More on the hilarity of "mixed economies": Hawaii quits out on child healthcare

October 18th, 2008 1 comment

Apparently, Hawaii’s hailed “universal child health care” initiative has been, well, uninitiated.

HONOLULU – Hawaii is dropping the only state universal child health care program in the country just seven months after it launched.

Gov. Linda Lingle’s administration cited budget shortfalls and other available health care options for eliminating funding for the program. A state official said families were dropping private coverage so their children would be eligible for the subsidized plan.

“People who were already able to afford health care began to stop paying for it so they could get it for free,” said Dr. Kenny Fink, the administrator for Med-QUEST at the Department of Human Services. “I don’t believe that was the intent of the program.”

Basically, this is an illustration of why mixed economies don’t work effectively. If the government guarantees a good or service of certain value to those who don’t have it, it will be exploited. More broadly, any entitlement system will be exploited because it’s simply economically stupid to do otherwise. If you can foist the cost of anything you need onto someone else and you don’t notice or have no moral qualms about the force involved, why wouldn’t you?

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The Descent Continues: British banks nationalized

October 13th, 2008 No comments

The Brits seemed keen on stopping National Socialism in Germany; that was the whole point of World War II, wasn’t it? But apparently, this was in order to foster and develop national socialism in Britain.

Banks nationalised in £37bn deal
The Government has begun nationalising HBOS and the Royal Bank of Scotland, pumping £37 billion of taxpayers’ money into the struggling firms.

…RBS has said that it will receive £20 billion of capital from the Government – meaning taxpayers will hold a 60 per cent stake in the company. Its chief executive, Sir Fred Goodwin, is to resign.

A further £17 billion is to be pumped into the merged HBOS-Lloyds TSB, meaning 40 per cent of the new "superbank" will be held by the Government on behalf of the public…

Banks will effectively be state-run, with Government-appointed board members put in place to ensure it once again begins lending to businesses and individual customers.

… Together with Northern Rock and Bradford & Bingley, the move will mean the Government effectively has four of the country’s biggest lenders under its control.

… However, Government sources were unabashed about nationalising more banks, after similar moves to save Northern Rock and Bradford & Bingley.

The Prime Minister said the financial crisis had fundamentally shifted the balance of power between companies and the state. Despite Mr Brown’s pledge to spend "up to £50 billion", sources said the final Government bill could be more.

Nothing to see here folks. Just government "saving the markets" through the use of massive and involuntary wealth transfers. The usual successful policy.

The chain of events that will follow from this are not surprising. The government will "save" the banks, only to lead to another crisis: "our banks need our support! If the national banks go down, it will be a catastrophe!" And so forth. And British taxpayers will be fleeced ad infinitum until there’s simply no more fleece, the nationalistic drugs have worn off, and the veil is really lifted so everyone can see the gigantic gun behind it all: "You’re not doing this because you’ve got some kind of British pride or because it’s your social organization of choice. You’re doing it because we’re making you."

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Some politicians really care about the bailout plan: precisely, 54% in campaign contributions more than those who voted ‘no’

October 6th, 2008 No comments

In the ludicrous atmosphere of platitudes, slogans, and cliches, we certainly hear plenty about how the boys in Washington are off drafting a bailout, er, rescue, err, investment to save the U.S. economy. Yes, I’m sure Barack Obama and John McCain have some idea about how to spend $700 billion that doesn’t even exist – at least more than those banks do! And what about That Congress? Why, nothing but the amassed intellectual wealth of America, legislating for the common good.

They’re doing such a great job that the financial sector decided to throw a little "bonus money" their way – you know, to reward them for working for the common good and all.

This is how the government ‘protects’ the economy. The empirical evidence is in: large corporations don’t spend money for nothing.

But hey, "more regulation" and "the government needs to do something" are the calls of the day, especially among those young people. I wonder if they’ve noticed our national debt lately, have considered the notion of legislative corruption and regulatory capture, or thought about how a bailout might encourage companies to undercapitalize, even decades into the future, allowing them to play the upsides of risky investments and letting taxpayers take the rest. Oh wait.

The government should totally do something, like really.

