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					  CHAPTER 6
   GLOBAL
  BUSINESS
INSTITUTIONS
Global Business Institutions PRISMS
1. Private vs. community
   capitalism
2. GGOs vs. NGOs
3. Godzillas vs. Tigers
4. The benefits vs. costs of free
   trade
5. Should GGOs support both
   cultural forms of capitalism?
6. Should human rights replace
   national sovereignty as the key
   goal of nations?
7. Is defensive protectionism
   justifiable when
   underdeveloped nations are
   threatened by Global 500
   corporations?
8. Should rich nations be required
   to engage in import
   substitution?
9. Does the IMF have an agenda to
   convert Tiger nations to private
   capitalism?
10. Should the international debt of
   struggling Tiger nations be
   cancelled?
11. Should the IMF be reformed or even
   dissolved?
12. Should governments use their
   corporations as a foreign policy tool?
13. Is private capitalism a form of
   nationalism?
    ENTERING THE LAST ERA OF HUMAN HISTORY?

Families        Clans             Tribes

Villages           Cities

Nations            Regions

       Era of internationalism
   (multilateralism) over nationalism
There’s no bigger
dimension for the
  world to grow
  into unless it’s
  interplanetary
       trade!
“A new global civilization has emerged
whose identity lies not just in the norms
of dress, advertising, multinational
brands, or the constant buzz of world
music. Technology has enabled our planet
to be covered by a single civilization for
the first time in human history. It is now
enmeshed in tiny capillaries that not only
transmit information at lightning speed but
also convey integrated norms of social,
political, & economic behavior.”
   WHY NATION STATES ARE DECLINING
1. Nations are becoming so economically
   interdependent that regionalization is
   becoming a new force.
2. People are more mobile than ever before.
3. Minority populations in a growing number of
   nations are assertively demanding greater
   self-determination.
4. Global corporations can meet the consumer
   needs of the world’s population better than
   most national governments.
5. New global problems have emerged that
   require the cooperation of nations: terrorism,
   global warming, illegal immigration, disease
   pandemics.
A NEW21 ST

 CENTURY
  GLOBAL
  ORDER
The 21st century political & economic order
  is no longer based on second-half 20th
  century Cold War American capitalism
  vs. Soviet Communism. According to
  new global thinker George Friedman ,
  the 21st century global structure is
  overbalanced in favor of U.S. hegemony,
  because America is for the time being
  the only truly global power. But another
  21st thinker, Fareed Zakaria, asserts that
  we are living in a “Post-American” world
  where the U.S. is not declining as much
  as other developing nations (led by
  China, India, & several South American
  nations) are rising.
These rising 21st century powers will
   eventually move to form (primarily
   economic) coalitions as a counterbalance
   to U.S. dominance. New variants of
   capitalism are emerging better suited to
   the cultures of developing nations, posing
   a long-term challenge to the Western “neo-
   liberal” Adam Smith ideology (profit
   maximization, single-stakeholder
   nationalist) capitalism. In this “post-
   American” emerging world structure, the
   U.S. will have to decide if it wants to
   participate in shaping the new order via
   multilateral policy consultation, or settle
   for a less dominant global role as the
   British acquiesced to in the 20th century.
      NEW EMERGING GLOBAL
INFRASTRUCTURE FOR THE 21 CENTURY

1. Global Government
 Organizations (GGOs)
2. Non-Government
 Organizations (NGOs)
3. Global Public Policy
 Networks (GPPNs)
           GGOs TODAY
1. International Monetary Fund
   (Authority over nations that
   borrow money)
2. International Labor Organization
   (U.N.) (Authority over human
   rights violations in the global
   workplace)
3. World Trade Organization
   (Authority over nations in trading
   practices)
4. International Standards
   Organization (Mandates standards
   for all phases of global business
   operations)
5. European Union (Assuming
   increasing authority over the
   economic & political practices of 25
   European nations)
6. International Criminal Court (ICC)
   (Capacity to prosecute national
   leaders who commit “high crimes
   against humanity”)
7. North American Free Trade
   Agreement: limited, but growing,
   authority, over “CANAMERICO”
8. “G20” governments: an informal
   coalition of the world’s 20
   strongest who strive to influence
   how the global economy operates
9. The influence of the United Nations
   over sovereign nations has been
   limited by the nationalism of a few
   nations possessing veto power
     MEMBERS OF THE “G20”
• Argentina, Australia, Brazil, Canada, China,
  France, Germany, India, Indonesia, Italy,
  Japan, Mexico, Russia, Saudi Arabia, South
  Africa, South Korea, Turkey, UK, USA
• The G20 was instrumental in managing the
  world economic crisis of 2008-2010
  instigated by investment bank and
  deregulation abuses in the USA. Without the
  willingness of the world’s largest economies
  to stimulate the depressed global economy,
  recovery from the crisis would have been
  much slower and more destructive.
                   THE ICC
“The International Criminal Court (ICC) is an
  independent, permanent court that tries
  persons accused of the most serious crimes of
  international concern, namely genocide, crimes
  against humanity, and war crimes. The ICC is
  based on a treaty, joined by 104 member
  nations so far (but not the USA). The ICC is a
  court of last resort. It will not act if a case is
  investigated or prosecuted by a national judicial
  system unless the national proceedings are not
  genuine. In addition, the ICC only tries those
  accused of the gravest crimes. In all of its
  activities, the ICC observes the highest
  standards of fairness and due process.” Thus
  far, the Court’s main involvement has been with
  the wars in Congo, Sudan, & Uganda.
    THE ESSENCE OF NGOs
1. NGOs strive to represent the community
   interests often ignored by private
   corporations: employee welfare,
   environmentalism, human rights, etc.
2. Although varied in mission, NGOs share
   one common perspective: unrestrained
   nationalistic economic growth is the
   catalyst for the world’s biggest problems
   in the 21 century: environmental
   degradation, materialistic consumerism,
   exploitative capitalism, etc.
“NGOs have become the new and
 efficient watchers of multinationals,
 being able to denounce those
 activities which could be damaging to
 the environment and to local
 communities as well as some
 shameful corruption practices; as a
 result they have been able to force
 them to improve their corporate social
 responsibility and their awareness of
 the heavy costs to their sales of
 having a negative social reputation.”
