FOCUS ON TRADE
Number 60, March 2001

by Walden Bello

(Co-authored with Nicola Bullard. Keynote speech at the National Convention against Globalization, New Delhi, India, March 21-23, 2001.)

Today the movement against corporate-driven globalization is at a decisive juncture. There are different proposals on how to move forward. Oftentimes, clarification of the demands of the moment are clouded by what are, in effect, non-issues. For instance, among many of those who support attaching environmental and labor clauses to the World Trade Organization, one often encounters the feeling that the opposition of many social movements and civil society organizations to this approach stems from either lack of sympathy for labor rights and the environment or "softness" towards authoritarian regimes. This is regrettable since many of those most opposed to the social clause approach are also oftentimes strong backers of labor rights, labor organizing, and environmentally sensitive development in their countries.

Values are not the issue. Whether or not we adopt the social/environmental clause approach to constraining globalization is largely, in our view, a matter of strategy and tactics. And the question of what are appropriate strategy and tactics for the moment can only be determined by analyzing the current global conjuncture.

The global conjuncture or, to use a more precise term, the global correlation of forces after Seattle and Porto Alegre is quite different from that in the mid-1990's. The founding and ratification of World Trade Organization in 1994-95 (WTO) was the apogee of capitalism in the era of globalization. Socialism had collapsed and the Washington Consensus seemed to carry all before it. There seemed to be very little space for maneuver, and very little opportunity to influence events except to play by the rules and get whatever morsels of reform you could get. It was this sense of being overwhelmed by a juggernaut that informed the strategy of attaching social and environmental clauses to the WTO and other trade agreements that some labor and environmental groups came up with during that period.

Today, the global correlation of forces is different--some would say, quite different. A crisis of legitimacy now envelops the key institutions of global economic governance: the International Monetary Fund (IMF), the World Bank, and the WTO. The Asian financial crisis of 1997-1998 was the Stalingrad of the IMF. It was clear to observers and ultimately to some people in the IMF itself that the Fund, with its prescription for capital account liberalization, helped create the crisis, and with its cure of tight money and tight budgets, converted a financial crisis into economic collapse in Thailand, Indonesia, and Korea. The now famous Meltzer Commission report and the massive demonstrations against the World Bank in Washington, DC, and Prague in 2000 combined to precipitate the World Bank's crisis of legitimacy. The Meltzer report, which is likely to inform the new Bush administration's perspective on the Bank, argues that the Bank is irrelevant to the question of solving poverty and should be radically reduced in terms of scale and functions. Seattle, of course, saw the magic combination of massive street protests, a revolt of the developing countries in the Seattle Convention Center, and irreconcilable differences between the European Union and the US scuttle the Third Ministerial and place the WTO in a state of limbo. Three quotations from extremely credible sources underline the depth of the crisis of confidence of the global elite in their key institutions of global economic governance post-Seattle.

• The Economist: The protesters "are right that the tide of 'globalization,' powerful as the engines driving it may be, can be turned back...International economic integration is not an ineluctable process, as many of its most enthusiastic advocates appear to believe. It is one...of many possible futures for the world economy; others may be chosen, and are even coming to seem more likely."
• Stephen Byers, UK Secretary for Trade and Industry: "The WTO will not be able to continue in its present form. There has to be fundamental and radical change in order for it to meet the needs and aspirations of all 134 of its members."
• C. Fred Bergsten, head of the Institute of International Economics and prominent advocate of globalization, in a speech before the Trilateral Commission: "the anti-globalization forces are now in the ascendancy."

Today we are in a different ballgame from that in the mid-nineties, when the social and environmental clause strategy was devised. Whatever merits it may have had then, today such an approach is unsound and counterproductive, both tactically and strategically. Tactically, it is unsound because the only way to smuggle it into the WTO is by having a new trade round that would simply open up the space for other forces to add new agenda for liberalization and globalization such as competition policy, investment policy, more agricultural liberalization, a new round of industrial tariff cuts, a TRIPs even more congenial to TNC interests. A new round is a Pandora's Box. The WTO, says C. Fred Bergsten, is like a bicycle. It can only remain upright by moving forward in terms of more liberalization and globalization. Our immediate goal must be to pin the bicycle down and out of locomotion by preventing a new trade round.