The U.S. Intervention in Grenada: Apologism City   [ Part 4]

July 4th, 2008 Comments off


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Back home, the public responded with a surge in Presidential approval ratings and bipartisan support in Congress, even by Reagan’s future democratic challenger, Walter Mondale. The rapid deployment and achievement of military superiority demonstrated the still-living power of American hegemony. As William Blum smugly describes, “America had regained its manhood, by stepping on a flea. ”[14]


Too frequently, writings on the US intervention in Grenada address the topic solely as what happened in the October of 1983- and what the Reagan Administration made up to get there- but they treat with surprising brevity and simplification the years prior. If public recognition of falsehoods related to the intervention is limited, then recognition of studies done on the relationships between Grenada and the rest of the world beforehand is even sparser in visibility. As in the in current Gulf War, surrounding the 1983 intervention was a slew of misinformation from the government, but accompanying it in its aftermath were criticisms that treated the conflict in an overly one-dimensional manner. The one qualification that can be made about both wars- ethical justifications and moral qualms aside- is that the U. S. acted on them with a specific national-strategic purpose. Between Syria, Iran, and Iraq, Iraq was chosen; between Cuba, Nicaragua, and Grenada, Grenada was “the place to invade. ”

[1] American Academic Encyclopedia, “Grenada: History and Government. ”

[2] Zunes, http://www. globalpolicy. org/empire/history/2003/10grenada. htm

[3] Blum, p. 273-274

[4] New York Times, 28 March 1983.

[5] Lormand, Grenada: How We Continue to Believe the Hoaxes of Our Military Establishment.

[6] Blum, p. 274

[7] Appendix (II), Grenada is not Alone, p. 144-146

[8] Cde. Unison Whiteman, Grenada is not Alone, p. 114

[9] Cde. Prime Minister, Maurice Bishop, Grenada is not Alone, p. 22

[10] O’Shaughnessy, p. 220

[11] Cde. Unison Whiteman, Grenada is not Alone, p. 119

[12] Dujmovic, p. 11

[13] Appendix (II), Grenada is not Alone, p. 144-146

[14] Blum, p. 277

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The U.S. Intervention in Grenada: Apologism City   [ Part 3]

July 4th, 2008 Comments off


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[9] Considering these outward gestures, Bishop’s government appeared to be following a route of foreign policy similar to Cuba’s, attempting to ensure its survival by aligning with the “anti-U. S. ” Soviet and miscellaneous powers. A viable purpose of the conference, then, was to visibly demonstrate to these powers that Grenada was ready for a serious commitment in return for economic and military assistance. Whether this predicament was caused unfairly or not, Bishop’s strategy would become grounds for U. S. concern. The 1983 MRC coup, however, drastically altered Grenada’s strength. After imprisoning and executing Bishop and his cabinet, General Hudson Austin, the military architect of the coup, realized that his new government had overstepped and become isolated, condemned by Cuba, sanctioned by the Organization of Eastern Caribbean States, and only supported with words from Moscow. In the language of British correspondent Hugh O’Shaughnessy,

There is every reason to think that in the case of Grenada the MRC would have collapsed under the great weight of the opprobrium it was suffering within the island, combined if there had been a need with the outside pressures exerted on it by its neighbors… had [Austin] and Coard not given up their narrowly dictatorial aspirations it is difficult to see what force they could have relied on to maintain them against the popular anger at the massacre they were responsible for. [10]

Indeed, though Austin desperately sought to negotiate his government out of its helpless position and the previously mentioned security concerns were all but dissipated for the time being, the U. S. immediately seized the opportunity to invade and claim a victory in the name of liberation.

Ideological Security

In another political dimension, Grenada presented an ideological challenge to the United States and its economic system. Keenly aware of this, the Bishop government used it to explain the hostility of the “big-powers”:

From the outset, the anti-imperialist nature of Grenada’s solution and the “danger” of a new, successful, non-capitalist model in the bosom of the English-speaking Caribbean was more than the Washington/London axis was willing to tolerate. The hostility of imperialism and the threat of instant confrontational politics were on the horizon the very week following March 13, 1979. [11]

