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The World Trade Organisation - An Australian Guide
- 2006 Edition
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Economic Globalisation & the Global Economy

For the last three decades, the world has been in the grip of a global economic experiment. It is now becoming obvious that this experiment has not merely failed, but has failed catastrophically, causing massive poverty and environmental damage around the world.

This experiment is often called "globalisation" – or more specifically, economic globalisation. It is a process by which national governments have "liberalised" their economies, removing protections for local farmers and manufacturers, and giving up power to set policies to international organisations and multinational companies.

"Globalisation ... is about power and control. It is the reshaping of the world into one without borders ruled by a dictatorship of the world’s most powerful central banks, commercial banks and multinational companies. It is an attempt to undo a century of social progress and to alter the distribution of income from inequitable to inhuman."
- Paul Hellyer, former Deputy Prime Minister of Canada (1)

Economic globalisation is based on an ideology – often called "economic rationalism" or "neo-liberalism" – which argues that private profit is the highest value, and that economic efficiency and growth should reign supreme. Countries should strive for economic growth above all else, and should do this by exporting what they can produce cheaply, and importing everything else. The quasi-religious belief of economists is that trade liberalisation will lead to growth and that growth will "trickle down" and lead to poverty reduction, employment and general happiness.

To produce such a system, countries have been encouraged, and sometimes forced to "liberalise" their economies, removing all "barriers to trade". At one time, "barriers to trade" were limited to taxes (tariffs) on imports, and subsidies for exports. Now "barriers to trade" includes the public ownership of services, quarantine standards and government regulations which protect labour and environmental standards.

Economic globalisation is an ideology promoted by the rich countries – and the large corporations which dominate their economies – which have benefited the most from it. As you shall read, it has been to the detriment of the vast majority of the world’s population, upon whom it has been imposed.

The Impacts of Economic Globalisation

Since 1950, world trade increased more than nineteen-fold, and world output has increased by six times – a massive increase in economic “welfare”. Yet in 2005, more than 800 million people do not have enough food to eat, more than 10 million children died before their fifth birthday, and more then 1 billion people are forced to survive on less than $1 a day (2). At the same time, oceans are over-fished, forests are destroyed at the greatest rate ever, species are going extinct at the greatest rate since the time of the dinosaurs and the air is polluted to such a degree that the Earth’s climate is actually changing. Why has the massive wealth of the "global economy" had these impacts?

Myth 1: "Globalisation Has Made the World Better Off"

Untrue! Contrary to many economists’ claims, while the last 25 years of ‘globalisation’ and trade liberalisation have increased the wealth of rich countries, for the vast majority of countries – particularly poorer and middle-income countries – this period has seen a decline in social progress compared to earlier periods. A 2004 study of the world’s poorest countries by the UN found that trade liberalization and increased international trade corresponded with increasing poverty in most countries. (3)

“I was wrong about free trade. I was wrong. Free market trade policies hurt the poor”
– Stephen Byers, Former British Trade and Industry Secretary. (5)

A study by the US Centre for Economic and Policy Research compared the growth rates of 175 countries between 1960 and 1980, and between 1980 and 2005. It found that the latter period of economic liberalisation, privatisation and deregulation had sharply reduced rates of both economic growth and social progress for most countries.

Dividing the countries into five groups according to their per-capita income, the study found that between 1960-1980 and 1980-2005:

• Per-capita GDP growth declined in four out of the five groups, with the fifth group only increasing growth by 0.1% annually.
• The rate of life-expectancy growth declined for almost all low and middle-income countries.
• The rate of improvement of child and infant mortality declined in all five groups.
• The rate of increase in secondary school enrollment declined in all five groups.

In Australia, over the period of 1960 to 1980, wages as a percent of GDP rose from about 52% to over 60%, while corporate profits as a percent of GDP remained mostly under 20%. Over the next 25 years to 2005 (the period of economic liberalisation) wages fell back to about 53% of GDP while corporate profits have sky-rocketed to over 27% of GDP. (4)

Myth 2: "Trade Liberalisation Increases Economic Growth"

Untrue! The graph below uses data from a World Bank study into the effects of economic globalisation. It shows that when most of the world’s countries are compared, far from increasing economic growth (GDP), low tariff rates actually correlate with (slightly) lower rates of economic growth.

In Australia, between 1980 and 2000 (when the economy was being liberalized) economic growth also slowed when compared to 1960 –1980. GDP grew by 123% between 1960 and 1980 – over 30% faster than over the later two decades of economic liberalization, when GDP grew by only 93%. (6)


Next Section: The Global Economy: Winners & Losers

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