More broadly, we are engaged in an epochal struggle for legitimacy, and, as in every kind of warfare, the strategy revolves around the issue of who has the momentum, who has what Clausewitz called the "moral initiative." Strategically, the social and environmental clause strategy is obsolete given the new global correlation of forces. To borrow from military strategy, using the social/environmental clause strategy is like employing a pre-Stalingrad strategy of defensive warfare to a post-Stalingrad situation that demands offensive warfare.

The shifting balance of forces is causing the global elite to reassess its own strategy and tactics, a development indicated by the fact that a number of key corporations, like Caterpillar and Boeing, as Naomi Klein points out, are now endorsing social clauses as a way to secure fast track authority for the US president that would facilitate new round of liberalization and globalization via the WTO and regional free trade agreements like the proposed Free Trade of the Americas Agreement (FTAA).

The global elite-the Davos crowd-is beginning to embrace the social clause as part of a strategy to relegitimize globalization. They do not have to read Gramsci to know that unless legitimacy is regained, global power structures whose cohesion is principally dependent on the perception of legitimacy could begin to unravel. But the social clause is not the only element in what we might term the "soft corporate counteroffensive." There are two other moves that must be highlighted.

One is participating in the Global Compact promoted by UN Secretary General Kofi Annan. A brainchild of Annan and the Davos crew, the Global Compact is said to commit corporations to nine principles, the most important of which have to do with respecting labor rights, human rights, and the environment. However, compliance is voluntary and self-monitored, and consistent corporate rights violators like Nike, Shell, and Rio Tinto are making use of this platform to bluewash their very tarnished image. Even George Soros admits that the Global Compact is nothing more than a device to whitewash the corporate image, and it is unfortunate that some civil society organizations have been manipulated into endorsing it.

A third prong of the soft counteroffensive is the corporate embrace of civil society. In a manner similar to the way they coopted gender diversity and racial diversity into their drive to market dominance (a process so insightfully analyzed by Naomi Klein in her classic book No Logo), the smart corporations now see "civil society"--meaning us--as the key to both legitimacy and marketing success. NGOs are now being literally deluged with requests to join this corporation's NGO advisory committee or that multilateral organization's NGO consultative group. A few weeks ago, even the IMF held its first NGO consultation in Singapore. Of course, the Davos elite club has begun to justify its existence by saying that it has began to incorporate labor unions and NGOs into its annual retreat held in Switzerland at the end of January. In the leadup to this year's meeting, for instance, Davos chiefs Klaus Schwab and Claude Smadja made sure to trumpet the fact that "a thousand business leaders from the forum's member companies will be joined by dozens of heads of state or government and nearly 70 representatives of civil society to discuss, and hopefully advance, the major issues on the global agenda." The idea is to project dialogue when in fact monologue governs and to gain legitimacy via the mere mention of "consulting civil society."

A new civil society-labor strategy needs to be elaborated to respond to the dangers, openings, and opportunities of the new conjuncture. We would like to present a strategy that 1) addresses the soft counteroffensive, 2) delineates the line of struggle or line of march against the key global institutions, and 3) proposes an alternative paradigm of global economic governance.

Allow us to first address the soft corporate counteroffensive. We must meet the challenge of relegitimization of the globalist project head on by discarding the labor and environmental clause strategy when it comes to the WTO and other trade agreements. We must also oppose and expose the Global Compact as a whitewash mechanism and ask NGOs and labor unions that have joined it to withdraw. We must, furthermore, be very discriminating about lending our participation to consultation initiatives launched by the mutilaterals and corporations. Clearly, it is time to boycott the Davos meetings and the Davos process, which has become the premier site for developing corporate cultural hegemony over the rest of us by drawing the participation of some of us.

Moving on to an offensive strategy against the key institutions of globalization, priority must be put on stopping a new trade round from being launched at the Qatar Ministerial in November of this year. Beyond this, we must support the moves of many peasant and farmer groups like Via Campesina to remove agriculture from WTO discipline. We must ensure that no consensus emerges in the current negotiations on the GATS, the General Agreement on Trade in Services, which would stalemate the process. We must likewise put ourselves squarely behind the drive to place public health above TRIPs and profits by supporting the drive to reproduce and mass-market patented AIDs drugs at cheap prices. We must campaign to enshrine the priority of the precautionary principle above free trade, deriving momentum from the GMO, mad cow and foot-and-mouth eco-health disasters. Likewise, we must place ourselves firmly behind the South's demand for the recognition and institutionalization of "Special and Differential Treatment"--that underdeveloped countries require a different set of trade rules--in trade negotiations among countries. The overall strategy is to disempower or radically "shrink" the WTO so that it becomes simply another forum, with very limited and very diluted coercive capabilities, for trade negotiations.

