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Chapter 9

The spectre of the world market

"They say in the East
We're payin' too high
They say that our ore ain't worth diggin'
And it's much cheaper down
The South American towns
Where the miners work almost for nothin'"
– Bob Dylan. North Country Blues

In the early '70s I worked as a sausage-maker in Oss, my hometown. Every day my co-workers and I stuffed and bound thousands of sausages. Our bosses were rarely if ever happy with our efforts. Always they wanted more, more and still more. We worked at a table with six men: one stuffed, four bound, and one threaded the sausages on to a sort of spindle and hung them in the smoke room. Because of my height, the last job was always mine.
In total there were five groups. According to the time-honoured method of 'divide and rule', the various tables were set against each other, and every day each table was kept precisely up to date with how much had been produced. If you had made fewer sausages than the other tables, you were called into the office, where it was made clear that this could not continue. Why had another table produced 1600 kilos when we had managed only 1550?
Competition did not stop there. Next to our factory stood that of a rival sausage-maker. Our bosses were always trying to engender a spirit of rivalry between that factory and ours. Time after time they would get on to us about how the other factory produced more than we did. Of course, we checked with the workers over the road as to whether this was really the case. And what did they tell us? That their bosses said that it was in fact we who, thanks to our enormous dedication and discipline produced more than they did.
Since then both firms have been swallowed up by the same foodstuffs giant, UVG. Whether this has brought an end to the playing of one group of workers against another I don't know. There is no doubt that there are still plenty of bosses who keep their workers in hand with the same kind of 'divide and rule' tricks. Only the scale has changed: back then it was their fellow workers who were employed by a competitor in the same town who were held up as an example; now its the employees of competitors at the other end of the world.
The new stick with which workers everywhere are beaten is called globalisation. If you want to count you have to operate worldwide, and that means you have to be able to compete worldwide. No country can expect to remain an island of social wellbeing in a sea of sharks. But is it really the case that workers in countries like the Netherlands are going to have to compete with the underpaid, exploited employees of the numerous profitable enterprises belonging to the family of the Indonesian dictator Suharto? And if so, what will that mean for their social achievements? Or for the possibility that the Indonesian people will ever live in dignity? These are the questions discussed in this chapter.

On dazzling capital and cheap labour

What precisely does 'globalisation' mean? Two examples will serve to suggest a definition. The first is the new, worldwide capital market. Every day billions of virtual dollars flash from one computer screen to another, propelled by the lust for profit of ever new buyers. Geographic distances have become irrelevant. Thanks to the newest telecommunications, New York lies as close to Hong Kong, Tokyo or London as it does to Chicago. The daily sale on the currency markets rose from $75 billion in 1975 to $1200 billion in 1994. Today, barely a tenth of currency transactions relate to trade in goods and services: the rest is pure speculation. Just how speculative was shown for example by the sudden collapse of Barings Bank. Thanks to the unbridled speculations of a single employee, Nick Leeson, in 1995 the bank lost a cool £600 million, an event that signalled the end of one of the oldest and most respectable merchant houses of the British Empire.
The other, much-cited example of globalisation is the multinationals' quest for more favourable climates in which to establish their operations, in other words for cheaper labour. Electronics giants such as Philips and Siemens, sporting goods manufacturers like Adidas and Nike, airlines including Swiss Air and KLM and chemical firms such as Akzo-Nobel conduct an increasing amount of their activities in low-wage countries in Asia and eastern Europe, with the aim of forcing down production costs. Naturally this phenomenon creates, at a time of persistent unemployment, widespread unrest in western Europe and North America. Yet is it really to blame?
Even to ask this question is to experience a certain unease. the development of the Third World and the reconstruction of eastern European economies are for most people, certainly for socialists, sympathetic goals. In every developed country, people give freely to NGOs working in poorer parts of the world. The unease with which many regard the rise of the Asiatic tiger economies does not signify a blanket hostility. But has much more to do with the way in which it is exploited by employers and neoliberal politicians, to justify the demolition of social security, collective provisions and the protection of workers' health and safety. Wage restraint, the lengthening of working hours, flexibilisation in all of its forms, the lowering or better still abolition of the minimum wage and the lowering of benefits, all of these measures are, we are told, necessitated by the battle for survival with the tiger economies.
Commenting on attacks on the welfare state and supposed high wages of Dutch workers by ex-Philips boss Jan Timmer, the American futurologist Joe Coates said the following during a recent visit to the Netherlands:

