Colombia and Brazil, are forced to service the interests of the core nations, like the United States, Great Britain or France, for example. The former group of developing nations faces exploitation through labor-intensive production in foreign-owned factories. Core nations, which focus on capital-intensive productions, are able to capitalize on the periphery nations, allowing them greater benefits in the worldeconomy (Machida). This system works well for core nations as global capitalism imposes a structure of severe inequality on citizens in developing economies. According to a 2011 study by CBC News, a Canadian media conglomerate, there are approximately 10.9 million people in the world that possess at least USD $1 million or more in liquid assets, with an aggregate total of USD $47.2 trillion. Therefore, less than 1% of the seven billion people presently on Earth have truly reaped the benefits of

Emerson 6 neoliberal market economics, a term synonymous with economic globalization and globalized capitalism. It should also be noted that these figures do not include home values or other private property, as only capital reserves were taken into consideration. To put this data into perspective, the World Hunger and Education Service (WHES) estimates that as many as 1.02 billion people are living off USD $1 or less per day (WorldHunger.org). Schools of Thought Economic globalization affects citizens around the world in different ways, depending on their states position in the global economy. Citizens that live in the core industrialized nations are more likely to be in support, given that almost one third of worlds wealthiest people live in the United States, Germany and Japan (Bower). Conversely, poorer nations typically fret most western ideas with any resemblance to an imperialist agenda. As a consequence, the debate on the pragmatism of globalized capitalism presents two opposing theoretical perspectives: those who are in favor of neoliberal economic globalization, and those who believe the world community must recourse the direction neoliberalism is taking society. First we will examine the pro-economic globalization camp. According to supporters, neoliberalism is the best mechanism in global trade for all nations to prosper and develop fairly and equitably (Shah). This economic strategy contends that little or no governmental regulations allow the easier facilitation of global financial transactions. The free movement of capital, goods and businesses, according to this model, promotes the maximization of profits and operational efficiency. Neoliberalism however, requires the

Emerson 7 removal of tariffs, regulations, certain standards and laws, and unhindered capital movement (Shah). In addition, neoliberalism emphasizes the ability of the free market to naturally balance itself against the pressures of market demands, which is key to successful market-based economies (Shah). Richard Robbins, author of Global Problems and the Culture of Capitalism, contends that neoliberalism sustains economic growth, which inevitably encourages human progress. Others echo Robbins argument that free markets are the most efficient and socially optimal in the allocation of wealth, contending that globalized capitalism is beneficial to everyone. Through increased privatization, Robbins argues, inefficiencies are removed from the public sector and innovation, growth and development are promoted. On the international level, neoliberalism represents freedom of trade in goods and services, free capital mobility, and the freedom to invest in any market (Robbins). According to J.H. Dunning, economic research finds that the degree of a countrys openness and adaptability to contemporary technology brings, with time, substantial economic gains. Dunning argues that globalized capitalism increases the quality of life, promotes social justice, fairness, working conditions, gender equality and security (Dunning). Each of these positive aspects all stem from the basic tenant of neoliberalism, which is to advance material prosperity (Shah). In regards to those that oppose globalized invisible hand capitalism, several arguments are presented. Although this economic system is considered the best known to man to create wealth, the neoliberal model encourages an unacceptable level of poverty and social injustice (Novak). First, governments favor multinational, limited-liability

Emerson 8 corporations over individual citizens. As the LLC suffix indicates, these types of global corporations institutionalize an extreme form of absentee ownership. For example, a corporations headquarters may be in Delaware, but they may own several factories in a labor-cheap country like Bangladesh where human rights come second to economic growth. These LLCs protect shareholders from any liability for the harm their decisions may cause to others. Under the present system, Dunning argues that global corporations wield more power and influence than they can ethically and morally handle. Secondly, globalized capitalism leads to the disempowerment of local communities and economies. By favoring export-oriented trade, global corporations remain in control. As an inevitable consequence, local livelihoods, local jobs, and community self-reliance are destroyed (Criticisms). The environment is also negatively impacted by economic globalization. Everincreasing consumption patterns and increased disposal of toxins in oceans, land, and the air will jeopardize the ability for any living thing to sustain itself. Those who oppose globalized capitalism cite that the environment is seriously at risk as export-oriented production gives way to increased use of fossil fuels, unsustainable refrigeration, plastic packaging, and damaging infrastructures (Cavanaugh). The argument contends that a world with more airports, canals, dams, and pipelines will undoubtedly cause significant environmental degradation. Among the most negative aspects of economic globalization however, is that nations forgo their policymaking autonomy in environmental and health regulations. This keeps their hands tied and prevents any attempt for the passage of meaningful