NGOs go after GGOs
like dogs chase cats.
 Can their opposed
   missions ever be
     reconciled?
                       NGOs:
     The “Global Antigrowth Coalition” (GAC)
      Anti-business environmentalists, human
        rights organizations, anti-capitalists,
        New Age activists, & neo-isolationists
1.   Amnesty International
2.   Greenpeace
3.   Human Rights Watch
4.   Peacenet
5.   Forest Conservation Portal
6.   One World
         OVER 25,000 NGOS IN THE WORLD
        OXFAM INTERNATIONAL
Founded in 1995, OxFam (Oxford Committee for
  Famine Relief) is one of the world’s major
  NGOs, a confederation of 13 social
  justice/progress organizations (with 3000
  partners in 100 nations) working together to
  promote sustainable economic development
  and poverty. “Oxfam works with communities,
  allies and partner organizations, undertaking
  long-term development, emergency work,
  research and campaigning for a fairer world.
  We seek to help people organize so that they
  might gain better access to the opportunities
  they need to improve their livelihoods, and
  govern their own lives.”
1. Rainforest Action Network vs.
   Citigroup over loans that led
   to habitat loss & climate
   change in DCs
2. Greenpeace vs. ExxonMobil to
   reduce climate changing fuel
   production
3. People for the Ethical
   Treatment of Animals vs.
   Burger King & Wendy’s for
   beef farming & slaughtering
   abuses
4. Greenpeace vs. Dow Chemical (that
   bought Union Carbide & tried to get
   UC off the hook for its liabilities
   from a pesticide disaster in India
   during the 1980s)
5. Centre for Science & Environment
   vs. Coke & Pepsi in India over high
   pesticide concentrations in their
   soft drinks
6. Children’s activists vs. Nike for
   sweatshops
1. How did nations tend to
   resolve their differences
   before GGOs & NGOs came on
   the scene? (war & colonialism)
2. What promotes peace more:
   independent nations or
   interdependent nations? (The
   more nations need each other,
   they more they cooperate.)
 GLOBAL PUBLIC POLICY NETWORKS
“GPPNs are designed to bring in business as a
larger participant in the provision of those public
goods that are at the heart of the global
sustainability and development agendas. GPPNs
link local, national, & regional governments,
transnational corporations, & other businesses
and their associations. Diverse & sometimes
opposing groups discuss common problems that
no one of them can resolve by itself. The idea that
these various groups can meet face to face in a
non-threatening forum to discuss issues is
promising. GPPNs maximizes the inclusion of
material information & a rich variety of important
stakeholder voices.”
1. 50-60 GPPNs have emerged since the
   early 1990s to promote partnerships
   between business, government, & NGOs
   to coordinate resources to fight global
   economic, social, & ecological problems.
2. THE CONSULTIVE GROUP ON
   INTERNATIONAL AGRICULTURAL
   RESEARCH strives to broaden research
   support for food supplies & sustainable
   agriculture (where nations can feed
   themselves & aren’t dependent on
   importing food)
3. GLOBAL REPORTING INITIATIVE:
   Develops global sustainability action &
   accountability guidelines for
   corporations
4. MILLENNIUM ECOSYSTEM
   ASSESSMENT: Analyzes scientific
   research for policy initiatives on
   ecosystem change
5. MEDICINES FOR MALARIA VENTURE
6. RENEWAL ENERGY POLICY NETWORK
7. THE INTERNATIONAL CAMPAIGN TO
   BAN LANDMINES
 B(enefit)
COMPANIES
“B” (benefit) companies are a new hybrid
 between for-profit & non-profit
 organizations. Companies like
 Newman’s Own (started by actor Paul
 Newman) & Pura Vida Coffee (organic
 coffee) contribute their profits to
 charitable causes, adopting a part
 business-part, part- philanthropy
 organizational model. Some B
 companies even pay dividends to their
 shareholders. Most B companies
 characterize themselves as missions-
 driven rather than competitively driven.
“B” Corporations are a new type of
  corporation that are purpose-driven and
  create benefit for all stakeholders, not
  just shareholders. B Corporations are
  unlike traditional responsible businesses
  because they:
• Meet comprehensive and transparent
  social and environmental performance
  standards.
• Institutionalize stakeholder interests.
• Build collective voice though the power of
  a unifying brand.”
GATT: Forerunner to today’s
        World Trade Org.
1. General Agreement on Tariffs and
   Trade, 1948-USA
2. GATT was the first global org. to
   attempt to promote free trade
3. The only way GATT could pass
   trade policy was if all member
   nations agreed. Most favored
   nation status (MFN) was their
   incentive.
4. In the 1990s, GATT fell apart
   because developed nations
   and developing nations could
   no longer agree on a
   common policy agenda
   because they were poles
   apart.
5. This ushered in the World
   Trade Organization (WTO)
1. In 1995, GATT was
reorganized as the WTO
2. Headquartered in
  Geneva, Switzerland
3. 146 member nations
4. 550 staff members
WTO: The Watch Dog of
     Global Trade
      THE WTO MISSION
1.Promoting free & equitable
  global trade
2.Settling trade disputes
3.Evaluating the trade
  policies of nations
4.Providing economic
  consulting to DCs
5. “The essential goal of the WTO
   is to deregulate international
   trade. To accomplish this,
   WTO rules limit the capacity of
   governments to regulate
   international trade or to
   interfere with the activities of
   corporations.”
6. Clearly, the WTO seeks to
   promote “neo-liberal”
   capitalism in which markets
   take precedence over nations.
WTO Smooth sailing (?) through
      trading obstacles
Transparent trade, fair trade
          MOST COMMON NON-TARIFF
                TRADE BARRIERS
1.   Subsidies: The government financially
     helps corporations & farmers to compete
     against foreign competition
2.   Quotas: Forcing nations to restrict the
     quantity of exports they send
3.   VERs (“Voluntary” Export Restraints):
     Arm-twisting nations into “voluntarily”
     restricting their exports
4.   Local sourcing requirements: Foreign
     manufacturers must buy supplies from
     domestic suppliers
5. “Dumping”: selling below cost in
foreign markets to “steal” market
share from local competitors
6. Asian sweetheart bank loans:
The Asian government pays off
loans companies can’t pay off.