Timmer sets the Dutch labour force against 20 cents an hour 'coolies' from Singapore. The only way to compete with them is to go to 19 cents an hour. That is the only logical outcome of this kind of reasoning. All concessions worked out between trade unions and employers will, according to Timmer, make the Netherlands poorer. His argument is idiotic. What he is in fact doing is remonstrating with the Dutch people to choose poverty.

In reality it turns out that the threat of globalisation is considerably smaller than people like Timmer would have us believe. A recent study by economists Tulder and Ruigtuk, for example, showed that "the most important industrialised countries (...) conducted no more international trade in 1994 than they did in 1913." Although world trade rose from $60 billion in 1950 to $4000 billion in 1994, for countries in the European Union the vast majority of trade is conducted amongst themselves. For the Netherlands, only 1.6% of exports and 2.8% of imports during the first half of the '90s were with the Asiatic tigers. Moreover, a recent British study showed that the lowest wages are found in local service industries, which by their very nature do not suffer from international competition. The highest were in those sectors of the economy whose products continue to find a ready market on the world stage through the productivity of the labour that goes into their making, through quality and through effective marketing.
Between 1960 and 1995 the Netherlands' imports from outside the EU fell from 17.5% to 15.3% of GDP. From EU countries, on the other hand, they rose in value from 20.6% to 26.1% of GDP. The same picture is evident for exports: to EU countries the amount is growing, to countries outside it is falling. This is a normal pattern of development for an EU member state. What we are witnessing, then, is a regionalisation of the global economy and the emergence of three economic power blocs: the EU, NAFTA, and the Asian Pacific Rim.

Globalisation and New Technology

The neoliberal preachers of the world-market gospel may look with pleasure on what they see as the inevitable phenomenon of globalisation, against which it is as futile to resist as it would be to fight against a cold front in January. They point to modern communications technology as its principal source, and of course you resist new technology only at the risk of an eternal sojourn in the middle ages.
Whilst it is no doubt true that globalisation would not have been possible without new technologies, it is nevertheless an oversimplification to assert that they were its cause. The creation of a worldwide market, and the resulting international rat race, is primarily a result of the international capital-led liberalisation of transfrontier trade and capital movements. This liberalisation offers corporations obvious advantages: bigger markets on one hand, and the possibility of playing national authorities off against each other on the other. This is what all the hard work was for. Even before the end of World War Two America and Britain had drawn up an agreement that sought to create a more stable basis for the post-war capitalist economies. Had the inter-war crisis not allowed us to see exactly where economic chaos can lead?
The wartime negotiations led in 1944 in Bretton Woods, New Hampshire, to the establishment of a World Bank and the International Monetary Fund, as well as a system of fixed exchange rates. By the late '60s, however, the system had come under great pressure. More and more currencies ended their fixed value and were floated, and the speculative trade in them consequently increased. In the course of the following decade one country after another lifted controls on capital movements. Since then seventy nations have fully liberalised capital movements, and the IMF continues to exert enormous pressure to bring about unrestricted worldwide capital movements.
At the same time as the deregulation of the capital market was taking place, international trade in goods was being increasingly liberalised. It had been the intention of the World Bank and IMF to establish, shortly after the war, an international body to oversee trade. The GATT– the General Agreement on Tariffs and Trade – brought around a hundred countries to Uruguay in 1986 to the beginning of a series of negotiations which would lead to the establishment of the World Trade Organisation, the WTO. As these negotiations progressed, it became clear that rich, western countries increasingly dominated them. They were completed when, on 15 April 1994 in Marrakech, 111 countries signed a closing statement. Of these, 104 committed themselves to the new WTO.
Given the prevailing influence of neoliberalism in Europe and the US, the outcome of the negotiations was no surprise: existing trade restrictions will be as far as possible reduced, tariff barriers eliminated, and intellectual property rights established – and defended with a heavy hand. This last was of especial benefit to the richer countries, which own a great majority of patents. The scope for national authorities to determine their economic policies was drastically limited: communication networks, electricity grids and public transport systems must all be opened to overseas contractors and bidders. Support for national industries or agriculture through subsidies was declared taboo.
None of these decisions has anything to do with new technology as such. The latest computers could, for example, easily be used to increase states' control over international capital movements, but this would go against the neoliberal dogma of 'more market, less government'. The ever-diminishing control by national governments and thus by the citizens whom they represent is therefore clearly not the consequence of an autonomous process but of conscious political choices. Let us assume it is true that almost any country is now too small on its own and too dependent on the international market to escape the consequences of globalisation. Then at least the knowledge that what we are dealing with is a process brought about by human decisions casts the entire thing in a different light. If globalisation results from human choices, then new, different choices can be made which would lead to new, different consequences: we no longer need to feel bound to 'choose' decline and deterioration.