Initially influenced by Black Power ideology, a typical vessel for dissent in the Caribbean, Bishop gravitated toward the formation of the JEWEL, a rural-oriented faction aimed at undermining Prime Minister Gairy’s support among the “agro-proletariat. ” Eventually, the New JEWEL Movement was created by merging similar socialist political factions. It is important to note that long before any U. S. involvement, the NJM was already Marxist-Leninist oriented (in direct refutation of the belief that like Castro in Cuba, Grenada’s leadership was “forced” into leftist ideology to find allies against a hostile United States). In the Party Manifesto of 1973, it was made clear that atop the goal of redistribution of economic and political opportunity was the absolute transformation into a socialist economy with a full welfare system. [12] Early reforms were met with big success in the diversification of agriculture, strong growth rates, increases in literacy, and a slew of ambitious programs to boost development of important economic sectors. Bishop also capitalized on racial and ethnic appeal and took it to the United States, where he garnered the support of Black-American unions and Communist/Socialist groups who attended the 1981 Grenada conference, such as the Black Workers Organization and the U. S. Communist Party. [13] In the period of “Reaganomics” and dissatisfied minorities, a socialist “Black Power” movement could prove to be, however small in breadth, a considerable domestic political threat. Over an extended period of time, Bishop’s government would have likely been the target of a major U. S. -sponsored destabilization attempt had it continued its course of domestic and foreign policy. However, the MRC coup, executed by hard-line Leninists within the government, proved to be an effective substitute to remove the arguably successful “socialist experiment. ”

Military Pride

The actual invasion of Grenada in 1983, Operation “Urgent Fury,” is best explained by the urgency and fury with which Reagan needed a successful military campaign. A show of significant force would make governments in Latin America and the Caribbean think twice about stirring the political cauldron without permission from the United States. Already in the pessimistic shroud of the post-Vietnam era, the U. S. was dealing with the after-effects of the 1979 Iran hostage crisis and the bombing of the Marine barracks in Beirut that killed 241 servicemen a mere 2 days before the invasion. The MRC had largely disarmed and dismantled a majority of the militias for being “pro-Bishop,” leaving the bulk of what would be costly resistance to the American Marines out of the picture. As a quick and generally low-cost intervention (18 American dead, 116 wounded), the attack paid off. 7,000 servicemen were awarded medals for participating in the operation.

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The U.S. Intervention in Grenada: Apologism City   [ Part 2]

July 4th, 2008 Comments off


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Plans were also drafted by the CIA to “cause economic difficulties for Grenada in hopes of undermining the political control of Prime Minister Maurice Bishop,” but never came into fruition due to opposition from the Senate Intelligence Committee. [2] In the months leading up to the invasion, the Reagan Administration made a series of allegations against the Bishop government, centered about an image of a proximate hostile military threat that leveled accusations of military transfers to the island, such as a the construction of a Soviet submarine base and a shipment of a vast armada of aircraft. The most media attention was given to the construction of a new airfield under construction with the assistance of Cuba and Cuban workers, which was suspect to use for military purposes. [3] In March 1983, President Reagan announced on television:

Grenada doesn’t even have an air force. Who is it intended for? … the rapid build-up of Grenada’s military potential is unrelated to any conceivable threat… the Soviet-Cuban militarization of Grenada … can only be seen as a power projection into the region. [4]

All of these claims were at least in most part proven false. A Washington Post reporter visited the purported submarine construction site, finding nothing except the sea being too shallow for a sub-base; the massive Soviet arsenal of MIG fighters and attack helicopters was never found; and the clear economic motivations for the airfield were supplemented by a report by the British multinational corporation, Plessey, that enumerated a number of necessary military specifications not applied to the airfield’s construction. [5] With the specious groundwork of such claims, opportunity then struck for an invasion: on October 19, 1983, hard-liners in the NJM (later forming the Military Revolutionary Council) led a military coup and imprisoned Bishop and his ranking supporters. Capitalizing on the presence of 800 American medical students, Reagan began attempting to emphasize their imminent danger from the chaos and unrest of the coup as a pretext for an invasion, despite assurances from Cuban officials, the Grenadian military government, and the students themselves that no such threat existed. Though there were valid grounds to be skeptical of promises made by enemy powers, widespread refusal by medical school officials and students to acknowledge any significant danger trumped any realistic need for action for the sake of American safety. Why Washington would hold such an antagonistic and disruptive position would lie beyond the televised broadcasts.