7. Tariff offset tax breaks:
Companies get to reduce their
taxes by the amount of tariffs they
paid
Most-favored nation status:
  WTO members get tariff
           breaks
BASIC WTO STRUCTURE
1.The Dispute Settlement
  Body
2.The Trade Policy Review
  Body
3.The General Council
  (Secretariat)
HOW THE WTO GETS THINGS DONE
1. “Informal green room” consensus
   forums between nations that
   want to “do a deal”
2. Consensus ministerial meetings
   (with majority voting permissible,
   but voluntary agreement
   preferred)
3. Policy-recommending committees
   & special issue task forces
4. The WTO must seek to harmonize
   its policies with those of other
   global government organizations
   (GGOs)
5. The WTO uses the technical staff of
   GGOs for policy analysis
6. The WTO isn’t supposed to
   micromanage the economic policies
   of its members (as the IMB/World
   Bank have been accused of doing)
 WTO CLOUT OF THE “QUAD” NATIONS
1. The “quad” nations of the WTO (the
   U.S., Canada, EU, Japan & the EU)
   often pool their voting power and
   political influence to steer WTO
   activities in a desired direction.
2. “The Quad countries basically
   determine which issues are
   important and come to the floor and
   which do not.”
        THE WTO’S TEETH
1. Member nations enact & enforce
   their own trade regulations
2. Nations can sue each other over
   trade disputes (via a typical civil
   litigation process of opposing law
   teams, jury panel of technical
   experts, verdict, appeal option)
3. Trade legislation can be passed by
   majority vote & can be blocked by a
   consensus of WTO members.
           THE WTO TRADE
       COMPLAINT PROTOCOL
1. The feuding nations must
   engage in an informal dialogue
   before the WTO can get
   involved
2. If the feud is not resolved
   after 60 days, a WTO trade
   panel (“jury”) can be formed &
   the case resolved within one
   year.
 The WTO panels
 (judges) meet in
    secret & all
proceedings remain
 confidential. No
 outside appeal is
    permitted.
 THE TOP 5 WTO PLAINTIFFS, 1995-2002
1.   INDIA: Filed 15 suits
2.   BRAZIL: 22 suits
3.   CANADA: 24 suits
4.   EU: 63 suits
5.   USA: Filed 74 suits (winning 78%);
     The U.S. successfully defended
     against 25% of suits as defendant,
     higher than the 15% victory rate for
     WTO defendant nations over all. (EU
     won 46% of its cases as defendant)
1. Godzillas filed 63% (177 out of 279) of
   WTO challenges between 1995-2002; a
   quarter of these were against Tigers;
   Godzillas won 95% of these challenges
2. Godzillas won 81% (4 of 5 cases) of all
   cases filed in the WTO
3. Tigers won 95% (20 of 21 cases) of
   challenges against Godzillas, while
   Godizilla won 82% of their suits against
   tiger nations.
4. Summary: Plaintiff nations have won
   most of the time; Godzillas have filed &
   won way more suits than Tigers
1. In 2002, the U.S. lost a $4B suit to
   the EU over granting American
   companies tax deductions for EU
   tariffs.
2. In 2003, the WTO slapped the USA
   with a $2.2B fine for steel tariffs.
3. In 2004, the WTO levied the U.S. an
   annual fine of $150M as long as the
   “Byrd Amendment” remained in
   effect (which compensates U.S.
   companies for filing trade complaints
   related to foreign company dumping
   or subsidies)
     AMERICA SUES CHINA
In 2007, the U.S. lodged trade
    complaints in the WTO
 against China, charging them
 with paying export subsidies
    to Chinese companies;
    pirating DVDs & CDs; &
 restricting the sale of foreign
    films & music in China.
In the summer of 2009, the World
 Trade Organization issued an
 unfair practices ruling against
 China for requiring American
 media companies to use state-
 owned Chinese companies for
 distributing their products to the
 Chinese marketplace and for the
 government’s right to alter the
 contents (censor) of media
 material.
1. Agreement on Technical Barriers To Trade:
   Prohibition of trade quotas, embargos, or
   bans.
2. Agreement on Agriculture: Nations should
   import food when it is cheaper than growing it
   at home.
3. Agreement on Trade-related Intellectual
   Property (TRIPs): Nations must enforce the
   intellectual property laws of other nations
4. General Agreement of Trade in Services
   (GATS): Nations must open their borders to
   the exporting of services from around the
   world.
5. Agreement on Trade-Related Investment
   Measures (TRIMs): Nation's must open their
   borders to the unrestricted inflow & outflow
   of capital.
           FAILURE OF THE WTO DOHA ROUND
              (2000-2006) OF TRADE TALKS
1. The round of WTO trade talks started in 2000 in the
   Middle East nation of Qatar had great hopes for
   addressing the trade complaints of developing nations
   (“Tigers”) relating to the use of agricultural subsidies
   by rich (“Godzilla”) nations.
2. But the round collapsed in the summer of 2006 when
   Godzilla nations finally “threw in the towel” on
   extending the subsidy dialogue further.
3. Tigers have 2 specific complaints against Godzilla
   nations for their use of heavy agricultural subsidies:
   (A) Subsidies significantly lower the cost of Godzilla
   agricultural products & thus restrict the amount of
   agricultural products imported by Godzillas from Tiger
   nations; (B) Under the WTO’s import substitution
   policy, Tigers are forced to purchase many food
   exports from Godzilla nations, since they are cheaper
   than what Tigers can grow the same products for at
   home.
4. The U.S. wanted the Doha round to
   focus more on cutting tariffs than on
   subsidies, but the EU was open to
   discussing tariff cuts on manufactured
   products only, not farm product tariffs.
5. The U.S. wasn’t interested in subsidy
   compromise, insisting that no new WTO
   agreement was preferable to a watered
   down one.
6. “The most likely route to renewed WTO
   subsidy talks is for nations to realize
   that regional (bi-lateral) free trade
   agreements don’t have nearly the
   economic potential as true global
   (multilateral) agreements.”