The 'unfreedoms' of the free world market

After the last few chapters it won't come as any surprise to hear that globalisation under the leadership of the neoliberal great powers will bring the same negative consequences on the international level as liberalisation has on the level of the individual country, only writ large. As I have said, globalisation's primary use is as a stick to break national resistance to attacks on living standards, social security and so on. Workers must work harder, longer and more flexibly for frozen or lowered wages, because that is how things are amongst the competitors. This is the modern version of the 'divide and rule' system which was used, back in the early '70s, to try to get us to stuff more sausages. A good example of where this leads is provided by what happened at Hoogovens, a steel firm situated in the Dutch town of IJmuiden.
In 1989 the management decided that profitability must be drastically increased. Under the slogan "If we want to survive international competition, we will have to behave internationally", a 'Masterplan' organised on Japanese lines was developed. The plan foresaw, first of all, the shedding of thousands of workers and the outsourcing of all activities to so-called 'outside firms', where a section of the sacked workers could be re-employed, albeit at much lower pay. In the entrepreneurial jargon this is known as the firm 'returning to its core activities'. A big car firm like Toyota is concerned almost exclusively with the development and assembly of automobiles. Small ancillary suppliers make all subsidiary parts, often by people working in miserable conditions for very low wages. This strategy is one of the most important pillars on which the success of the Asiatic tigers rests.
Naturally enough, at Hoogovens it was the older and less able-bodied workers who were the first to get the sack. The remaining workers were divided into so-called Product and Service Groups. These production teams are burdened with a large number of responsibilities that were previously allotted to middle management. They are involved in continual mutual competition. As a result tensions arise between the more productive workers and those who, perhaps through age or infirmity, cannot work as quickly. The 'bruises', as the less productive workers are called, soon lose their jobs.
If this corporate strategy works well for the firm, it is a catastrophe for the employees. Japanese workers, who work an average of 3,000 hours per year (as opposed, for example, to 1800 in the Netherlands) not only suffer a drastic reduction in their quality of life, but also in their life expectancy: yearly an estimated 10,000 Japanese workers suffer katoshi, death from overwork. The Hoogovens Masterplan has had a comparable effect: a couple of years after its institution the firm's shares had doubled in value. And what price did the workers pay for this? Many of them are no longer able to work as a result of physical or psychological problems. Of course, examples like that of Hoogovens can be found throughout the developed world. Related processes such as the introduction of short-term contracts damage productivity by reducing a worker's commitment to his or her job, and by preventing workers from developing a thorough familiarity with a particular process and workplace, not only undermines efficiency but, more importantly, increases the rate of industrial accident.
The whole operation of flexibilisation (the elongation of working hours, replacing permanent employees with those on temporary contracts, the introduction of 'just in time' production) is invariably defended with reference to international competition in the new global economic reality.