Security Concerns (warning: apologist bullshit)

Lies, falsehoods, and fabrications to drum up public approval notwithstanding, there were indeed several potential security concerns for the U. S. and the Western Hemisphere involving Grenada. After coming to power, Bishop, shunned by the U. S. and blocked from most Western aid, had no choice but to support his bankrupted treasury by appealing to the Soviet Union and Cuba for assistance. Unfortunate as these circumstances were for Grenada (either attracting more American enmity or letting the country’s economy suffer), associating with the Communist alliance would only invite influence and leverage from it. That the Reagan Administration concocted myths of vast Cuban and Soviet military aid to the island obviously did not change that such aid was possible and even desirable to the communists as a future opportunity. With strategic access to the Caribbean and Latin America, Grenada could serve as another Soviet power projection in the hemisphere and be used as a base of operations for South America. It had the potential to receive heavy aid and grow into a state similar to Cuba, it possibly becoming another flash-point for a confrontation similar to the Cuban Missile Crisis of 1961. Shortly after Bishop’s 1979 coup, the U. S. Ambassador delivered a note to address fears of a mercenary army (led by the exiled Gairy) counter-coup: “… it would not be in Grenada’s best interests to seek assistance from a country such as Cuba to forestall such an attack. We would view with displeasure any tendency on the part of Grenada to develop closer ties with Cuba. ”[6] At the First International Conference in Solidarity with Grenada in November 1981, Bishop’s government outlined its plan for building a socialist Grenada while protecting it from “imperialism” abroad to delegates from “around the world”; that is, as they wanted it to seem. Though present were representatives from U. S. British, and other national political interest groups (communist parties, Grenada Friendship Societies, etc. the majority of delegates sent by actual governments themselves were from such nations as Nicaragua, Libya, Vietnam, North Korea, and the USSR. [7] Over the course of the conference, the Grenadian ministers continuously expressed support for a vast list of distinct U. S. enemies, while emphasizing its positive relations with “the socialist community and other democratic and peace-loving states,” including those under the control of the Soviet Union in Eastern Europe. [8] Meanwhile, they lambasted American policy with harsh rhetoric, at one point labeling the Reagan Administration a “fascist clique.

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The U.S. Intervention in Grenada: Apologism City

July 4th, 2008 Comments off


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The following is intended merely for a demonstration about ignorance, not as a reflection of my current point of view.

I wrote this paper in my first year of college, while still desperately holding on to the idea of America as a good military power. But even I, as a vigorous apologist, simply had to cede the many, many facts that made the idea of noble American intervention absurd. I find this to be particularly instructive; not of the historical facts of the Grenada intervention, but of how easily one can talk about politics in floating abstractions with no foundation for good/bad. Far-fetched chance of Soviet intervention: bad! Invasion, coercion, and death: now justifiable! If you can spot all of the nationalistic and other mythological delusions in this paper and email them to me, I’ll paypal you $2. –more–>The U. S. Intervention in Grenada: Why?

When discussing the 1979-1983 U. S. actions in Grenada, one must ask the first and most important question: what interest could the world’s capitalist superpower possibly have in a tiny island less populous than a South American football stadium? The miniscule nation’s economy, lacking any significant natural resource or consumer markets (for example), naturally precluded almost any possibility of American business interest in Grenada that could capably provide a specific political-economic impetus for invasion. It likely follows, then, that the intervention was part of an arrangement of Cold War policy disassociated from narrow, influential business interests, and one more involved with broader ideological and strategic (Realist) theories. The new socialist government of 1979 had already not been in good standing with the Carter administration; the coming of Reagan in 1981 only deepened U. S. negativity toward Maurice Bishop and the New Jewel Movement (NJM), which had aligned with Cuba and the Soviet Union. Washington could, in turn, publicly allege that Grenada was a significant security threat if it were used militarily by the Cubans as a base for regional subversion, notably in Central America, or by the Soviets for projection of power, whether conventional or nuclear. In line with the U. S. ’s hard-line economic stance on Cuban communism, policymakers also sought to isolate (and destroy) any non-capitalist system to prevent the creation of any precedent toward the success of such systems anywhere else in the region. Finally, as probably the most central motivation for the invasion of Grenada, Reagan, battling a proxy war in Nicaragua against the leftist Sandinistas, wanted to send a clear message to all countries in the region that the United States still had the power to intervene-with its own forces- anywhere it deemed necessary during the post-Vietnam era, and did not need to rely on proxy armies like the Contras. The causes for intervention, separate from the Reagan Administration’s stated rationale, can be principally divided into three parts: the long-term military security of the nation, in addition to rolling back the influence of the Soviet Union; the discouragement and destruction of any installation of a “socialist experiment” in such proximity to the United States; and the symbolic display of military power to intimidate regional opponents while restoring prestige to the nation’s armed forces.