LESS REGIONAL FREE TRADE, MORE GLOBAL
     “Today the thriving world economy is
     complacent. Protectionism has declined
      significantly due to regional free trade
    agreements (NAFTA, the EU, MERCOSUR,
   etc.). But nations must understand that bi-
     lateral (regional) trade deals complicate
      importing-exporting on a global basis,
   especially in Asia where a noodle bowl of 70
   bilateral trade deals greatly complicate the
   efficiency of product movement logistics. In
    addition, bi-lateral deals tend to generate
      much bigger trading benefits for large
                nations than small.”
          WTO PROTESTS
Controversy & protests accompany
 the WTO ever time it holds rounds
 of talks in host cities around the
 world. In 1999, 50,000 sometimes
 violent protestors shut down WTO
 sessions in Seattle. Subsequent
 rounds of talks in Italy, Cancun,
 Hong Kong, & Rostock, Germany
 also experienced varying degrees
 of turbulence.
  GLOBAL INSECURITIES CAUSED BY THE
  SPREAD OF NEO-LIBERAL CAPITALISM
1. Clash of secular/consumerist cultures
   with theocratic cultures in the Middle
   East
2. Rapid rise in global oil prices caused by
   China’s rapid capitalistic growth
3. Global prosperity based on America’s
   debt-financed over-consumption
4. Destabilization of world financial
   markets by America’s investment
   banking scandal of 2008
 THE MAIN CONCERNS OF WTO CRITICS WITH
   BUSINESS-DRIVEN GLOBALISM IN C21
1. Rapidly rising global wealth
  inequality is evidence of unjust
  capitalism
2. Women all over the world, but
  especially in the developing world,
  have been forced to abandon their
  family nurturing role in place of
  earning money
3. Global economic & job insecurity are
  exploding due to global capitalistic
  competition
4. Cultural insecurity is growing with
 the rapid spread of Western
 consumerism (materialism, debt,
 pollution, & advertising)
5. Environmental insecurity is
 expanding due to the rapid onset of
 profit-maximization/cost-
 minimization industrialization
6. Political insecurity is the byproduct
 of economic, cultural, &
 environmental insecurity
7. In its efforts to support the
 interests of global corporations over
 the interests of nations of local
 communities, the WTO prohibited
 the EU’s efforts to restrict imports
 hormone-fed beef; approved sweat
 shop manufacturing in many
 developing nations; and sided with
 companies opposing foreign labor
 unions and environmental
 legislation.
 “National governments ceded
  power to the WTO and IMF or
had this power seized from them
  by international markets. The
   world economy needs to be
brought back in line with political
needs so that national and global
 political structures will reflect
   the interests of the world’s
peoples and assert authority over
        global markets. ”
   CRITICS FROM THE RIGHT
Not all WTO critics are from the left of the
 political spectrum. Conservative “neo-
 liberal” capitalists oppose government
 intervention into the marketplace,
 preferring for the “invisible hand” of
 capitalism to have full sway. Neo-
 capitalists thus oppose the free trade
 interventions of GGOs, preferring that
 corporate and nationalistic interests
 operate without GGO institutional
 coordination or multilateral (multi-
 nation) policy .
“Human rights must replace
   national sovereignty as
    the key international
  issue. Wealthy countries
   will become inundated
   with immigrants unless
 the North/South economic
       divide is faced.”
  NEO-LIBERAL
CAPITALISM: THE
   ECONOMIC
  IDEOLOGY OF
    GLOBAL
  GOVERNMENT
 INSTITUTIONS
1. “Neo-liberal” (private) capitalism is the
   ideology of most Western nations (especially
   the USA). Its bedrock principles include the
   importance of private enterprise, free trade,
   minimum government encroachment on the
   “invisible hand” of capitalism, & the profit
   maximization ethic.
2. “Neo” refers to applying this capitalist
   ideology to nations in addition to
   corporations; “liberal” refers to liberalizing
   the role of government in promoting private
   enterprise & free trade (as opposed to
   regulating business activity & owning or
   running corporations).
            THE IDEOLOGY OF
         NEO-LIBERAL CAPITALISM
1.“Invisible-hand” capitalism based on grass
   roots profit-maximizing business deals
   regulated by impersonal institutions (CPA
   firms, stock markets, brokers, law firms, etc.)
2. Single stakeholder (financial
  owners/stockholders) private corporations
  competition in Darwinist survival-of-the-fittest
  industries
3. Laissez-faire capitalism based on limiting the
  government’s regulatory role
4. Neo-liberalism wants the market to control
  capitalism, not govenments.
4. Exporting of neo-capitalist policies
   to developing nations via global
   economic institutions (World Trade
   organization, International
   Monetary Fund/World Bank,
   regional free trade agreements)
5. Exporting Western culture
   throughout the world: consumerism,
   pop culture, unisex gender roles,
   “Social Darwinist” (survival-of-the-
   fittest) competition
 Is neo-lib capitalism
    suitable for the
 interdependent 21   st

century world, or only
 for the independent
19 th & 20th centuries?
   GLOBAL
GOVERNMENT
  ECONOMIC
INSTITUTIONS
(10,000 employees)
1. The World Bank describes itself as “an
   organization of 184 countries, working
   to foster global monetary cooperation,
   secure financial stability, facilitate
   international trade, promote high
   employment and sustainable economic
   growth, and reduce poverty.”
2. It has loaned over $350B over the past
   50 years, mostly to developing nations).
   Money was loaned to a total of 66
   different nations in the past 25 years.
3. In recent years, the Bank’s average
   annual loan rate has been $20B.
 HOW THE WORLD BANK STRIVES
 TO SERVE DEVELOPING NATIONS
1. Long-term loans (15-30 years) for
   economic & social development
2. Infrastructure loans (dams,
   highways, bridges, etc.)
3. Pollution reduction
4. Family health & reproductive
   services
WHY ARE THE PRIVATE SECTORS
   OF MOST DCs SO WEAK?