The costs of deregulation

Apart from this pressure from globalisation for a more flexible labour market, the concept is also used as an argument for increasing deregulation. Not only does this fuel many of the same problems affecting workers by, for example, eroding health and safety legislation, it also undermines the safety and security of the consumer.
Days before the opening of the Olympic Games in Atlanta a TWA Boeing 747 crashed into the sea off Long Island not far from New York. The cause of the disaster, which cost 230 lives, was probably a bomb which had been smuggled aboard. In the weeks following the drama, the American media produced disclosure after disclosure about the inadequate security regulations in US airports. According to ex-official Mary Schiovo a report had existed for years, drawn up after the Lockerbie disaster of December 1988, that showed that the country's airports were amongst the least secure in the world. As a result of the enormous commercial interests involved, the report was hushed up. The cause of the lack of security lay in the minimal standards imposed by the US authorities, with anything beyond that being left, in keeping with the neoliberal credo, to 'the market'. Murderous competition leads to a situation where airports and airlines are unwilling to take any additional safety measures, as that would of course require additional investment and might lead to an increase in delays and inconvenience for passengers. The American firm Thermedics has been for several years producing efficient apparatus for detecting explosives which is used throughout Europe, yet they are unable to sell it in their own country. In addition, surveillance staff at US airports are poorly paid, badly trained, and often overworked to the point where they are neither alert nor well motivated. This provides a good illustration of how the negative effects of deregulation strengthen those of flexibilisation.
From the consumer's point of view, deregulation is also extremely expensive. Since the deregulation of freight transport in the United States 100 major firms have gone out of business and 150,000 workers have lost their jobs. In their place have come thousands of small trucking firms employing poorly paid drivers. Whilst it is true that the cost of freight transport has fallen, the advantages of this have not been passed on to the consumer.
The same pattern can be seen in the case of air transport. In a short space of time following deregulation a dozen American airlines had gone under and 50,000 workers lost their jobs. Cabin personnel saw their average yearly income fall by 6% between 1983 and 1989, while the cost of living rose by 24%. Despite this, airline tickets did not become any cheaper: in 1978, before deregulation, a return journey from Philadelphia to Pittsburg cost $86. By 1992 this had risen to $460.
Deregulation of shop opening hours also brings few, if any benefits. In Sweden, a country which is often cited as an example of the beneficial effects of the process, longer opening hours have led, according to most shopkeepers, to higher prices. Moreover the number of shops has fallen with small, local stores being the victims. Because of this total employment in the sector has been reduced, as in the big 'hypermarkets' which replaced the small shops the ratio of staff to customer is visibly lower. The only people to benefit from this situation are major firms which, when small competitors are eliminated, find themselves in a position to do whatever they like, including fixing prices and increasing profit margins.