Emerson 9 environmental legislation. This claim is consistent with the core aim for all global enterprises, which is to maximize profits. As corporations seek to reduce costs and increase market control, they capitalize on cultural homogenization, economic specialization, and by eliminating unprofitable products (Bower). Global corporations seek to profit from economies of scale, reduced operational costs, and the increased dependence of consumers on the products they deem profitable to sell (Gheorghe). Thus, the corporate strategy lacks the humanitarian aspect a sustainable society requires of its enterprises. When corporate profits are considered more important than the welfare of a local community, moreover, the negative externalities of capitalism on the global scale become easily comprehensible. Food security is another policy area that has felt the great impact of globalized capitalism. People need safe food, which neoliberal economic globalization has made into a scarce market commodity. As mega-corporations use pesticides and machineintensive labor to reduce operating costs and to maximize their profit, it is ultimately the individual citizens that will bare the cost in low-quality food and degraded soils (Cavanaugh). Moreover, the ability for a community to provide adequate food resources to its citizens is paramount for their overall survival. Thus when governments cede one of their primary responsibilities to the profit-minded private sector, eventually food security will present a national security risk. So, not only must society suffer from the environmental degradation and lowquality food as side effects of globalized capitalism, but also the widening income disparities, which are pressing more and more people into positions of economic hardship

Emerson 10 (Williams). Couple this with the privatization of public education systems, and those who are poor will become less likely to obtain a formal education. This reality corresponds with a host of other societal problems that a formal education can help to alleviate. Discussion The challenges posed by globalized capitalism under the neoliberal model are so vast that nothing short of a carefully planned and guided revolution may suffice. John Cavanaugh and Jerry Mander, authors of Alternatives to Economic Globalization, have put forth a comprehensive plan of action that, in their opinion and my own, will rectify the negative externalities associated with the neoliberal economic model presently dominating the world economy. The comprehensive solution to fix the flaws of globalized capitalism for more sustainable societies involves: reforming democracy, implementing subsidiarity, promoting ecological sustainability, defending common resources, welcoming diversity, respecting human rights, ensuring employment and livelihood, food security, poverty eradication, and universal education. I discuss each of these policy areas below. I. Reform Democracy Democracy is traditionally thought to be a government for and by the people, one that promotes social equality and public participation in policymaking. The three basic tenants are rights, rules and responsibilities. Democracy flourishes when citizens organize themselves to protect their communities and hold their elected representatives accountable for their actions (Novak). Because of the increasing interconnectedness of national economies, governments have been required to relinquished much of their

Emerson 11 operational sovereignty into the hands of multinational corporations (MNCs) increasingly so over the last two decades (Cavanaugh). A reversal is needed where governments give individual citizens and their communities preference over the subjective interests of global corporations. The first step will be to remove corporate money from politics and to center government agendas on the rights and needs of their citizens. Furthermore, accountability in all forms should be central to democracy. When those who will bare the consequences make the decisions, they are more likely to act in a responsible and ethical manner. It is thus important to limit the rights and powers of absentee owners, ensuring that those who hold decision-making power are liable for any negative outcomes their actions may cause others (Cavanaugh). II. Implement Subsidiarity The principle of subsidiarity recognizes and promotes the democratic right to selfdetermination for people, communities and nations, as long of others rights are not infringed upon. Subsidiarity follows the notion that sovereignty resides in the individual, and that legitimate political authority rises upwards from the populace by the expression of democratic will (Cavanaugh). Subsidiarity hence is indicative of decisions made as close as possible to the individuals who will bear the outcomes. Furthermore, local and national self-reliance in meeting essential needs is much more likely through domestic ownership and control of resources (Cavanaugh). Moreover, increased local ownership and community self-reliance equates less dependence and vulnerability from external exploitation and less competitive struggles for jobs, money and resources that are central to the global political economy.