Background and Outset of the Conflict (Some Lies, too! )

Grenada, a small island nation one hundred miles north of the coast of South America, is a heavily agriculture and tourism-dependent state with a population of under 100,000. Formerly a British colony, it gained its independence from Britain in 1974 under the leadership of Prime Minister Sir Eric Gairy, one of the key players in fomenting change through trade union organizations in the previous decades. Though his popularity after independence successfully won his reelection to the premiership three times, he soon proved to be eccentric- obsessed with UFOs, extraterrestrial contact, and occult practice- and despotic, maintaining his rule through a secret police known as the “Mongoose Squad. ”[1] Gairy’s opponents, the largest being the New JEWEL (Joint Endeavour for Welfare, Education and Liberation) Movement, a Marx-inspired socialist group led by attorney Maurice Bishop, began to take action. In a coup with little bloodshed, Bishop and the NJM seized the government while Gairy was in New York discussing UFOs in the United Nations. Following the NJM victory, the new government began to pursue aggressive and ambitious socialist programs that arguably turned the country toward progress, reducing unemployment from 49 to 14% and pulling up impressive growth rates in the midst of a world recession. The World Bank praised the new government in 1980, declaring, “government objectives are centered on the critical development issues and touch on the country’s most promising development areas. ” The U. S. stance toward Bishop rapidly turned adversarial, however, and the Administration under Carter (and then Reagan) began taking measures to undermine Bishop’s government, particularly through subversion of the Grenadian economy. Travel-scare rumors were spread to American travel agencies while the White House painted the island as a communist enemy in order to discourage economically important tourism, and several international lending institutions were aggressively lobbied to halt loans to Grenada (to not much avail).

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Globalization, Growth, and Poverty (a summary of the 2001 World Bank report)   [Part 3]

July 4th, 2008 Comments off


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Despite this, globalization remains to be more effective for poor people and have its adverse effects mitigated. Global policy has failed to keep up with the opportunities and dangers of globalization. Attempting to avoid “nationalism, protectionism, and anti-industrial romanticism,” the report proposes an agenda for making globalization more effective and universal, emphasizing seven in particular aimed toward benefiting the poor.

The first area of action should be in a “development round” of trade negotiations, primarily centered on market access. Rich countries continue to maintain protectionist policies in markets in which developing countries have comparative advantages. Developing countries also have high barriers between themselves, higher on average than those of developed nations. Subsumed under this is that labor and environmental standards should not be imposed on poor countries, as without the proper resources, such measures can actually lower standards of living and have an overall adverse effect on welfare. Generally, trade agreements should allow for different institutional goals and solutions to environmental standards, social protections, cultural preservation, etc. Economic integration need not interfere with institutional and cultural diversity.

Next, improving the investment climate in developing countries is an important goal. Open trade and investment policies do not yield many benefits in context of bad policies, reflected by the fact that the most prosperous developing countries during the recent wave of globalization have been those that have established good investment climates for firms to be established and expanded. Improving the investment climate is not to be mistaken for tax breaks and subsidies for firms, but rather general economic governance, including control of corruption, efficient bureaucracy and regulation, contract enforcement, and respect and protection for property rights. Also, maintenance of local and global market access via transportation and communications infrastructure is key.

The report’s third prescription is the delivery of health services and education. Global integration raises returns on education, but with poor social services, inequality and extreme poverty can be exacerbated. Education, health, and a good investment climate are critical for giving the poor the chance to participate in an expanding economy. Closely related is the solution to the problem of “churning” in labor markets, which create temporary losses for many groups of people. Hence, the fourth area of action lies in the provision of social protections geared toward a more dynamic labor market, helping individual short-run losers to globalization and giving a solid foundation for poor households to engage in the risk-taking activities of entrepreneurship.

A new approach to foreign aid constitutes the report’s fifth recommendation. When reforms and social services alter the investment climate, private investment usually has a delayed response. Large-scale aid programs work in this context. Financial support can assist societies making troublesome changes, or for addressing geographic and demographic challenges that can not be met by policy changes. Also, debt relief constitutes a considerable part of aid, but is different in some ways from other forms of aid, making it the report’s sixth recommendation. Many of the aforementioned countries who have been marginalized by the process of globalization are saddled by high debts, particularly in Africa. Especially when combined with policy reform, lowering the debt burdens of these countries can make a significant difference in poverty reduction.

Lastly, the report argues for the importance of dealing with the problems of greenhouse gases and global warming. The report contends that though there is a broad scientific agreement over the issue, there is a lack of effective global cooperation to solve it. The environmental effects of global warming are also expected to be especially borne by poor countries and poor people if they remain unaddressed.