 •Agricultural economies
   •Scarce investment
           capital
    •Limited business
      infrastructure
   •Weak institutions
IMF Headquarters,
  Washington, DC




   Bank to the
 Developing World
The Executive Board
1. The IMF tends to make short-term
   (3-5 years) loans to help developed
   nations deal with short-term
   economic challenges, such as
   occasional trade deficits,
   recessions, weakening currency, or
   crop disasters. It relies on its sister
   lender, the World Bank, to make
   longer-term, developmental loans
   (major construction projects, health
   & human services, technology
   development, etc.) to developing
   nations.
2. The IMF makes short-term loans to nations
   struggling with trade balance problems &
   unstable currencies.
3. The IMF sometimes makes large, risky
   loans that private banks would not make.
   It’s the lender of last resort.
4. The IMF provides a $ buffer to deal with
   the hot money problem (money criss-
   crossing borders with limited institutional
   control).
5. Private sector financers can’t deal with the
   complexity & risk of financing nations.
6. The IMF is often used to advance the
   foreign policy aims of its depositors.
 WHY NATIONS DEPOSIT MONEY IN
   THE IMF TO BE LOANED OUT
Nations don’t make deposits in the IMF in
 order to make money on interest, but
 rather to have a say in the terms of the
 loan. The more money a nation deposits
 in the IMF, the more say it gets in
 determining the terms of the loan—such
 as structural changes the borrower must
 make in its policies & economic structure
 & policies. Thus, IMF loans can be a
 potent form of global political influence.
By tradition, the World
   Bank president is
elected by the U.S. (the
 largest shareholding
 nation), while Europe
    chooses the IMF
  managing director.
Neo-liberalism is the economic
 philosophy of “private
 capitalism” that supports the
 “invisible hand” of market
 (rather than community or
 governmental) forces: profit
 maximization, free trade,
 unrestricted movement of capital
 resources (money & technology)
 across borders, & global
 business.
#1. PRIVATIZE (sell government-run
   companies to private corporations) &
   DEREGULATE (drop all restrictions on
   which companies are allowed to
   compete in in industry)
Pros: governments don’t run businesses
   efficiently or effectively
Cons: “Tigers” (developing nations) have
   few large corporations capable of
   privatizing government companies, so
   foreign firms privatize them instead
#2. REMOVE GOVERNMENT RESTRICTIONS
 ON THE FLOW OF FOREIGN DIRECT
 INVESTMENT
 Pros: Investors are already taking big
 enough risks by loaning their money
 to Tigers; they shouldn’t be forced by
 Tiger governments to leave their
 money there any longer than they
 want to.
 Cons: Major regional currency
 meltdowns have happened due to the
 “hot money” syndrome caused by lack
 of restrictions on FDI flows.
#3. MANAGE TRADE AROUND THE NEEDS
          OF CORPORATIONS
Pros: Corporations take the risks in
  global business & should thus be in
  the driver’s seat; corporations are
  laden with productive resources
Cons: Corporations value profit over
  patriotism & often affect
  international politics due to their
  size & wealth. All nations are
  dependent on global corporations to
  one extent or another.
#4. PRACTICE IMPORT SUBSTITUTION IN
            TIGER NATIONS
The IMF import substitution program encourages
   Tiger nations to import efficiently-produced
   commodities (especially agricultural products)
   from Godzilla nations in place of producing
   them domestically.
Pros: Tigers can import many commodities from
   giant Godzilla agricultural conglomerates
   cheaper than producing at them at home—
   often because Godzilla farmers gain a
   competitive advantage from large government
   subsidies
Cons: Import substitution can cause Tigers to
   lose their food self-sufficiency & put farmers
   out of work in economies that lack substitute
   jobs
#5. MAKE GLOBAL BUSINESS OPERATIONS
  AS UNIFORM AS POSSIBLE TO EXPEDITE
              EFFICIENCY
Pros: Lowers the cost/price of
  products
Cons: Forces DCs to quit making
  inefficient products & to instead
  import them from more efficient
  nations. These DCs then
  experience job losses & become
  less self-sufficient.
        AMERICAN FARM SUBSIDIES
In 2005, American farmers received over $20B in
farm subsidies, thus depressing the global price
of corn (46% of total subsidies); soy-beans (6%
of total subsidies); rice (8% of total subsidies);
cotton (23% of total subsidies); and wheat (10%
of total subsidies). Sixty percent of American
farmers receive no government subsidies, and
10% (mainly the larger commercial farms) get
72% of total American subsides. Brazil has
already won a subsidy-related WTO suit against
the U.S., and American farmers are worried about
more subsidy-related suits in the near future
(especially in the key crop areas listed above.)
1. A recent study of the long-term effectiveness
   of IMF/World Bank loan projects disclosed
   that half of the 66 nations financed by the
   sister institutions over the past 25 years were
   are better off today than they were before
   partnering with the IMB/WB—and 20 of these
   nations were actually worse off economically.
2. Critics charge the 2 organizations with
   backing ill-conceived developmental projects
   that displaced more than a million people
   from the homes, spawned environmental
   damage, & either made fragile democracies
   more instable or reinforced the political
   power of dictatorial leaders in repressive
   political regimes.
EXAMPLES OF ALLEGED IMF-WB BOONDOGGLES

1. The Sardar Sarovar dam project in
   India displaced 250,000 people into
   squalid resettlement sites.
2. The Polonoroeste Frontier
   Development project caused large
   scale deforestation in the Brazilian
   rain forest.
3. The Pak Mun dam project in Thailand
   destroyed large human and animal
   habitats.
      IMF/WB STRATEGIC MISTAKES
1. In most places where they operate, the
   IMF/WB typically undercut private
   lenders (global banks) who are more
   likely to hold their client nations
   responsible for how the money is
   invested & safeguarded from
   corruption.
2. In an attempt to diminish socialism,
   the 2 organizations frequently force
   governments to cut their domestic
   spending to such an extent that
   significant economic downturns result
   (causing significant unemployment).
3. IMF loans often have below-
   market interest rates which
   encourages nations to borrow
   larger sums than they can afford to
   pay back.
4. The IMF/WB make loans to
   developing nations in spite of
   corrupt governments, who often
   use the money for non-economic
   purposes, such as bolstering the
   military & making loans to “fat cat”
   businessmen.
5. “Even though the influence of the
   IMF/WB is often overstated, they
   have not been given enough credit
   for many of the little things they do
   well. Both institutions provide
   invaluable economic analysis
   information about the global
   economy that no other nation or
   GGO could perform with such skill.”
