Geoffrey garrett's globalization's missing middle.
Geoffrey Garrett's Globalization's Missing Middle.
Ever since the dawn of civilization, trade has been an indispensable and necessary part of prosperity. The Chinese Han dynasty constructed a vast trade route called the Silk Road in 200BC to encourage and stimulate trade throughout the empire. This route slowly began developing outside the country and spread to the edges of Europe. This was the seed of globalization that would grow and develop into the current modern version of globalization. Globalization has not been an easy or clear path, but it is clearly the way of the future. Such an integral part of society must be analyzed for its positive and negative consequences. Situations may or may not be zero-sum games, and before we embrace any major change in our social structure we must figure out the factors in the new system.
Rourke defines globalization as, "A multifaceted concept that represents the increasing integration of economics, communications and culture across national boundaries"(Rourke). Globalization, in simple words, is shrinking the world and connecting people across countries into one group that is inter-dependent. In this current moment I am an Indian man in the United States of America, watching Chinese television, writing on a Japanese made laptop. Globalization affects every person in the world in every moment of their lives. Globalization can be the catalyst for immense positive effects.
Globalization has spread itself into every one of those fields which Rourke talks about. Every field has found its way into everyone's lives. The United Nations in 2000 created the "Millennium Development Goals" and made eradicating poverty a global goal. They encourage states, not just individuals, to step up in the globalized world and contribute to the world. However not all states have stepped up to the call, and the current implementation of the globalization leaves out lower developed countries in the process. It makes the rich richer and the poor poorer.
Geoffrey Garrett wrote an article in Foreign affairs titled, "Globalization's Missing Middle." He comprehensively wrote about the winner and losers of Globalization. Geoffrey Garrett is the former Vice Provost and Dean of theInternational Institute, Director of theRonald W. Burkle Center for International Relations, and Professor ofPolitical Scienceat UCLA. Before coming to UCLA in 2001, Garrett was Director of Ethics, Politics and Economics and of the Leitner Program in International Political Economy, as well as Professor of Political Science, at Yale University. He had previously been on the faculties of the Wharton School of the University of Pennsylvania, Stanford University and Oxford University. Garrett has been a fellow at theCenter for Advanced Study in the Behavioral Sciencesand a National Fellow of the Hoover Institution and has held visiting appointments at the Australian National University, the Juan March Institute, Madrid and the Wissenschaftszentrum, Berlin. Garrett's undergraduate education was at the Australian National University (B.A. 1980), and he holds MA (1984) and Ph.D. (1990) degrees from Duke University (Garrett).
As Garret starts his analysis, he claims the working middle class is the one to suffer the most from globalization. In today's market there are only two ways to achieve fortune. Either you have to be skilled in knowledge and engineer new technologies or you have to be willing to be in the low-wage sector, which requires receptivity completing a low-skilled task. This creates the middle class Garrett refers to as the one to suffer most. "Those who cannot compete in either include not only the erstwhile industrial middle class in wealthy nations but also most countries in the middle of the worldwide distribution of income" (Garrett). Garret agrees that his working class structure does not fit any conventional model of globalization. Supporters of globalization, according to Garrett, try to reason the failure of the middle class on social and ethnic problems. For example in Eastern Europe, the supporters blame the negative movement of the middle class on the rupture it had with its socialist ideals causing them to face an identity crisis. In Latin America, supporters blame the rampant corruption that is embedded in their political and social system. Critics, he claims, refuse to accept that it has benefited anyone but the rich. They are fixated on the idea of sweatshop labor benefiting the rich and hurting everyone else. In reality both the sides refuse to accept the fact there are three, not two, social structures at work. There is enough statistical proof to show neither of the opposing views is factual.
This concept of middle class not only applies to individuals but also to states. Countries like the United States are considered high class, Latin American and European countries are considered middle class and China, India are considered to be low class. Garrett draws a metaphor: misplaced U.S workers would love to be able to work at firms such as Microsoft and Apple however for most of the middle class workers this is nothing short of a pipe dream. Countries such as Panama and Mexico would love to be able to compete with powerhouses such as Japan and the United States but most countries do not posses that much manpower and/or the technology. So the real question therefore lies in how to raise those countries up to the level of United States and Japan without lowering the production of the developed countries. Garret argues that education is the key for others to catch? up. High class economies can and should educate and train lower economies to raise their levels. Garret also notes that middle class economies need to reform their own institutions if they want to be a role player in the world stage.
Garret presents statistics of American job changes in twenty years. Twenty years ago, manufacturing employment used to consist of one fifth of the workforce. In twenty years it had reduced to one tenth. Meanwhile, in twenty years, employment in "professional and business services" has doubled, overtaking manufacturing in the process. In the meantime lower-waged jobs in "leisure and hospitality" had also doubled and now rivals manufacturing. Jobs in manufacturing have been replaced by burger flipping and cleaning floors or by glamourous professions such as writing software and writing money. This increase in social inequality has been mimicked in the global stage.