The divisiveness of globalisation

Globalisation leads to an increasing gap in incomes. International competition is used to justify not only a lowering of wages at the bottom, but also a raising of them at the top of the wage-pyramid, on the grounds that otherwise top management would emigrate. In the same way as neoliberalism on the national level limits the room for manoeuvre of governments, so globalisation in combination with that same neoliberalism further erodes the power of the nation state.
Give a dog a bad name and you might as well hang him. In the neoliberal vocabulary and under American influence 'trade restrictions' have been given an exceptionally bad name. As a result, member states of the EU no longer have any power to implement their own policies in relation, for instance, to genetically manipulated products. Although almost all of them are very critical of genetic manipulation, they are no longer able to forbid the import of products such as genetically modified soya because this would mean an unacceptable restriction of free trade. The same will soon go for meat from growth hormone treated cows and pigs. As in the case of wage-costs, international free trade drags everyone down to level of the lowest existing standards.
We find a similar situation when it comes to environmental legislation. Initiative after initiative at the national level designed to bring about a solution to environmental problems perishes in the face of an international refusal to adopt similar measures. Meanwhile international agreements such as that made at UNCTED, the UN-conference on Environment and Development held in Rio de Janeiro in 1992 are followed up by almost no-one, on the grounds that this would give an advantage to competitors. The powerlessness of national governments is only surpassed by the impotence of the UN. Real international power lies with G7, the grouping of the world's seven richest countries, whose heads of government meet regularly in order to co-ordinate their political, economic and monetary interests and to head off any new global division of power.
The biggest sufferers from all this are the countries of the Third World. In contrast to what the propagandists for globalisation would have us believe, these gain little or nothing from the new economic world order. Poor countries are forced to struggle constantly with enormous debts. Between 1980 and 1992 their total foreign debt grew, according to the UN, by $572 billion to $1419 billion. In the same period these countries paid $1662 billion in interest, more than $200 billion yearly than they received from the developed world. As is the case inside almost all countries, on the international level the rich grow richer and the poor poorer. In 1960 average incomes in the richest countries were 38 times as high as the ones in the poorest. By 1985 this had increased to 52 times, and according to the World Bank this will at best have improved to 50:1 by 2010. Even this slight reduction is only achievable, according to the Bank, if the poor countries continue to pursue a strict market-led economy and if globalisation proceeds unhindered. If this is not the case, then the prediction is that the ratio will rise to 70:1.
The results of shocking poverty in major areas of the Third World are not only destructive for the poor themselves, but for social stability in general. The seemingly endless conflicts and battles in Africa offer bitter proof of this, but similar effects can be witnessed in India and Pakistan as ethnic strife, fed by the hopelessness of existence, rages or, at best, simmers just below the surface. As Pakistani development economist Dr Mahbul ul Haq put it, "You can call these conflicts ethnic or regional, but the real causes are social and economic."
Meanwhile the IMF and World Bank continue undeterred to impose heavy demands on poor countries. While the US has a gigantic budget deficit, poor nations are expected to balance the books. As a result, food subsidies are cut so that military spending can be maintained and internal unrest kept down. Apart from poverty, large parts of the Third World remain terrorised by dictatorial and corrupt régimes, even if most have dropped their openly military character, and even if it is no longer fashionable, provided they follow the dictates of neoliberalism, to criticise such governments.

The moral bankruptcy of development aid

International development aid suffers from a number of evils: it is susceptible to fraud, the money often does not reach the people who most need it, and, most importantly, it often undermines the dignity of those who are affected by it. It does not base itself upon a concept of equality or on a real commitment to reduce the income divide between nations, but often serves instead to camouflage a fundamental lack of concern for the rights and interests of the inhabitants of the Third World.
In the end, any solution to the problem of global inequality will be found not in aid but in trade. This will only happen, however, when rich countries and their exclusive interests no longer dominate world trade. Economic, monetary and trade policy are designed to serve the interests of big western firms. The manner in which Shell treats the Ogoni people of Nigeria, for example, demonstrates in a macabre fashion where the unlimited power of multinational corporations in the Third World can lead.

From tariff barriers to a solidarity tax

That neoliberals pay no attention to the structural causes of global poverty is hardly surprising, as it is hard to see how the 'invisible' hand of the free market could address them, and any problem which cannot be solved through the market is invariably swept under the carpet. As has repeatedly been shown, it is the richer countries that benefit from the removal of frontiers. It is they which have at their disposal the necessary knowledge, technology and capital to drive the vulnerable 'competition' in poor parts of the world out of the market. The only weapon poor countries can bring to this fight is their cheap labour, or, to put it another way, their poverty. As soon as they begin to pay their workers better wages western firms move on.
Is it possible to break this vicious circle? The answer, if the short sighted struggle to maximise profits remains the only measuring stick for international political economy, must be no. As the UN organisation UNDP rightly asserted in its Human Development Report 1996, it is high time that a new look was taken at the idea of 'economic growth'. The Dutch newspaper NRC Handelsblad summarised the report's argument as follows:

The real question must be, growth of what, and for whom? Rising pollution, which demands more environmental measures? The growth of criminality, which gives more employment to an army of lawyers? Growth in the number of car accidents, through which more mechanics are needed? These are not things most people want, and yet all of them can provide a growth in national income.