6. More than 60% of Asians & 70% of
   Africans feel the 2 institutions have
   had a positive effect on their
   countries.
7. Despite some of its policies that have
   fallen short of the mark, The World
   Bank has helped many of the world’s
   poor to receive schooling, gain access
   to clean water and electricity, increase
   agricultural output, and to benefit from
   improved infrastructure such as roads
   and sanitation projects.
8. “A balanced assessment of the World
   Bank would likely show that more poor
   people have benefited from bank
   projects than have not.”
Developing nations have been forced to
 follow a less secure pattern of
 economic development than the largest
 economies of the world. Due to the
 onset of rapid “trade-liberalization”
 (quick elimination of protectionism &
 subsidies plus import substitution),
 developing nations were not given the
 same opportunity to protect their new
 industries until they became strong
 enough to compete on their own
 against their powerful competitors in
 the developed world.
According to developing nation economist Ha-
  Joon Chang, history gave Western Europe,
  Japan, the U.S. and several areas of Asia
  much longer to slowly nurture their key
  growth industries via substantial subsidies
  and other forms of infant industry
  protection.
“Rich countries have kicked away the ladder
  from DCs by forcing free-market, free-trade
  policies on poor countries. Already
  established countries don’t want more
  competitors emerging throgugh the
  nationalistic policies they themselves
  successfully used in the past.”
“Developed countries have been accused of
 maintaining high levels of protectionism on
 the goods and services exported by
 developing countries, such as agricultural and
 food products, textiles, footwear and clothing.
 They have also been accused of generously
 and absurdly subsidizing their own
 agricultural production, which is largely
 inefficient and very uncompetitive vis-à-vis
 that of developing countries. These subsidies
 also lead to huge stocks of non-competitive
 products, they are exported to developing
 countries (also with subsidies) at dumping
 prices, shattering their domestic agricultural
 prices and markets”.
The richest nations (which largely control
 the economic policies of the IMF and
 WTO) “have created a new international
 trading system that is rigged in their
 favor. They are preventing developing
 nations from using the very tools of trade
 that the rich nations themselves so
 effectively used in the past to promote
 their own economic development, now at
 the expense of DCs. Trade liberalization
 does not necessarily bring overall gain.
 Even there are winners in the process,
 their gains may not be as large as the
 loses of the losers.”
Ha-Joon Chang concludes that “free trade
 works neither in practice nor in theory.
 Despite its abysmal record, rich nations
 have strongly promoted trade liberalization
 in developing since the 1980s. The secret
 of economic development success is a mix
 of protection and open trade with areas of
 protection constantly changing as new
 infant technologies are developed and old
 infant industries become internally
 competitive. Free trade is not the best path
 to the economic development of emerging
 economies today.”
1. Are the loan conditions set by the
   IMF good economics or political
   meddling—a form of
   “neocolonialism”?
2. Neocolonialism refers to an
   institutional form of colonialism in
   which developing nations are
   allegedly dominated by global
   governmental institutions, such as
   the IMF & WTO, rather than by
   colonizing nations.
A DIVIDED WORLD
 Will the 20th century wide divide
between rich & poor nations narrow
               in C21?
   THE GLOBAL NORTH-SOUTH DIVIDE
1. The developed world makes up only
   20% of the world’s population but
   has 80% of the total wealth
2. The North’s economy revolves
   around the service sector, the
   South’s around manufacturing
3. The North consumes more than it
   produces and the South produces
   more than it consumes
THE GODZILLAS




 The world’s largest corporations from the
       world’s largest economies.
TIGERS: Rapidly developing
          nations
1.Latin America
2.Middle East
3.Africa
4.China
5.Southeast Asia
6.The “G20” are the largest
  developing nations in the world
  including China, Brazil, & South
  Africa.
ZEBRAS: Underdeveloped nations with
    stagnant economic growth
1. The “G90” are the 90 poorest nations in
the world, located predominately in Africa
& the Middle East, but also in parts of Latin
America & Southeast Asia.
2. These least-developed nations are
labeled as zebras because, like the
stripped African horse, they are vulnerable
to predators (Godzilla capitalism);
dependent on the herd (resource-rich
nations); & agricultural (high-risk, low
return economies).
“Traffic” on the Godzilla side of the
bridge symbolizes Western
“imperialistic capitalism” being
exported into Tiger nations: WTO &
IMF profit-maximization ideology,
import substitution, global efficiency
mandate, etc.)

Would the world be better off if the
“bridge” came down?
“When huge billboards for
 Sex and the City are found
 in the middle of Israel, it is
 obvious that the culture of
 celebrity emanating from
 the United States has
 become a currency that is
 traded throughout the
 world.”
  NATIONS WITH THE GREATEST VOTING
             POWER IN THE IMF:
1. USA (greatest voting power)
2. German-Japan (equal vote)
3. France & Britain
4. Belgium-led consortium of Eastern Euro
   nations
5. Netherlands-led consortium of Ural
   Mountain nations
6. Mexico & Latin nation consortium
7. Italy & Med Sea consortium
 THE “PARIS CLUB” OF CREDITOR
         NATIONS (G-7)
1. G-7 nations (USA, Canada, Britain, France,
   Germany, Italy, Japan) control over half of
   IMF loan votes
2. Russia is sometimes an informal member of
   the G-7 , but 3 nations (China, India, South
   Korea) that have much stronger economies
   than Russia want to become part of the Paris
   Club
3. The USA has the greatest IMF voting power
   (17%), putting it in the power seat on most
   issues that require an 85% IMF majority
4. Critics contend that the IMF caters to and is
   controlled by America’s economic agenda
 THE GODZILLA TRADE AGENDA
The worlds’ most affluent nations
  depend on innovative global service
  sector products for most of their
  growth, so they want intellectual
  property protection on patents,
  copyrights, etc. Thus, these Godzillas
  are most interested in the WTO’s
  GATS (General Agreement on Trade in
  Services) trade program & TRIP
  (Trade-Related aspects of Intellectual
  Property).
WHY SHOULD THE GODZILLAS CARE
  ABOUT THE PROBLEMS OF THE
           TIGERS?