When it comes to the IMF and the World Bank, the time is ripe to press and build up a global campaign for decommissioning or neutering these institutions. Currently, there are a number of influential appointees in the economic agencies of the Bush administration who favor either eliminating or radically reducing the role of the Bretton Woods institutions. With many Republicans and Democrats in Congress evincing similar sentiments, international civil society and labor unions might add their weight to form a critical mass that would determine the future of these institutions. As the head of one international agency who follows politics in this area fairly closely told us, "The mutilateral institutions are today very vulnerable to a pincer movement carried out by, on the one hand, the conservatives in the new administration and, on the other, international civil society." It might be added that another factor that should spur decisive action on our part is that the staffs of both institutions are severely demoralized currently by the combination of external criticism and/or internal mismanagement. Windows of opportunity are rare, and we better move before this one slams shut.

Next, unions and civil society organizations must band together to scuttle--while they are still in the dockyard the Free Trade of the Americas Agreement and similar global free trade treaties that are now being pushed--partly as a substitute for the stalemated WTO. These regional or bilateral agreements are as much guided by the destructive principles of neoliberalism-liberalization, deregulation, and privatization-as the WTO. Here it must be noted that full opposition to both the FTAA and a new trade round were two of the agreements contained in the common statement signed by hundreds of unions and civil society organizations at the World Social Forum in Porto Alegre a few weeks ago.

Finally, we must extend the crisis of legitimacy from the multilateral institutions of global governance to the engine of globalization itself: the transnational corporation. TNCs are in disrepute today, and even in the US a recent survey has shown that 70 per cent of the people feel that TNCs have too much power over their lives. Corporations find it less and less possible to operate without engaging in criminal activity. This similarity between the mafia and the TNC is something that we must continually stress in this campaign of delegitimation. It is only when we realize how great is the potential of campaigns to unmask the criminal that is at the heart of the corporation that we begin to see how inappropriate and untimely is Kofi Annan's Global Compact and understand how it functions less as a lifesaver for society than a lifesaver for TNCs.

Finally, to the question of the alternative. Our side has always been criticized for only opposing and not proposing. Well, that is no longer valid--if it ever was--after Porto Alegre. Under the banner "Another World is Possible," the 12,000 people who came to the southern Brazilian city not only wrested the moral ascendancy from the Davos crowd, as the Financial Times pointed out in its feature piece "Attack on Planet Davos." They also came to engage in hard discussion on how to create an alternative world in non-utopian and pragmatic ways.

We disagree with the view that thinking about the alternative is a task that for the most part is still in a primeval state. In fact, we feel that that many or most of the basic or broad principles for an alternative order are already with us, and it is really a question of specifying these broad principles to concrete societies in ways that respect the diversity of societies.

Work on alternatives has been a collective past and present effort, one to which many North and South have contributed. Allow us to synthesize the key points of this collective effort under the rubric "deglobalization." While the following model addresses principally the situation of countries in the South, many points have relevance as well to societies and economies in the North.

What is deglobalization? We are not talking about withdrawing from the international economy. We are speaking about reorienting our economies from the emphasis on production for export to production for the local market;

• about drawing most of our financial resources for development from within rather than becoming dependent on foreign investment and foreign financial markets;
• about carrying out the long-postponed measures of income redistribution and land redistribution to create a vibrant internal market that would be the anchor of the economy;
• about deemphasizing growth and maximizing equity in order to radically reduce environmental disequilibrium;
• about not leaving strategic economic decisions to the market but making them subject to democratic choice;
• about subjecting the private sector and the state to constant monitoring by civil society;
• about creating a new production and exchange complex that includes community cooperatives, private enterprises, and state enterprises, and excludes TNCs;
• about enshrining the principle of subsidiarity in economic life by encouraging production of goods to take place at the community and national level if it can be done so at reasonable cost in order to preserve community.

We are talking, moreover, about a strategy that consciously subordinates the logic of the market, the pursuit of cost efficiency to the values of security, equity, and social solidarity. We are speaking, to use the language of the great social democratic scholar Karl Polanyi, about re-embedding the economy in society, rather than having society driven by the economy.