The report is also a piece of shit, but go figure. If you’re in school, you might have to deal with it.

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Categories: globalization, summaries Tags:

Globalization, Growth, and Poverty (a summary of the 2001 World Bank report)   [Part 2]

July 4th, 2008 Comments off


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Globalizing countries face many common issues, but can approach them with different policies and institutional arrangements for coping with them. For example, China, India, and Mexico have employed different strategies. Two of the most important issues requiring attention are the globalizing nation’s investment climate and its social protections for workers.

Because open economies confront greater competition, the year-to-year levels of entry and exit of firms (“churning”) are much higher than in more closed economies. Data on Chile, Morocco, and Colombia shortly following liberalization have shown that one-fourth to one-third of manufacturing firms experienced turnover in a four-year period. Some evidence has shown that it is unlikely for manufacturers to shift from domestic production to exporting, thus requiring the creation of new firms and the destruction of old firms for entry into world markets.

Case studies have demonstrated that firms in developing countries are capable of being competitive, but are frequently hindered by a weak investment climate caused by inefficient regulation, poor infrastructure, and deficient financial services. States calculated to have a good investment climates receive both more domestic and foreign investment. Coastal China and northern Mexico are two examples in which a good investment climate has been achieved (also resulting in major poverty reduction). Many of the nations left out of the global economy in the 1990s tended to have property rights and other general investment climate issues.

Because of the “churning” caused by increased competition, labor market turnover – one of the most disruptive characteristics of a global economic integration has also grown. While workers gain in the long run, as evidenced by wages growing twice as fast in the more globalized group of developing countries than in those less so, short-run effects are often different. An economy that liberalizes trade could experience a drop in formal sector wages, due to either a bad investment climate or because of lagged investment response.

Globalization inevitably creates winners and losers, and some of the most important losers in the present are former workers of now-churned protected industries. The report suggests that social protection and labor market policies are essential for not only the immediate welfare of these workers and others, but for the long-term welfare of all workers. Unemployment insurance and severance pay can help with high turnover. These protections can help the poor engage in the risk-taking of entrepreneurship. Additionally, a well-educated labor force produces general improvements in welfare.


Ch. 4: Power, culture, and the Environment

Though the economic factors above play a large role in attitudes toward globalization, much of the anxiety about it is caused by issues of power, culture, and the environment. According to a poll of 20,000 people in 20 countries (including Braizl, China, India, and Nigeria), two in three people reported that they thought that globalization would “materially benefit their families,” but over half of the same sample reported that globalization threatens their nation’s culture, and a significant portion of them expressed a belief in a need for greater international control over worker rights, human rights, and environmental issues.

While the United States is the largest (in output) economy and often regarded to be the most successful in the world, it is not the only successful model. Some economies are near or exceed the U. S. ’s income per capita, but have different policies and income distributions. These economies include Austria, Belgium, Japan, Norway, and Denmark. In light of that, the report argues that there is no ultimate model of or fixed formula for success.

Successful globalization, the report states, usually makes the state larger, though it renders some policy tools ineffective. Globalization has a tendency to weaken monopolies, since national monopolies are faced with competition from foreign firms. However, there are some cases in which firms can attain a temporary global monopoly or oligopoly, posing a difficulty for national anti-trust laws. Globally, trade has also begun to conform to a legal framework, which may potentially benefit weaker countries, but there are concerns that the rules may benefit the stronger nations instead. One example are the vastly different interests regarding intellectual property in rich and poor countries: while the former favors keeping it a private good in order to reward innovation, the latter desires to keep it as a public good.

It has been speculated that globalization could result in a “race to the bottom” of environmental standards, but this phenomenon has not made itself evident. A study of the new globalizers showed that air quality had increased in major industrial centers. Through transfers of knowledge communities are able to share methods of combating pollution. On the other hand, poorer nations typically have problems enforcing environmental standards because of strong vested interests.

Some groups in rich nations have suggested that environmental regulations be enforced through WTO sanctions, but risk of the sanctions being captured by protectionist lobbies could potentially be used to the detriment of poor nations’ opportunities. Still, some environmental issues, like global warming, will require global policing. Seven economies account for 70 percent of the world’s carbon dioxide emissions. Because each of these countries is hesitant to proceed with reduction because of the potential for others to free-ride on the benefits, collective action such as in the Kyoto protocol are important steps in addressing global warming.

Ch. 5: Agenda for Action

Globalization has been a strong force of poverty reduction, narrowing the gap between many rich and poor countries.