Emerson 12 Please note that subsidiarity is not the same as isolationism. These concepts differ in that a sustainable society is friendly, cooperative, peaceful and mutually beneficial to all people through trade, cultural exchange, and the sharing of technology (Cavanaugh). Isolationism is the polar-opposite of globalization, while subsidiarity represents the compromising principle. III. Promote Ecological Sustainability The maintenance of biodiversity is essential for the health of all life on Earth. According to Cavanaugh and Mander, the ultimate measure of long-term viability for an economic system must finally be weather it is able to meet the genuine needs of people without diminishing the ability of future generations to meet theirs and without diminishing the natural diversity on Earth. This means that the degree to which resources are exploited and consumed cannot exceed the rates of regeneration. Furthermore, rates of pollutants and harmful emissions cannot exceed their rate of safe absorption. IV. Defend Common Resources Any attempt by persons or corporations to privatize common resources like land, water, forests, or air should be stopped and deemed unacceptable. It should be recognized that no individual created Earths natural resources, thus no one should be permitted to monopolize them. V. Welcome Diversity Cultural, biological, social and economic diversity are important for a happy and sustainable lifestyle. According to Cavanaugh and Mander, diversity is key to the

Emerson 13 vitality, resilience, and innovative capacity of any living system. Diversity is a benefit to society as differences in any area supports cultural uniqueness and saves the world from a homogenized global monoculture. VI. Respect Human Rights The goal of global trade and investment should not be the maximization of profit, but rather to enhance the quality of life for the greatest amount of people. In order to accomplish this complex task, the World Trade Organization (WTO) should coordinate with the World Health Organization (WHO) and the United Nations (UN) to require all member nations to agree to the UNs Universal Declaration of Human Rights. This will set a values-precedent for subsequent generations in their conduct of governance in international affairs. VII. Employment and Livelihood As affirmed by the Universal Declaration of Human Rights, every person is due, the right to work, free choice of employment, just and favorable work conditions, and protection against unemployment. This provision is indicative of a minimal standard of living for global citizens in the 21st century. As the system of capitalism is indicative of a product of winners and losers, governments should coordinate Adam Smiths invisible hand to redistribute a relatively small portion of wealth from the very top, to the bottom of the income ladder. The most efficient way to do this is to create jobs through domestic spending in public infrastructure and education systems. As President John F. Kennedy once famously said, Its not what your country can do for you, but what you can do for your country. Here lies an opportunity to foster a set of workers values where the government encourages work ethic as opposed to a welfare state.

Emerson 14 Governments should create or expand community service programs as a way to add public sector jobs to sustain a social safety-net. This will protect the most vulnerable citizens from the severe suffering caused by a lack of capital resources, while also allowing a productive use of taxpayer money. Above all however, is that public employees will expose themselves to the value of dedicated work. In cases where unemployment rates right high, as seen in the United States following the 2008 financial crisis, governments must use their legislative powers to create jobs. As America well knows, high unemployment rates inevitably leads to severe economic and social decline. VIII. Food Security Food production for local communities should be part of national security. Encouraging local self-reliance on food production is quite smart, as a greater opportunity will exist for individual citizens to consume healthier foods. A reliance on the fast and processed foods industries is especially a cause for concern in the United States, as obesity related health issues are becoming the norm. The best way to keep a citizenry healthy is by ensuring uninhibited access to quality food. IX. Universal Education Among the 2008 Millennium Development Goals (MDGs) is to provide universal primary education to every boy and girl in the world. An investment in education is necessary to help alleviate poverty and hunger. In the 21st century, knowledge is the most valuable tool for any person seeking to improve their quality of life. An education opens the doors to a world of opportunity that low-income citizens often forgo in order to meet their basic living needs. A technically trained citizenry with established reading and writing skills could do wonders to advance a countrys position on the United Nations

Emerson 15 Human Development Index (HDI). By implementing basic education standards on the global level, we will help prepare future generations to continue the fight for real universal prosperity. An education is so fundamental that by withholding this right, society as a whole will suffer. It could be assumed that people lacking a basic education, likely due to poverty, are less likely to reach self-actualization and find a productive niche in society. In this sense, it is in the worlds best interest not only to establish a minimal standard of living, but also minimal education standards. It is my personal opinion that the global society as a whole is only as strong as its weakest citizen. Analysis Neoliberal economic globalization directly impacts macroeconomic policy and thus is the dominant existential threat to human kind. Both social scientists and economists alike agree that the synonymous globalizing ideologies of neo-liberalism, capitalism and economic globalization, are subjecting the world community to instability and environmental and social disparage. There is little doubt that globalized capitalism will face some structural modifications in the near future due to technological advances and a general awareness of the social problems neoliberalism perpetuates. The gross disparity between the worlds wealthiest 1% and poorest 14% is the perfect indicator that globalized capitalism is incapable to pragmatically distribute wealth (Criticisms). Neoliberalism is essentially flawed by design, as the invisible hand suggested by Adam Smith in 1776 does not take any social or humanitarian concerns into account. Moreover, many global citizens remain behooved that this irrational economic model is still consistently exported to LDCs. Thus, a departure from the current direction