Deglobalization or the re-empowerment of the local and national, however, can only succeed if it takes place within an alternative system of global economic governance. What are the contours of such a world economic order? The answer to this is contained in our critique of the Bretton Woods cum WTO system as a monolithic system of universal rules imposed by highly centralized institutions to further the interests of corporations--and, in particular, US corporations. To try to supplant this with another centralized global system of rules and institutions, though these may be premised on different principles, is likely to reproduce the same Jurassic trap that ensnared organizations as different as IBM, the IMF, and the Soviet state, and this is the inability to tolerate and profit from diversity. Incidentally, the idea that the need for one central set of global rules is unquestionable and that the challenge is to replace the neoliberal rules with social democratic ones is a remnant of a techno-optimist variant of Marxism that infuses both the Social Democratic and Leninist visions of the world, producing what Indian author Arundathi Roy calls the predilection for "gigantism."

Today's need is not another centralized global institution but the deconcentration and decentralization of institutional power and the creation of a pluralistic system of institutions and organizations interacting with one another, guided by broad and flexible agreements and understandings.

We are not talking about something completely new. For it was under such a more pluralistic system of global economic governance, where hegemonic power was still far from institutionalized in a set of all-encompassing and powerful multilateral organizations and institutions that a number of Latin American and Asian countries were able to achieve a modicum of industrial development in the period from 1950 to 1970. It was under such a pluralistic system, under a General Agreement on Tariffs and Trade (GATT) that was limited in its power, flexible, and more sympathetic to the special status of developing countries, that the East and Southeast Asian countries were able to become newly industrializing countries through activist state trade and industrial policies that departed significantly from the free-market biases enshrined in the WTO.

Of course, economic relations among countries prior to the attempt to institutionalize one global free market system beginning in the early 1980's were not ideal, nor were the Third World economies that resulted ideal. They failed to address a number of needs illuminated by recent advances in feminist, ecological, and post-post development economics. All we wish to point out here is that the pre-1994 situation underlines the fact that the alternative to an economic Pax Romana built around the World Bank-IMF-WTO system is not a Hobbesian state of nature. All we want to stress is that the reality of international relations in a world marked by a multiplicity of international and regional institutions that check one another is a far cry from the propaganda image of a "nasty" and "brutish" world. Of course, the threat of unilateral action by the powerful is ever present in such a system, but it is one that even the most powerful hesitate to take for fear of its consequences on their legitimacy as well as the reaction it would provoke in the form of opposing coalitions.

In other words, what developing countries and international civil society should aim at is not to reform the TNC-driven WTO and Bretton Woods institutions, but, through a combination of passive and active measures, to either a) decommission them; b) neuter them (e.g., converting the IMF into a pure research institution monitoring exchange rates of global capital flows); or c) radically reduce their powers and turn them into just another set of actors coexisting with and being checked by other international organizations, agreements, and regional groupings. This strategy would include strengthening diverse actors and institutions as UNCTAD, multilateral environmental agreements, the International Labor Organization, and evolving economic blocs such as Mercosur in Latin America, SAARC in South Asia, SADCC in Southern Africa, and a revitalized ASEAN in Southeast Asia. A key aspect of "strengthening," of course, is making sure these formations evolve in a people-oriented direction and cease to remain regional elite projects.

But above all, it would support the formation of new international and regional institutions that would be dedicated to creating and protecting the space for devolving the greater part of production, trade, and economic decision-making to the national and local level. The primal role of international organizations in a world where toleration of diversity is a central principle of economic organization would be, as the British philosopher John Gray puts it, "to express and protect local and national cultures by embodying and sheltering their distinctive practices."

More space, more flexibility, more compromise--these should be the goals of the Southern agenda and the international civil society effort to build a new system of global economic governance. It is in such a more fluid, less structured, more pluralistic world, with multiple checks and balances, that the nations and communities of the South-and the North--will be able to carve out the space to develop based on their values, their rhythms, and the strategies of their choice.

In conclusion, in this post-Seattle, or should we now say, post-Porto Alegre world, our side has the momentum, the initiative, the ascendancy. Of course, the structures of global capitalism seem as firm as ever. While guarding against unwarranted optimism, we must also not underestimate the possibilities in the more fluid situation of the moment. Let us remember that power structures ultimately cannot survive without the perception that they are legitimate. The other side knows this, which is why the invocation of "civil society" has become more desperate, more shrill. From the WTO to the corporation, the key institutions of capitalism in this era of globalization are undergoing a profound crisis of legitimacy. Let us not waste the opportunities opening up by being wed to the thinking, calculations, and strategies of the past.

Walden Bello is the Executive Director of Focus on the Global South

Focus on the Global South (FOCUS)
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