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Globalization, Growth, and Poverty (a summary of the 2001 World Bank report)

July 4th, 2008 Comments off


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The following is my summary of a World Bank report published in May 2001 giving us the expected statist rundown of globalization: yeah, it’s good, but the state needs to play an ever-more-important role! Hopefully this summary will be useful to anyone else forced to read this boring and academically cliche journey through college-student moderate politics.

Globalization, Growth, and Poverty: Building an Inclusive World Economy

Reduced transportation costs, lower trade barriers, speedier transmission of ideas, pressure for labor migration, and increasing capital flows have all led to greater integration among economies and societies internationally, a phenomenon that has come to be labeled “globalization. ” While globalization is a major force propelling poverty reduction in the modern world, some concerns have been raised about increasing economic inequality, transfers of power, and cultural uniformity. The policy research report entitled Globalization, Growth, and Poverty: Building an Inclusive World Economy released by the World Bank in 2001 examines the influence of this globalizing force and the anxieties caused by it, serving as a summary of World Bank research into the topic and providing a policy agenda for harnessing globalization to positively augment opportunities for the poor and to offset its potential hazards.

The report is divided into five major areas. Chapter 1 explores the economic effects of the new wave of globalization, examining them in light of the effects of earlier periods of globalization and their subsequent reversals. Chapter 2 focuses on global policy agendas for trade, financial infrastructure, and migration. Chapter 3 concerns itself with the agenda of globalizing economies to integrate into world markets, investigating institutional arrangement and policies to facilitate integration. Economic issues aside- poverty, income distribution, and policies- Chapter 4 examines apprehension over issues of power, culture, and the environment. Finally, in accordance with the study’s findings, Chapter 5 proposes the World Bank’s agenda for action aimed at making globalization more beneficial, particularly for the poor and those marginalized by globalization.

Ch. 1: The New Wave of Globalization and Its Economic Effects

Economic integration can be thought of as having three components: trade, measured in the report as relative to world income; migration, using immigration to the United States; and capital flows, represented by the stock of foreign capital in developing countries as a proportion of GDP. From 1870 to 1915, falling costs of transportation propelled these figures to an important level. Mid-19th century changes from sailboats to steamships and reduction in trade barriers facilitated by an Anglo-French agreement triggered the first wave of globalization. Improved transportation and the elimination of political trade barriers resulted in the exchange of land-intensive primary commodities for manufactures and the doubling of exports as a fraction of world income to 8%. Labor became a necessity for these commodities. Sixty million people migrated from Europe to North America and Australia to work on the newly-accessible land, and some scholars speculate that “South-South” migrations (from China and India to southeast Asia, for example) were of the same magnitude, making labor flows during this period a grand total of 10 percent of the world’s population. Capital was also necessary; while in 1870, the foreign capital stock in developing countries was 9%, by 1914 it had grown to 32%. As a result, the rate at which per capita income increased each year had risen from 0. 5% to 1. 3%. Economic forces created an increasing convergence between globalizing countries; wages increased in the emigrant countries (particularly of Europe), while wages decreased in immigrant countries (America, Canada, etc. The overall impact of these changes on equality within individual countries was a function of the distribution of land ownership, as the benefits of primary commodity trading would accrue to land holders.

Despite the fact that transport costs continued to fall from 1915 to the end of the Second World War, globalization froze as trade barriers rose in response to nationalistic demands worsened by the First World War. Following 1945, new international cooperative efforts proceeded to reduce protectionism, reviving trade and producing a second wave of globalization much like the first, particularly among rich countries. The General Agreement on Trades and Tariffs (GATT) was formed to restore trade relations multilaterally. However, many developing countries were specialized only in primary commodity exporting and were left out of newly opened capital flows, albeit because of their own protectionist policies. The poorest industrialized countries grew the fastest, and while growth in developing countries recovered from the period of the two World Wars, they did not grow as quickly, resulting in a widening of the gap between rich and poor countries. As for income distribution patterns, the number of poor people increased (because of increased life expectancy and hence population growth), but the distribution of income among developing countries was only slightly affected.

