Globalisation: sound and fury in Seattle

From Prof S Ambirajan article published in The Hindu, 2000:

• “To make some sense of this process of globalisation which seems to have received the imprimatur from almost everyone, one must try to understand on what philosophical basis the edifice stands. Looking at the big names in economics supporting globalisation, the unlettered layman could easily believe that it is all based on esoteric but sound theories which lead us to the ultimate truth.
• At its core is the orthodox economic reasoning of the neo- classical variety which believes in the following fundamental principles: (a) the way economies behave is solely dependent on the actions of individual economic agents who take decisions independently; (b) the individual is a rational actor taking all decisions carefully with self-interest in mind and (c) the actions and reactions of individual economic agents tend towards an equilibrium which brings benefits to everyone.
• The institution of unfettered market enables the achievement of this desirable outcome because it is where uncoordinated but fully informed individuals - who though individually by themselves lack any power to influence - lead the economy to adjust at a desirable level.
• Individuals cannot always take decisions solely in their own interest because of informational barriers and institutional compulsions. More often than not, key decisions are taken to suit not individuals but groups defined by criteria as varied as religion, caste, community, locality and gender. Freedom to take decisions is not evenly distributed but is determined by those who have the levers of political power. Often individuals and even groups become helpless spectators when key decisions that involve them are taken willy-nilly. Markets embedded as they are in a social milieu are seldom unfettered. Despite all the brouhaha about vanishing national boundaries, they are guarded zealously because the nation-states have not shown any intention to give up their power over their citizens.
• Globalisation is a process of rearrangement of the world's resources between people and countries. In this process, there are winners and losers. While some countries as a whole may lose out and others gain, in general the losers and the winners are individuals and groups. Let us take two examples. In a study of foreign entry in the domestic banking market worldwide during 1988-95, three World Bank economists, Claessens, Demirguc-Kunt and Huizinga, have shown that in developing countries foreign banks as a rule have greater profits, higher interest margins and higher tax payments than do domestic banks. On the contrary, in industrial countries, it is the domestic banks which have the upper hand in terms of profits, interest margins and tax payments. Does this mean foreign entry in the domestic banking market is altogether harmful? They argue that it need not be so because the entry of foreign banks can make national banking markets more efficient by compelling the domestic banks to meet the competitive challenges with vigour. Take import of second- hand cars. How should we judge this policy? The beneficiaries in the short-run are the consumers and in the long-run, the second- hand exporting countries. The losers are the local manufacturers in the short-run and the importing countries in the long-run because the ultimate environmental effects of the disposal of old cars are borne by the importing countries.
• Sad to say, we are not living in an ideal world because those who are powerful will always try to dominate the weak. What should be done? As the economist Albert Hirschman said in a different context: ``Do we exit or do we voice?''

Recently Niranjan Rajadhyaksha has written a piece on this ‘exit’ and ‘voice’ matters.