Thursday, November 7, 2013

The Shift From Colonialism and The Evolution of Globalization: The State, The Private Sector, The Hegemon of Treaty

The connections of the current international system of globalization are a result of centuries of political, military, and economic evolution, and consolidation, which began with the state actor, or empires such as the Holy Roman Empire and the Ottoman Empire. States, as main actors, have always conducted regional trade, as far as technology would allow reasonable trade boundaries, and that trade capability vastly expanded during the age of European colonialism and the trans-Atlantic slave trade as new technologies became available which expanded sea trade.

From the 1400s onward, states increased agendas of imperialism, often through colonialism. One example of this imperialism was during the height of the Holy Roman Empire when Portugal was awarded a trade monopoly on the West coast of Africa, via Papal Bull Dum Diversas, to supply Spanish colonies in the Caribbean with slave labor in which to exploit natural resources for trade. After the British Empire rose to new heights after breaking with the Holy Roman Empire over Protestantism, the British Empire took international exploitation and colonial trade to new levels of imperialism through territories such as North America and, the Jewel of the British crown, India. Even leading into World War I, the European states were conducting a colonial scramble in Africa.

We can actually see the 20th century evolution from state sponsored colonialism, in which the state burdened colonial expenses, toward private sector imperialism backed by collective state entities such as the League of Nations, and later the United Nations, when we look at the independence dates of post-colonial states, mostly known today by organizations such as the World Bank and International Monetary Fund as Lesser Developed Nations.

The following examples of independence dates for post-colonial British territories are just a few in order to illustrate the timeframe trend:

India in 1947, (which includes the partitioning and creation of Pakistan), Burma – 1948, Jamaica – 1962, Kenya 1963, Sierra Leone – 1961, Singapore 1959, Uganda – 1962, Trinidad – 1962, Kuwait – 1962, Barbados – 1966

At the conclusion of the First World War, the League of Nations was established, with internal structural errors, to provide the blueprint for globalization. Those internal structural errors were corrected after the Second World War by allowing the victorious states permanent Security Council status with veto capability. In the aftermath of World War II, the GATT (General Agreement on Tariffs and Trade) was established (which would eventually become the World Trade Organization).

“At the conclusion of World War II, twenty-three countries, led primarily by the United States, Canada, and the United Kingdom, negotiated the General Agreement on Tariffs and Trade” [1]

The winners of World War II set the international structure for globalization and instantly began to allow their colonial possessions independence in order to bring them into the global economy via the GATT, World Bank (originally established as the International Bank for Reconstruction and Development for conditional loans to post-colonial and war-torn states), and the International Monetary Fund (which established international currency exchange rates). One interesting note about World Bank and IMF loans is that, in addition to containing conditional terms which opens up recipient states to foreign private sector investment, the loans are issued in the strongest currencies and required to be repaid through the weak currency of the loan recipient state.

Once the international global market was firmly established, the Cold World between the Capitalist U.S and the Communist Soviet Union (which bolstered incredible private sector profits in arms production) kept the international capital system from global expansion. Looking back to the collapse of the Soviet Union, you can see the World Bank issuing loans to former Soviet bloc states and the admittance of those newly “independent” states into the GATT/World Trade Organization.

The overall difference between international connections in the past and modern globalization is that prior to the World War I and II, individual states were the primary actors. In modern globalization, collective international organizations such as the United Nations, the IMF, the World Bank, and the World Trade Organization maintain international systematic hegemony. Any state that does not assimilate into the global market can be punished by collective international (or, as the U.S. likes, unilateral) sanctions. The primary actor role shifted from the individual state to international private sector organizations that utilize the collective military hegemon of the most powerful states (linked by international treaties) to bring non-compliant states and states suffering from instability into capitalist market compliance (because foreign capital exploitation of natural resources is impossible under political instability).

[1] Brookings Institute. The WTO and GATT: A Principled History, p. 11. http://www.brookings.edu/~/media/press/books/2009/selfenforcingtrade/selfenforcingtrade_chapter.pdf

Two states that share a connection under globalization: Jamaica and Barbados

Two states that are connected through the IMF and the international global economy are Jamaica and Barbados, both post-colonial possessions of the British Empire that were allowed independence in the 1960s. Both states currently hold debt to GDP ratios well above 100% and both states have been recipients of multiple IMF loans. Jamaica recently entered into a new agreement with the IMF; Barbados is currently being pressured to enter into an new agreement.

1. U.S. and World Report news report listing the top 10 states with the highest GDP to Debt ratios:

http://www.usnews.com/news/articles/2011/01/28/the-10-countries-with-the-most-debt

2. 2009 Article from the Jamaican Gleaner on the threat of downgrading the Jamaican international credit rating if that state did not secure an additional IMF loan:

http://jamaica-gleaner.com/gleaner/20090820/business/business1.html

3. IMF Press release on the latest 2013 IMF agreement forced on Jamaica:

http://www.imf.org/external/np/sec/pr/2013/pr13150.htm

4. Barbados received “financial assistance from the International Monetary Fund (IMF) and the World Bank” in 1990. Previously, loans were issued to Barbados in 1977 and 1982-83 (p.42). The following report by Dr. Andrew Downs provides a brief history.

http://www.lacea.org/WEB/country_studies/barbados.pdf

5. The last link is a November 2013 article in the Jamaican Gleaner on the pressures being placed on Barbados to accept, yet another, IMF agreement.

http://jamaica-gleaner.com/extra/article.php?id=2552

Many pro-globalization positions will use Brazil and India and positive examples of globalization, but, it appears the economic inequality that usually accompanies capitalism is present in both states. 
In India, 10% of the population owns over 53% of domestic wealth while the bottom 80% battle of less than 30% (BBC News, 2007).  The following is from the same report: "About 35% of people live on less than US$1 a day. Poverty is at its worst in rural areas and is often accompanied by high levels of illiteracy and poor health.  Nationally, almost half of children suffer from malnourishment, although infant mortality rates have declined. Almost 60% of people in towns and 20% in rural areas do not have access to proper sanitation.  Despite such problems, India has seen overall poverty decline - a shift which has been accompanied by more general improvements to living standards."

In Brazil, the CIA World Factbook states that 21.4% of the population lives under the poverty level.  In addition to the CIA World Bank Factbook, I have listed a World Bank report below that show a "Gini coefficient of 0.59 in the distribution of household incomes per capita, Brazil has one of the highest levels of income inequality in the world: (p.11)

BBC News.  Key Facts: India Rising, January 22, 2007.  Accessed from http://news.bbc.co.uk/2/hi/south_asia/6257057.stm

CIA World Factbook.  Brazil.  Accessed from https://www.cia.gov/library/publications/the-world-factbook/geos/br.html

World Bank.  Inequality and Economic Development in Brazil.  Accessed from http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2004/10/05/000012009_20041005095126/Rendered/PDF/301140PAPER0Inequality0Brazil.pdf

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