The World Bank has created a way to categorize these sectors. The top 25 percent of countries are labeled "high income," a category that comprises the nations in the Organization for Economic Cooperation and Development, plus a few small Middle Eastern oil exporters and trading states such as Singapore. The bottom 30 percent are labeled "low income." This group includes more than half of the world's six billion people, chiefly in the countries of Asia and sub-Saharan Africa. The remaining 45 percent of countries - almost all of Latin America and the former Soviet bloc as well as the Asia and much of the Middle East - are "middle income." Twenty years ago average GDP per capita was less than $300 in the low-income group, roughly $2,500 in the middle income group, and more than $20,000 in the high-income group. After two decades of integration of national economies into international markets, by 2000, per capita incomes in the countries categorized as high income in 1980 had increased by roughly 50 percent. The low income countries faired even better in these twenty years. Their real per capita income increased by hundred sixty percent. Supporters of Globalization point to NAFTA and the effect it has had on the Mexican economy. They say it has stimulated trade in the country and their country did notice a 10% increase in export from 1980. However this figure by itself is not a clear signal of the progress. In the time span, the real per capita income of the middle-income group in Mexico grew by less than 20%, the high-income group countries grew by 40%.
The solution to this problem is education, according to Garrett. He believes the European Union should relax its process of accepting countries. Entry into the EU proved heavily beneficial for Poland, Hungary, and other members of the ex-soviet bloc. Before entering the EU countries such as Spain, Portugal, and Greece faced major economic instability. Garrett argues that this effect will be the same on countries just now entering even though they are in worse shape than Spain and Greece ever were. Latin American countries have been pursuing to be able to integrate with the EU. Since membership is not an option they must opt in for the closest trade organization, NAFTA. The United States has refused to extend NAFTA's reach to Latin American countries, leaving them in limbo. The World Bank has stepped in at times to promote smart development assistance. They focus on educating the people and developing them into high-class societies. This in many situations has proven to be ineffective. The United States and European Union has to step in to improve the middle-income countries develop.
Garrett presents a very unique and different argument against globalization. He however forgets to emphasize the importance of the middle class in society. The middle class is needed for society to function. It acts as a buffer between the rich and the poor in the world. The middle class is where people usually work the hardest. In February 2009, the Economist magazine announced that over half the world's population now belongs to the middle class, as a result of rapid growth in emerging countries. It characterized the middle class as having a reasonable amount of discretionary income, so that they do not live from hand to mouth as the poor do, and defined it as beginning at the point where people have roughly a third of their income left for discretionary spending after paying for basic food and shelter. This allows people to buy consumer goods, improve their health care, and provide for their children's education. Most of the emerging middle class consists of people who are middle-class by the standards of the developing world but not the rich one, since their money incomes do not match developed country levels, but the percentage of it which is discretionary does. By this definition, the number of middle class people in Asia exceeded that in the West sometime around 2007 or 2008 (Parker). The middle class has been persistently important throughout history. Starting with the feudal age we can see a society where there was no middle class. Either you were a noble or a peasant. The feudal society was constructed for one reason: security. The nobles wanted the security of maintaining control over their far-reaching kingdoms, so they were forced to delegate power to local control. The peasants wanted security from marauders and barbarians from neighboring lands. They also wanted security from invading armies, and thus the development of the feudal system. However this period began dwindling with the start of the crusades and trade created the start of the middle class. The importance of the middle class was re-iterated in the violent French Revolution. The inequality between the rich and poor meant the absence of a middle class.
The year 1980 is used as a timeframe because 1980 is considered the time of ending of the Cold-War era. Before 1980 the global scheme of things were determined by the United States and USSR. As the USSR began crumbling, the situation switched from bi-polar to uni-polar with United States of America being the most dominant power in the world without any major competition.
The inequality led to the poor rebelling against the nobles. The French revolution was in essence a class struggle that the world was heading towards. If globalization continues on its current course there is a strong possibility of poor countries rebelling in their own way towards larger richer countries. In the current time with terrorism and weapons of mass destruction being too rampant even the possibility of such a rebellion should be squelched. Instable countries foster terrorist for economic benefits, letting them use their soil to run their organization from. Helping the poor stay in the middle class or get richer will not only improve the world economy but also increase higher developed countries national security.
Garrett in his article does not analyze the concept of globalization. He begins his critique of the middle class without first explaining the inherency of globalization. In his analysis, Garrett assumes a couple of misguided sets of criteria of globalization He just accepted the common definition of the word. Jose Bove in "Globalization's Misguided Assumptions" expanded on these assumptions and shows the problem with some of these assumptions.
