Some Ugly Faces of Globalization

by G. E. Gorfu

“As it is the grotesque distortions of the global market mean that for every dollar the West dispatches to Africa in the form of aid, two dollars are clawed back through subsidies and tariff barriers: a monumental rip-off by the rich as they instruct the poor to accept 'free' trade or else.” Jonathan Dimbleby ⁽¹⁾

In these few words we have the truth stated by Jonathan Dimbleby, one of those rare human beings who will call the shots as they see them, even though his country is one of the beneficiaries of such ‘claw backs’ from Africa. How is it possible to ‘claw back’ two dollars for every dollar they give in the form of aid? Colonial exploitation has neither ended, nor abated. If anything, it appears to have become far worse, more refined, rather well hidden, and made abstract. How do they do it? How can rich Western countries claw back two dollars for every dollars they give in aid? How is it that the fate of the poor, instead of improving, continues to get worse and worse year after year? Let us look at a few examples of what we will call ‘the ugly face of Globalization’ for some answers:-

Nike or Adidas produce shoes at large factories, with production costs from a few cents to a few dollars a pair, and introduce them into the African or Asian market at a “good price,” usually at a hundred or more times the cost of production. Even if they sell them at half price, they still make profit. But that is only half the story. (Shoes that cost $0.50 to produce are sold at $50 or more). As these shoes go on the market, within a few days, merchants in many small towns and villages feature them on their shelves. The local shoe maker, who has been making hand crafted shoes since his youth, had inherited the craft from his father as a family heirloom handed down over many generations, will soon fold his bench, close down his store, and go to the city looking for work. Any work. He might peddle anything he can buy and sell to make decent bread. If he fails to find something soon, he would be reduced to begging in the streets, his steady livelihood gone forever!

Another might be an entrepreneur introducing Maytag, Kenmore, or similar washing machines. There always were people in the towns and villages washing clothes, ironing them, folding and delivering them to clients regularly. Now that these washing machines are here, one takes coins and runs over and washes clothes oneself, or might give it to a full time washer who would use these machines and take the job of ten or twenty people.

It is clear what the local entrepreneur and the overseas manufacturing CEO will get from the expansion of these new washing machines. The local investor will have become even richer than he used to be. He must have been pretty well off to begin with to have had the investment capital for these machines. And the CEO somewhere in the USA, England, or Germany, will now be able to afford a private helicopter, or executive jet to expedite his trips between various business centers, and would end up far richer than he was last year. But the fate of hundreds, nay thousands, who used to wash clothes in Africa and Asia, is sealed. They will now have to end up in the streets, looking for new jobs or begging for bread to fill their hunger. These then are some of the ugly faces of Globalization.

The same can be said for every technical gadget or commodity introduced from the West to all underdeveloped countries. We have stated it in other articles, but it might be worth repeating: “When two systems interact, the more developed or mature system will exploit and eventually destroy the less developed system.” ⁽²⁾ This is a scientific law of systems dynamics, and it applies to the interaction between any two systems in natural ecology: the interaction between chimps and monkeys, snakes and birds, cats and mice… etc.

This is not to advocate stagnating in archaic modes of production, or remaining in stone-age working systems and conditions, but one would also be well advised to consider all the repercussions before introducing new technologies into stable and functioning social systems. Progress is very important, but at what cost? If you are going to enslave and impoverish me in order to civilize me, do you really think that I want it? No!

It might be ‘profitable’ to introduce super-size textile factories like they have in China or India and produce ‘good’ clothing at dirt-cheap prices in Ethiopia, but ‘profitable’ to whom? And what would become of the local artisans and ‘shemanies’ now making traditional clothes? All responsible governments have a duty of putting controls in place until careful studies are conducted to fully understand the social impact of all such ventures. When, and if, it is found to be beneficial to introduce these new technologies, steps should be taken to provide training and/or alternative means of gainful employment to those who would be most affected by the new gadget or mechanization.

Another way of ‘clawing back’ is through the financial loans given to the Third World in the form of aid. When the World Bank lends money to countries like Ethiopia at very low interest ‘to help’ farmers purchase fertilizers and/or improved, high yield grains, they have far more sinister plans ⁽³⁾ afoot, and they are not really after the pittance gained from the low interest sprinkled over thirty years, especially when the entire loan might be ‘forgiven’ anyway. The real benefit is reaped when nations are held to ransom with patented, genetically modified seeds and have to pay for them through the nose, as well as when coffee, cocoa, or some other cash crop come in bumper harvest. Prices tumble down 30% – 50% below what they were last year. ⁽⁴⁾ The buyers in the West will make a killing in a single year. They will get all the coffee or cocoa they need for that year at half of what they paid for it last year, and these are the real dividends on the loans. In two or three such years, they might recover several times more than the entire loan.

The peasant however, is bewildered. When he saw a bumper harvest, he had thought he would become rich, pay back his loans, and have plenty left for himself and his family. But his hopes soon fade away as he learns that he is far worse off this year with bumper harvest than he had been with a meager one last year. He could not figure out where he went wrong. Some coffee farmers have come to see the fertilizer and the loans as a curse, and many have abandoned the traditional coffee and switched to farming chat or Khat.

Exporting countries like Ethiopia might have to wait until market prices recover, ⁽⁴⁾ but that could take many months, during which time the coffee, cocoa, or some other grain might rot, be destroyed by mice and/or other vermin, unless modern style granaries are used. The common farmer cannot afford these types of storages.