Since 1980 an unprecedented level of global economic integration has taken place. “New globalizers” – a set of developing countries – have entered world markets for manufactured goods and services. The average composition of exports from developing countries, for example, has changed from 25% manufactured goods in 1980 to over 80% today. Foreign direct investment has vastly increased, particularly among countries like Brazil, Mexico, Hungary, India, and China. The general trend has been that some low-income countries formerly focused on primary commodities have become more competitive with high income countries for all types of goods and services. On the other hand, a group of less developed countries with approximately 2 billion people experienced an overall negative growth rate in the 1990s, becoming increasingly marginalized. Some concerns have also been raised about global integration causing rising inequalities within countries, but the report finds that this is not the case. At the same time, since 1980 the absolute number of poor people has stopped increasing and has decreased by 200 million, falling rapidly in the new globalizers and increasing in the remainder of the developing world. Overall, however, world inequality has stopped falling and has even possibly begun to decrease.

In light of these globalization experiences, particularly the most recent one, the study concludes that globalization can strongly reduce poverty. The non-globalizing countries of Africa and the Former Soviet Union (FSU) depend highly on primary commodities and have failed to participate significantly in globalization. Their marginalization is most often attributed to three things: poor policies, infrastructure, institutions, and governance; intrinsic geographic and climate disadvantages; or, as a fusion of the first two, that a temporary phase of poor policies has caused certain countries to be left out of major economic agglomerations. The report suggests the strategy of “opening up with the necessary complementary actions [of policies, institutions, etc. while building the global coalitions needed to address the deep-seated structural problems that face many countries. ”

Ch. 2: Improving the International Architecture of Integration

The international architecture for economic integration- i. e. tariffs and other trade barriers- has experienced change during each of the waves of globalization, but it has particularly done so in the most recent wave. Over the last 20 years, many developing countries have eliminated their restrictions on imports, but they now face protectionism from rich nations. Rich countries have low tariffs, on average, but retain trade barriers in agriculture and labor-intensive manufactures- areas in which developing nations have a trade advantage, whose protection by rich nations costs them over $100 billion.

However, developing countries have barriers three times higher than those in OECD countries. Because developing countries trade with each other far more than they did in the past and 70% of tariff barriers on their exports come from other developing countries, a “development round” of trade liberalization would be significantly gainful by improving access to new markets, both rich and developing. Despite this, protectionist interests in Northern developed countries present opposition to such changes, effectively using institutional trade agenda issues such as intellectual property, health and labor standards, and environmental issues as prerequisites for barrier reduction. The report argues that many of the developing countries in question are in fact improving labor conditions and environmental policies, but that the threat of trade sanctions from the WTO is only destructive to those ends.

Foreign investment relates closely to trade liberalization issues. Private capital flows have vastly increased, especially as developing countries have lowered restrictions on foreign direct investment (FDI), bringing an increased supply of capital and better access to technology, management, and markets. While the new globalizers have experienced these gains, the least globalized countries have experienced capital flight. Poor locations that have not improved much from globalization have created a demand for more well-managed aid from rich countries.

The third main global flow, migration, is also subject to structural improvement. Economic pressures for migration are resisted by legal restrictions on migration. Compared to a century ago, labor flows are not as globalized: only 2 percent of the world’s population is composed of non-citizen residents. Meanwhile, OECD labor forces are aging and retiring, putting strain on social security systems, while developing countries’ labor forces are growing rapidly because of high birthrates. There exists a potentially great mutual economic benefit achievable by combining capital and technology of developed countries with the labor resources of developing countries. Nonetheless, geographic limitations prevent (or will at least delay) capital flows and trade from eliminating migration. Wide divergences in quality of institutions and infrastructure keep production opportunities where their quality is high, and make production less attractive when their quality is low.

Migration can be a net positive factor for two nations, as evidenced by the experiences of the United States and Mexico. Individual migrants from Mexico to the U. S. for example, made $31 per week in Mexico on average, and could move to the U. S. and immediately begin earning $278 per week. Their migration to the U. S. has also taken pressure off of the Mexican labor market, raising wages there, as well as increasing money remittances. The U. S. has also benefited from this arrangement; the labor inflow was partly responsible for sustained growth and low inflation in the 1990s. Overall, OECD countries like the U. S. tend to have discriminatory policies toward immigrants, particularly biased in favor of educated workers, resulting in “brain drain” from developing countries. The report suggests that migration would reduce poverty more effectively if immigration policies were less discriminatory and permitted more unskilled labor flows.

Ch. 3: Strengthening Domestic Institutions and Policies

While trade policies are important to integration, other institutions and policies play a key role (even if they are not specifically catered to international commerce).

 |   [Part1] |   [Part2] |   [Part3] | 


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