1.Humanitarian concern
2.Global political stability
3.Smoother global trade
4.Markets for Western
companies
THE TIGER
 & ZEBRA
  TRADE
 AGENDA
THE HAVE-NOT SOUTHERN HEMISPHERE
    NATIONS HAVE A LOT LESS OF:
1. Per capita income
2. Foreign Direct Investment
   (FDI)
3. Infrastructure
4. Technology
5. Representative, stable
   governments
    TWO STRIKES AGAINST
    DEVELOPING NATIONS
1. Weak democracies
2. Internal civil wars
3. Ethnic strife
4. Over-population
5. Legacy of colonialism (economic
   & political exploitation)
6. Agriculture-based economies
   GLOBAL WEALTH DISTORTION
At the start of C21, the wealthiest
20% of nations had:
1. 86% of the global GDP (vs. 1% for the
   poorest 20%)
2. 82% of total global exports (vs. 1% for
   the bottom 20%)
3. 68% of total global foreign direct
   investment (vs. 1% for the bottom
   20%)
4. 74% of global phone lines (vs. 1.5% for
   the bottom 20%)
 The WTO’s Doha (Qatar) DEVELOPMENT
        AGENDA (2001-2006):
1. Impact of free trade agreements
   on the General System of
   Preferences (Godzilla nations
   agree to engage in import
   substitution—to import key Tiger
   products instead of making them
   at home)
2. Less Western political meddling
   into Tiger affairs
 IN THE GENEVA TALKS (7/04)THE
      USA & EU AGREED TO:
1. Reduce farm subsidies ($88B
annually for the USA & $52B for
the EU)—the “framework for
establishing modalities in
agriculture”
2. Lower tariffs on key Tiger
exports that Godzilla nations
already make at home
  AG SUBSIDIES AS % OF FARM
        OUTPUT, 2003
1. Australia: subsidies were
   1.0% of total Australian farm
   output
2. Canada: 5.6%
3. USA: 38.9%
4. Japan: 44.7%
5. EU: 121.4%
 Would Godzilla
nations be able to
  avoid import
   substitution
     without
   agricultural
    subsidies?
  THE “GREEN ROOM” PROBLEM
1. The “4 Quad” WTO members (USA,
   Canada, EU, & Japan) often broker
   private/closed trade deals with select
   other nations, bypassing Tiger nations
   & ignoring their needs
2. The WTO favors forming a steering
   committee of affected nations to
   coordinate trade dialogues in a fair,
   transparent, and representative
   manner
“Fair trade is commerce with a
  commitment to developing equitable
  partnerships between marketers in highly
  industrialized nations and low-income
  producers in developing regions of the
  world. Fair trade creates the opportunity
  for businesses to increase their profits
  through socially responsible business
  practices, for consumers to vote with
  every purchase for a more equitable
  world, and for farmers to view
  themselves not as an anonymous cog in
  the world market, but as a valuable
  contributor to a global community.”
“Fair trade cooperatives produce a healthy
 alternative to large-scale manufacturing,
 working mainly with small businesses
 where workers earn a greater return on
 their labor, and profits are distributed
 more equitably and often re-invested into
 the local community in health clinics,
 child care, education, & safe working
 conditions. Workers learn leadership and
 organizing skills, enabling self-reliant
 economic development. Producers gain
 greater control and decision-making
 power over the use of local resources.”
       IS INSTANT FREE TRADE FAIR?
It was competitively necessary for most of
  the world’s richest (“Godzilla”) nations to
  go though protracted protected (non-
  free) trade eras early in their history.
  They were not strong enough
  economically or militarily to withstand
  “free” trade. Many developing (”Zebra”)
  nations complain that free trade has been
  prematurely foisted on them by the WTO
  & IMF before they are ready, generating
  economic hardship & political instability.
“Rich nations now hector the poor on the
  importance of free trade, respect for
  intellectual property, and hospitality to
  foreign investors, yet avoided and rejected
  such practices when the rich nations were
  climbing the ladder towards prosperity.
  They hypocritically tell the poor world to do
  as we say, not as we did. The West’s neo-
  liberals (private capitalists) have either
  forgotten or rewritten their secret history,
  arm-twisting today’s developing nations to
  to open up to the free trade regime in the
  mistaken belief that free trade secured the
  West’s current prosperity.”
           DO WE NEED MORE FREE TRADE
                OR MORE FAIR TRADE?
1.   International trade is worth $10 million a
     minute.
2.   Poor countries account for only 0.4 percent of
     world trade. Since 1980 their share has been
     cut in half.
3.   The United Nations estimates that unfair trade
     rules deny poor countries $700 billion every
     year affecting 30 million people.
4.   Income per person in the poorest countries in
     Africa has fallen by 25% in the last 20 years.
5.   The three richest people in the world control
     more wealth than all 600 million in the world’s
     poorest countries.
6. Nearly half the world’s population (2.8 billion
    people) lives on less than US$2 per day.
7. The prices of many poor countries’ key
    exports are at a 150-year low.
8. At the last full meeting of the WTO, the
    European Union had 500 negotiators and Haiti
    had none.
9. After the last round of trade negotiations, rich
    countries estimated that they would gain by
    $141.8 billion per year and Africa would be
    $2.6 billion per year worse off.
10. Global trade is regulated through priorities
    and policies set by international institutions,
    including rules made at the World Trade
    Organization and conditions attached to loans
    provided by the World Bank and International
    Monetary Fund. These bodies are controlled
    by governments.
    WHEN PROTECTIONISM IS
    EXPLOITATIVE NATIONALISM:
1. EXPLOITATIVE PROTECTIONISM:
   One nation tries to raise its
   standard of living by lowering
   another nation’s standard of
   living.
2. DEFENSIVE PROTECTIONISM:
   used to prevent foreign
   companies from stealing business
   from domestic companies
     THE FAIR TRADE MOVEMENT
1. Fair trade is virtually the only
  organized social movement that strives
  to improve the economic self-
  sufficiency of workers in developing
  (community capitalism) nations &
  empower them to become stakeholders
  in global trade.
2. The free movement is backed by a
  coalition of international religious,
  development aid, environmental, &
  social justice organizations.