Emerson 16 of globalized capitalism to one that emphasizes sustainability at the local level is in fact, the best option moving forward. However, the strong pressure exerted by the United States and other powerful nations makes it nearly impossible for any country to reject neoliberal economic policies. Conclusion Despite the Washington consensus, the nine principles for sustainable societies previously discussed represent the best alternative to uninhibited economic globalization. By ensuring the welfare of individual communities through sustainable reforms, as oppose to the profit-maximizing approach, the world will see less corruption, less poverty and less hunger. With time, these principles for sustainable societies will guide the unpredictable forces of globalization to manifest an ideal model of society: a global society in which a minimal standard of living is established by a set of laws, and a set of institutions that will promote a better quality of life for all, which will thus beckon the true end of history.

Emerson 17

References
"2011 World Hunger and Poverty Facts and Statistics." WorldHunger.org. World Health Organization, 04 Dec 2011. Web. <http://www.worldhunger.org/articles/Learn/world hunger facts 2002.htm> Bower, Joseph L., Herman B. Leonard, and Lynn S. Paine. "Global Capitalism At Risk. What Are You Doing About It?." Harvard Business Review. 89.9 (2011): 104-112. Business Source Complete. Web. 10 Nov. 2011. <http://library.law.suffolk.edu/> Cavanaugh, J., Mander, J. Alternatives to Economic Globalization. 2nd. San Francisco: BerrettKoehler Publishers, 2004. 24-254. Print "Criticisms Of Capitalism." (n.d.): Encyclopedia Britannica Online. Web. 9 Nov. 2011. <http://library.law.suffolk.edu/> Dunning, John H. "Is Global Capitalism Morally Defensible?" Contrib. Pol. Economy 24.(n.d.): 135-151. Oxford University Press: Oxford Journals Online Web. 7 Nov. 2011. <http://library.law.suffolk.edu/> Gheorghe, Savoiu, and Cruceru Gheorghe. "Economic Freedom, Globalization, Corruption and Macroeconomic Results." Annals of the University of Oradea, Economic Science Series 17.2 (2008): 946-952. Business Source Complete. EBSCO. Web. 27 Oct. 2011. <http://library.law.suffolk.edu/> Machida, Satoshi. "Globalization And Citizens Support For Global Capitalism." Journal of Developing Societies (Sage Publications Inc.) 27.2 (2011): 119-151. Academic Search Complete. Web. 10 Nov. 2011. <http://library.law.suffolk.edu/> Makki, F. The Empire of Capital and the Remaking of Centre-Periphery Relations. Third World Quarterly, 25(1), 149-168. Novak, M. The Spirit of Democratic-Capitalism. New York: Madison Books. Raab, M., Ruland, M., Schonberger, B., Blossfeld, H.P. GlobalIndex- A sociological approach to Globalization Measurement. Institutional Sociology, 23(4), 596-631. Web. 29 Nov. 2011. <http://www.traseurope-project.org/page.php?id=356> Robbins, Richard. Global Problems and the Culture of Capitalism (Book). Canadian Review of Sociology and Anthropology. 36.4. (1999): 612-614. Academic Search Complete. Web. 1 Dec. 2011. <http://library.law.suffolk.edu/> Shah, Anup. "A Primer on Neoliberalism." Social, Political, Economic and Environmental Issues That Affect Us All. Global Issues, 20 Aug 2010. Web. 6 Dec 2011. <http://www.globalissues.org/article/39/a-primer-on-neoliberalism>

Emerson 18
Williamson, Thad. "There Is No Alternative To Forging An Alternative: On Gar Alperovitz's American Beyond Capitalism." The Good Society. 15.3 (n.d.): 31-36. Project MUSE. Web. 10 Nov. 2011. <http://library.law.suffolk.edu/>