India's National Magazine
From the publishers of THE HINDU

Vol. 16 :: No. 04 :: Feb. 13 - 26, 1999

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WORLD AFFAIRS

Challenge and opportunity

An international meeting of economists convened at the initiative of Cuban President Fidel Castro in Havana considers the question of neoliberal globalisation and searches for ways to cope with its inevitable consequences and social and human costs.

C.P.CHANDRASEKHAR
in Havana

AHEAD of the Davos summit on global finance which has hogged media headlines in recent weeks, the Cuban capital Havana was host to an unusual conference. Between January 18 and 22, while the real crisis in Brazil unfolded, more than 1,000 participants from 51 countries, with a predominantly Latin American representation, gathered to discuss the challenge of globalisation. The International Meeting of Economists on Globalisation and the Problems of Development was remarkable for its timing and scale. What was more significant was that through the five-day conference, with three daily sessions stretching well into the night, sat Fidel Castro Ruz, First Secretary of the Central Committee of the Communist Party of Cuba and President of the Councils of State and Ministers. As Roberto Verrier Castro, President of the National Association of Economists of Cuba and the Association of Economists of Latin America and the Caribbean, made clear in his inaugural address, it was Fidel's anguish over the problems generated by globalisation and his search for ways to face up to them that led to the convening of an international meeting of economists to debate the issue. Not surprisingly, Fidel listened, questioned, argued and preached. All with one intent: to advance, sharpen and propagate with the help of the economists present his convictions regarding the current international conjuncture.

These convictions have been in the making for quite some time, as evidenced by Castro's speeches through 1998. Central to them is the view that while technological changes had rendered globalisation inevitable, the specific form - of "neoliberal globalisation" - that the process has taken in the context of an unequal world order, is unsustainable. To affirm this perception one requires, according to Castro, no great economic knowledge, but merely the skills children acquire at the elementary school "to add, subtract, multiply and divide". The real question then is how the transition to an alternative form of globalisation - which "couldn't be any other than jointly shared, socialist, communist or whatever you want to call it" - is going to occur. That is the uncertainty. Would it be, Castro asks, "through widespread violent revolutions or great wars?" That in his view is improbable, irrational and suicidal. Would it be "through profound and catastrophic crises?" "Unfortunately that seems the most likely, almost inevitable, outcome, and it will come about in many diverse ways and through many forms of struggle." The essential weapons in that struggle would be "ideas, minds".

Given these convictions, the motivation for hosting an international meeting of economists is obvious. It was partly aimed at developing the argument regarding the nature of neoliberal globalisation, its logic, and its consequences, all of which render reversal imperative. It was also aimed at mobilising those who would "sow these ideas, cultivate them and make them invincible". It is only natural that the leader of a country that is weary with actual and proxy wars, which directly suffers the consequences of the United States' hegemony and which, in the wake of the collapse of erstwhile friend and partner, the Soviet Union, has had to choose to integrate with the capitalist world system, should lead such an initiative. It has known the consequences of isolation within the present global order and now the effects of attempting to integrate, however gradually and cautiously. In its view, the reversal of a process of global economic evolution with devastating social and human costs, while inevitable, has to be struggled for, since "nature and with it the human species" cannot survive for long in the absence of such change. But that change must occur in ways that would preclude widespread war and revolutions, which are also costly in human terms.

THREE kinds of issues were focussed on in the papers presented and the discussions that followed. First, the nature of the process of globalisation. Second, the reasons why the logic of that process inevitably leads to worldwide crisis. And, finally, the consequences of that crisis for humanity, and especially for poor countries and the 4.5 billion people who live in poverty within an unequal world order.

The analysis of the nature of economic globalisation focussed on both real and financial trends. Some, like Paul Bairoch from the University of Geneva, emphasised real processes of integration through trade and foreign investment. Others stressed the role of financial flows in defining the process of contemporary globalisation as well as in understanding the logic and the inner contradictions of the process. While the value of goods and services produced on the planet amount to about $222 billion a day, trading in stocks and currencies amounted to $1.8 trillion a day. Since the latter is dominated by speculative trades, it is the speculative factor which becomes the driving force for contemporary growth, as exemplified by the nature of the growth process in the U.S., which dominates the world order. There, "paper wealth" created by a stock market bubble is encouraging ordinary citizens to consume more today in the belief that they are well endowed to deal with the future. As a result growth remains high, the trade deficit widens and international capital flows in to finance that deficit and sustain an illogical stock market boom. In the event, while countries elsewhere suffer the consequences of the crisis in the form of recession and massive deflation, the U.S. continues to prosper. However, the contradiction between such uneven development and greater economic integration renders the system vulnerable to periodic and widespread crises.

JOSE GOITIA / AP
Cuban President Fidel Castro answers questions from economists attending the conference in Havana on January 20. Seated behind him, at right, is CPI(M) general secretary Harkishan Singh Surjeet.

Tracing the rapid increase in integration to the post-oil shock trade boom and the subsequent boom in foreign direct investment (FDI) flows triggered by the depreciation of the dollar, Bairoch pointed to the fact that this however is not a unique experience in the history of capitalism. Rather, in the years before 1913, some countries recorded an even higher export-GDP (gross domestic product) ratio than the current ratio as well as a higher rate of increase in that ratio. What is interesting, according to Bairoch, is the fact that the current period of rapid integration has been accompanied by (a) a slowdown in the rate of growth of world output during the 1980s and 1990s compared with earlier decades; (b) a widening of the income gap between the developed and developing countries, especially the developing countries in the West.