In the same manner, the concept of 'free competition' is being redefined. Is it honest competition when one country takes no interest in the environment and is therefore able to produce more cheaply than another? How honest is the competitive position of a firm that profits from a criminal dictatorship which meets any attempt at popular resistance with violence, as is the case with Shell in Nigeria? Is it honest to force all countries to accept products from other lands, without giving the slightest thought to the conditions under which these products were produced?
It is high time that we broke the taboo against tariff barriers. What is needed is an agreement to impose upon countries with a per capita GDP within the range of EU countries an obligation to bring their social and environmental standards up to a level comparable to those found generally in Europe. If they do not do this, then we should impose a solidarity tax to deter unfair competition. This would prevent the lowest common denominator from being imposed on the world community. If it is possible to formulate strict rules in the area of government finance, as is done by the IMF, the World Bank, and EMU, why would it not be possible to do the same in relation to such important matters as social and environmental policy?
Developing countries with a low per capita GDP would be exempt from this solidarity tax, giving them the free access to the EU market that they certainly do not currently enjoy. We can keep our consciences quiet by giving poor countries a trifle in the form of development aid, but it would be a great deal better if we were to address the structural causes of their poverty, amongst which are existing trade restrictions. Any proceeds from the solidarity tax could be used during the transitional period to help people who currently benefit from these restrictions.
It is an illusion to think that a free world market will lead to a free world. You can only compete with slavery by introducing slavery yourself. Instead of the rich countries helping poorer ones to raise themselves up, people in the former are under pressure to abandon their social achievements. The present liberalisation of international trade is not an attempt to lay the foundations of a unified world, but serves only the interests of big capital.
As soon as the interests of the three great economic powerblocks, in which the major multinationals are concentrated, collide with each other, international crisis threatens. Not for nothing have we heard during the last few years repeated talk of trade wars between Japan and the United States, or the US and EU. There is a reason that for several the CIA years kept itself occupied with economic espionage, by hacking, for example, into EU computers. A world order which is based on a continuing contest for international markets can never be lastingly peaceful, especially if within that order there is no place for billions of people. Both the World Bank and the UNDP have calculated that absolute poverty has grown by nearly 50% since 1975, almost as much as has the world population. It is further predicted that this army of the poor will grow to 1.3 billion in 2000, and to 1.5 billion by 2025. As sociologist and Asia expert Jan Breman wrote, "This continual polarisation eventually leads to a division of people, as much on the national as the international level, into two segments: the ones who form part of the social order and those who are excluded from it."
Such a division will lead inexorably to bloodshed. The international community, after the collapse of the Eastern Bloc, has need of socialism. In socialism, in contrast to neoliberalism, there is a place for every individual as well as for the social nexus upon which every individual is dependent.

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“Enough” Contents:

• Index
• Preface
• Introduction
• Chapter 1 The wondrous rebirth of liberalism
• Chapter 2 The death of social democracy
• Chapter 3 The disempowerment of the people
• Chapter 4 Poverty in the midst of plenty
• Chapter 5 The assault of the market
• Chapter 6 The unbearable lightness of commerce
• Chapter 7 A question of civilisation
• Chapter 8 The United States of Europe
• Chapter 9 The spectre of the world market
• Chapter 10 The inevitability of an alternative
• Preface to the 2006 - updated edition
• Chapter 11 Ten years later, in the Netherlands
• Chapter 12 2006: Another world is possible
• Chapter 13 New optimism