And what happens during the waiting time? Time is what farmers do not have. Most suffer irreversible damages, or might even go destitute during the waiting period. How does this come about? Common peasants live from hand to mouth, and have neither the economic support nor the resilience of stashed capital to fall back on and recover from such drastic losses. What is more, waiting is the real killer, making the loan multiply in compound interest. World Bank loans may be for thirty years, but local banks want their returns monthly, quarterly, or yearly. The farmer is perplexed and at a loss. Farmers sell their cattle ⁽⁶⁾ to pay back loans, and farms are often seized by courts in litigations with banks. (7) Some farmers are simply overwhelmed with all that complexity, feel cheated and bitter, and abandon their farms to end up in city streets to sink into destitution.

The market reports quoted below are from last September and coffee prices, after five years of slump, have recovered somewhat, largely due to the Tsunami disaster. Third World nations and peasants however, are vulnerable to the ups and downs of market forces. And Globalization in these particular cases is more of a curse than a blessing. It is up to economists, social scientists, and politicians to find solutions for these problems.

G. E. Gorfu

May, 2005

Notes:

1. http://observer.guardian.co.uk/waronterrorism/story/0,1373,1340175,00.html

2. "A MOER MATURE SYSTEM ALWAYS EXPLOITS A LESS MATURE SYSTEM. THUS THE LESS MATURE SYSTEM IS KEPT IN A STEADY STATE OF LOW MATURITY BY THE EXPLOITATION TO WHICH IT IS SUBJECTED." RAMON MERGALEF, PERSPECIVES IN ECOLOGICAL THEORY p. 37-38, University of Chicago Press, Chicago 1968

3. ”In other words, the famine - itself in large part a product of the economic reforms imposed to the advantage of large corporations by the IMF, World Bank and the US Government - served to undermine Ethiopia's genetic diversity to the benefit of the biotech companies. With the weakening of the system of traditional exchange, village level seed banks were being replenished with commercial hi-bred and genetically modified seeds. In turn, the distribution of seeds to impoverished farmers had been integrated with the "food aid" programmes. WPF and USAID relief packages often include "donations" of seeds and fertiliser, thereby favouring the inroad of the agribusiness-biotech companies into Ethiopia's agricultural heartland. The emergency programs are not the "solution" but the "cause" of famine. By deliberately creating a dependency on GM seeds, they had set the stage for the outbreak of future famines.”

from http://www.raceandhistory.com/historicalviews/12112001.htm

4. GETINET KELKLE, EXECUTIVE SECRETARY OF THE ETHIOPIAN COFFEE EXPORTERS ASSOCIATION, TOLD ECON/COM OFFICER ON MAY 13 THAT THE INTERNATIONAL COFFEE PRICE WAS CONTINUING TO FALL. THE MARKET IS SATURATED, HE COMMENTED, SO THE NEW YORK RATE OF 106 (CENTS PER POUND) FOR THAT DAY WAS "WELL BELOW HALF" ITS PEAK IN THE PREVIOUS COFFEE YEAR. IF EXPORTERS SELL AT THE CURRENT PRICE, THEY WILL GO BANKRUPT, HE COMMENTED, BECAUSE THEY PURCHASED THE COFFEE AT A MUCH HIGHER PRICE FROM FARMERS AND INTERMEDIARIES. MORE IMPORTANTLY, GETINET SAID, "MARKET ACTIVITY IS COMPLETELY DEAD." EVEN WHEN COFFEE PRICES WERE THIS LOW IN THE PAST THERE HAS BEEN MORE ACTIVITY. NORMALLY AT THIS TIME OF YEAR ALL ETHIOPIA'S WASHED COFFEE WOULD BE SOLD, GETINET SAID. INSTEAD, STOCKS OF ETHIOPIA'S FINEST WASHED COFFEES, INCLUDING LIMU, SIDAMO, AND YERGA CHEFE, ARE UNTOUCHED… from: - http://usembassy.state.gov/ethiopia/wwwhec01.html

5. THE ONLY HOPE FOR EXPORTERS, GETINET COMMENTED, IS TO HOLD THE COFFEE AND WAIT. BESIDES STOCKPILES IN ADDIS ABABA, HUGE AMOUNTS OF COFFEE ARE IDLING IN THE RURAL AREAS. MANY COFFEE WASHING STATIONS ARE KEEPING 5-7 CONTAINERS (WITH 18 METRIC TONS EACH) FULL OF COFFEE UNTIL THEY CAN COMMAND A BETTER PRICE. THE WAITING IS HARMING THE STATION OWNERS FINANCIALLY, HOWEVER, BECAUSE THEY ARE PAYING HIGH INTEREST RATES ON LOANS… from http://usembassy.state.gov/ethiopia/wwwhec01.html

6.”The banks and government agencies that had extended credit to pay for seed and fertilizer were clamoring for their money. Many farmers defaulted on these loans or were forced to sell their cattle to make the payments.”

from http://www.globalpolicy.org/socecon/develop/2003/0701famine.htm

7.”After detaining their owners and managers, the courts gave restraining orders on the assets and properties of the TPSCs. Their overdraft accounts and loan accounts were frozen. Instead of servicing these loans, the assigned administrators or receivers were made to open new blocked accounts in which they accumulate cash incomes from sales and transport services. The courts refused repeated requests by the detainees that such incomes be used to service the loans at the Banks. Except the CBE, all private banks demanded that they services the loans they advanced to the TPSCs or be allowed to foreclose on the properties they held as collateral to the loans. The courts chose to ignore all these legitimate demands, or even out rightly refused in some cases… However, the CBE, despite the fact that it had never demanded for anything, is now being allowed to foreclose the properties of the detainees. The decision to auction the properties of some detainees has already been taken by the Bank's Management.”

from http://www.justiceinethiopia.net/impactonprivatesector.html