However, as Frederic Clairmonte, a veteran of the United Nations Conference on Trade and Development (UNCTAD) and contributor toLe Monde Diplomatique, repeatedly stressed, it is not just the coincidence of greater integration and slower growth that needs to be noted. More distressing was the sharp increase in centralisation and the concentration of capital, epitomised by a wave of intra-country and cross-border mergers and amalgamations. In this context, terms such as globalisation serve as propaganda weapons to help conceal the concentration of economic power that touches on "the vertebral column of sovereignty".

This damage to national sovereignty coming from the real realm is aggravated by the limits on the manoeuvrability of the state resulting from financial flows. As Theotonio Dos Santos (President, Association of Political Economy, Brazil) argued, elites in countries like Brazil sought to use the phenomenon of neoliberal globalisation as an alternative to unworkable capitalist growth strategies based on domestic markets constrained by structural bottlenecks. Capital inflows inevitably lead to "overvalued" currencies or even currency appreciation that undermines export competitiveness and widens the trade deficit. External capital is accessed to finance that deficit using the carrot of a high interest rate.

Analysing the same mechanism in other contexts, Jan Kregel, the UNCTAD representative in New York, argued that even countries which were successful exporters, like many in East Asia, found that success leads to voluntary or forced goods market liberalisation and contributes to currency appreciation, both of which undermine export competitiveness and worsens the balance of trade. Financial liberalisation is then resorted to in order to obtain the foreign exchange needed to finance the balance of payments. And given the relatively sound fundamentals in these countries, capital flows are easy to come by, leading to excessive dependence on foreign financial flows. However, such flows undermine national sovereignty over economic policy and can, as experiences in Asia and Latin America indicate, soon undermine the very success which led to increased financial flows. Speakers like Arturo Huerta, from the National Autonomous University of Mexico, and Harkishan Singh Surjeet, general secretary of the Communist Party of India (Marxist), indicated how in widely varying contexts, the macroeconomic (and therefore social) impact of globalisation has been debilitating.

Although he was in agreement with this analysis of the threat to sovereignty, Castro was not convinced. He queried the idea that there is much sovereignty left with nation states. Implicitly, he argued, there is a world government in place today. "Why is it that American companies across the world cannot sell even a screw in Cuba?" And how is it possible for one country to enact the Helms-Burton Law which constrains a range of companies - Swiss, Spanish, Italian and so on - from trading with Cuba. This indicates that there is in place a world government, manned by the greatest economic, political, military and technological power in history. Cuba fights back, through the United Nations, the Non-Aligned Movement, the Group of 77 and in collaboration with a number of Latin American and Caribbean countries, because it is not worth giving up that which is called sovereignty for the sake of humanity. But the reality is still to change.

BY SPECIAL ARRANGEMENT
Fidel Castro speaking at the conference.

THERE were indeed some people at the gathering who were optimistic about the current process of globalisation, including Andres Solimano from the World Bank and Patrick Low from the World Trade Organisation. This triggered a lively debate. But it was clear that the majority of those present had the arguments and the evidence at hand to question such optimism. "I am not against globalisation. I am only against the globalisation they have imposed on us," Castro declared. And at the centre of that neoliberal globalisation is an insistence on the primacy of the market in developing countries, and on rendering the dollar the currency of forced circulation. "What is the market?" asks Castro. "Is it a historical stage or is it eternal? Is it a social law, a physical law or a religion?" And is speculative profit and capital just fetishistic capital, or real surpluses garnered from the people? The tone of his question suggested that his mind is made up. Which is why, he argues, we must conceive of a form of globalisation without imperialism; why we need to advance the embryo of world government which exists in the United Nations, which in turn needs to be democratised. In the final analysis, sovereignty at the national level has to be sacrificed for world sovereignty. "Humanity can be a great homeland for all," said Castro.

In this context, many participants at the meet held that three factors provided an opportunity to ensure the transition. First, the fact that even the developed metropolitan centres are not immune to the crises created by the current process of globalisation. Unemployment in Europe has been at unsustainable levels for many years now. Japan is in the midst of a prolonged and deepening recession. And financial markets in the U.S. have begun to feel the tremors of worldwide crisis, with even hedge funds like Long Term Capital Management being driven to bankruptcy. Secondly, developing country governments across the globe have begun to realise that they cannot ignore the massive human costs in terms of rising unemployment, increasing poverty and deteriorating quality of life indicators that their voluntary or forced integration into the world system implies. Third, the crisis of globalisation indicates that even the alternative offered by countries in East Asia, for example, which were held up as models for the Third World is both unsustainable and, in any case, too late to replicate.

James Crotty and Gary Dymski from the University of Massachusetts stressed this in their paper with a revealing title, "Can Neoliberal Globalisation Survive its Victory in Asia?" The ability of the international financial institutions and the interests they represent to change development trajectories in Asia has only worsened the contradiction of neoliberal globalism which results in continued capacity growth driven by desperate competition even while global demand growth slows because of the assault on labour and an increasingly restrictive budgetary policy.

These developments, according to Castro, provide an opportunity which must be seized. "We need to change the correlation of forces in our countries, in order to change the correlation of forces internationally. We need both. Events have gone beyond ideas, and we can expect a crisis that will change the correlation of forces. But we cannot wait for the crisis. We have to prepare the people to act when that crisis takes place." There were few, it appeared, who disagreed.