3. The fair trade global coalition seeks to reduce
  poverty & promote sustainable economic
  development through the fair trade minimum
  price program (designed to price goods high
  enough to pay for their direct cost plus a
  contribution to sustaining their future
  production).
4. The Fairtrade Labeling Organization (FLO),
  begun in 1997, set standards for labeling
  products as Fairtrade Certified. The highest
  volume fairtrade certification products include
  bananas, honey, coffee, oranges, cocoa, cotton,
  dried & fresh fruits & vegetables, juices, nuts &
  oil seeds, quinoa, rice, spices, sugar, tea and
  wine.
5. FLO-CERT (Fairtrade Labeling
  Organization Certification) coordinates
  the certification, marketing, &
  inspection of fairtrade products through
  a network of independent inspectors
  who travel the world as liaisons
  between families, traders, & sellers.
6. The International Fairtrade Association
  (IFAT), created in 1989, is a global
  coalition of agricultural coops, export
  marketers, importers, retailers, regional
  fairtrade networks, & support
  organizations. IFAT has 300 member
  organizations in 60 nations.
7. In addition to sustainable economic
  development pricing, core fairtrade
  values include safe working conditions;
  gender equity; environmental protection;
  worker participation in decision-making;
  & general adherence to the United
  Nations charter of human rights.
8. Fairtrade certified sales in 2005 were
  estimated at over $1B, less than one
  hundredth of one percent of total world
  trade. As of 2006, 1.5M economically-
  disadvantaged workers directly
  participated in fairtrade initiatives & 5M
  benefited from commerce.
9. The additional profit generated when
  producers bypass intermediate buyers, instead
  selling directly to international buyers can be
  highly significant. For example, in 1999, Central
  American coffee growers who sold to traditional
  middle men buyers averaged 38 cents per
  pound, compared to $1.26 earned by farmers
  selling though the fair trade institutions.
10. The fair trade system places a high priority on
  community development in addition to
  guaranteeing fair prices for farmers. Workers
  within a community participate in determining
  their own economic development priorities,
  including education, clean water, health care, &
  infrastructure development.
   MCDONALD’S FAIRTRADE DEAL WITH
          TOMATO PICKERS
1. In 2007, McDonald’s nearly doubled the wages
  of its Florida migrant tomato pickers by
  increasing the wages paid for a bucket of
  picked tomatoes from 40 cents to 72 cents.
2. The deal was made in an arrangement with the
  Coalition of Immokalee Workers, which has
  also brokered a fair trade deal with Taco Bell.
3. “The McDonald’s deal sends a strong message
  to the rest of the fast-food industry that the
  leaders of the industry are taking concrete
  steps to improve the lives of workers, of human
  beings.”
            FAIRTRADE PRINCIPLES
          (from the Americas Program
           Inter-hemispheric Center)
1. Local and regional producers and service
   providers should be in control so benefits
   remain in their communities.
2. Laborers should earn a fair wage and work
   in a healthy, safe environment.
3. Intermediary organizations that soak up
   and expatriate profits should be removed
   from the equation, allowing producers to
   keep a larger share of sales revenues
   without passing on excessive costs to
   consumers.
4. Goods and services should be
   environmentally friendly and socially
   responsible.
5. Community development needs, as well
   as environmental and social criteria,
   should be taken into account in
   business decisions.
6. Product and producer diversity should
   be supported, and increased
   opportunities for women should be a
   priority.
7. When possible, intermediaries that buy
   products directly from producers
   should provide financial assistance,
   such as direct loans, prepayments, or
   linking producers with sources of
   financing.
8. The finances, management
   policies, and business practices of
   fair trade enterprises should be
   open to public scrutiny.
9. Consumers who are educated
   regarding the importance of
   purchasing products and services
   that support living wages, healthy
   working conditions, and
   environmental protection will be
   willing to pay slightly higher
   prices.
10. Gender equality
11. Capacity building (developing
 the capacity of producers to help
 themselves).
12. Environmental protection
 through responsible production
 practices that sustain physical &
 human assets for successive
 generations.
        KEY PROBLEMS OF FAIR TRADE
         (from the Americas Program
          Inter-hemispheric Center)
1. Free trade favors large corporations, not
   Mexico’s many small-scale farmers,
   artisans, and businesses.
2. Smaller producers and service providers
   lack capital or access to credit, technical
   and marketing assistance, and delivery
   systems.
3. The export orientation of Mexico’s economy
   calls for the production of basic
   commodities, which face steep competition
   from foreign, subsidized products, are
   highly vulnerable to global price
   fluctuations, and generate minimal profit
  margins.
4. Foreign sales are usually
   managed by non-local
   companies, minimizing benefits
   for producer communities.
5. Agriculture, manufacturing, and
   tourism operations under
   pressure to compete according
   to the terms of free trade
   overlook sound natural resource
   management practices.
THE SIZE &
SUCCESS OF
 THE FREE
  TRADE
MOVEMENT
   THE LIFELINE OF CCs
1. Family & small local
   businesses
2. Sustainable incomes
   provided by the VAC
3. Protection from T-Rex
   corps
4. Subsidy-free
   competition from
   Godzilla nations
5. Flourishing “fair
   trade” options in
   Godzilla nations
In 2006, Fair trade global revenues were
  $2.3B, but represented less than one
  hundredth of a percentage point in total
  world trade of physical products. Over
  1.5M producers worked in fair trade
  organizations, but 5M more members of
  fair trade communities also benefited. In
  2002, fair trade sales in the USA, Canada,
  & the Pacific Rim were $251M, with the
  greatest sales growth of coffee. 3200
  people were employed in these regions.
  In 2000, there were 600 fair trade
  wholesalers in the USA & Canada and
  over 7000 retailers.
        AN IMPOSSIBLE DREAM?
Many Westerners would probably
respond if given the opportunity to pay a
5-10% surcharge on products made in
low wage capitalist nations. BUT no such
opportunity is feasible under the
invisible capitalist system of supply
chain corporate dominators (Wal-Mart,
giant food conglomerates, agriculture
subsidies, etc.). Fair trade initiatives
struggle under the invisible hand
rigidities of global-scale business.

				
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