First off is the assumption that Globalization helps the rich in all and every situation. In the field of Agriculture, since 1992, the major industrialized countries have integrated with global markets but the integration has come out with very little positive consequences. The United States pass the FAIR (Federal Agriculture Improvement and Reform) Act to help with the process. The act let farmers farm without any restrictions. Even after integration and governmental help the farmers could not have a positive upturn. It was in reality completely opposite. The United States increased its subsidies by four times to $23billion in four years. So, contrary to popular belief the market is inherently instable and needs constant governmental interference to sustain itself. The United States is very capable of subsidizing their economies however poor or middle-class economies will not be able to. Middle-class economies that cannot subsidize and interfere will eventually fall into being a poor economy since they will not be able to compete in the global scale which is the second misguided assumption. (Bove 11)
Competition is hailed as one of the greatest tools of a free and open market. Competition increases the efficiency of the market. However competition is only useful when competitors are able to survive. This is especially true in agriculture, where technology differences across the globe are huge. In the globalized state a farmer in Kansas, who owns the newest john deer equipment that makes mass farming easier, competes with farmers in Sub-Sahara Africa, who still uses simple hand tools and only works on a couple acres. The numbers for this are astounding. 1.3 billion farm workers still harvest the land with their hands or farm animals. These 1.3billion compete with the minority of 28million that used mechanized methods of farming. The minority of the farmers out-produce their 1.3billion counterparts. This raises the question of fairness. In simple words, globalization just is not fair. Garrett implies this but never states why it's not fair.
"The predatory attitude has become the habitual and accredited spiritual attitude," the economist Thorstein Veblen said of the late nineteenth century (Kapstein). Sadly the same holds true today. Global poverty rates have continued rising in the past twenty years. As stated earlier, the United Nations made in one of its millennium goals to eradicate it. However this goal has still not been achieved. "In 1980, median income in the richest 10% of countries was 77 times greater than in the poorest 10%; by 1999, that gap had grown to 122 times (Weller)." Inequality has also increased within many countries. Over the same period, any gains in poverty reduction have been relatively small and geographically isolate. The number of poor people rose from 1987 to 1998, and the share of poor people increased in many countries. In 1998 almost half the world was poor. In 1980 the poor 10% of the world was living with 72cents per day. In 1990 that number has only increased by 6 to 78cents. In 2009 the lowest part of society is living with 82cents per day. Though there is a positive trend in these numbers it is still a daunting number.
Proponents of globalization argue that these poor people are a result of many social, political, and economic factors. However the evidence shows that unregulated capital and trade glows contribute to rising inequality and impede progress in poverty reduction. Trade liberation leads to countries importing more and more foreign goods. This causes the nation's own goods to go down in price and causes wages to decrease. The global market has also caused local markets to become instable and fall into a state of crisis. Big economies such as United States can handle such a crisis. With developing countries, any negative economic effect will cause major problems. The effects of economic crisis are disproportionate.
Faster rate of capital flow also creates instability. From 1980 to 1997, capital increased from 1.9billion to 120.3billion dollars. This faster rate of capital flow in a de-regulated economy leads to rising inequality, both within countries and between countries and to less poverty reduction or even increasing poverty (Weller). A report by UNCTAD found that in Latin America the income gap between he rich and poor to have increased exponentially. The promises of more equal income distribution and reduced poverty around the globe have failed to materialize under the current form of unregulated globalization. Thus it is time for multinational institutions and other international policy makers to develop a different set of strategies and programs to prove real benefits of the poor. Garrett stresses the need for education but I believe an alternate system is needed before education can make any impact on the lower/middle class economies.
Ethan Kapstein proposes such programs. "Focusing on poverty is inadequate," Kapstein argues, because it does not put relations between states front and center. "It is government that sign treaties and agreements, impose sanctions and boycotts, and make war and peace, and it is governments that - for good or for bad - are ultimately accountable for their actions at home and abroad (Kapstein)." To stabilize the economic and world system we must emphasize relations between states and the kinds of economic arrangements states subscribe to. Individuals are not the only moral agents. States are also moral agents, with duties and responsibilities to one another as well as their citizens (Wade). Kapstein presents an alternate global framework for global justice. He refers to this framework as "Liberal Internationalism." This new system must be inclusive, participatory, and welfare enhancing for all. Free trade is the social arrangement that has the potential to best achieve justice in interstate relations and to fulfill each state's goals.
The first and foremost element of this new international system is creating a system that has a level playing field. "Fortunately, a resource redistribution mechanism exists that is welfare-enhancing for all participants, and it is called free trade" (Kapstein). Instituting a system where everyone has an equal voice and opportunity is the first step to provide equality and justice in the economic system. You begin this process by removing barriers that make it difficult for poorer countries to enter the world stage. This begins with relaxing some trade laws instead of going "tit-for-tat" in deals. Developing countries cannot be expected to make the same concessions that fully developed countries make. However this does not mean they be given special treatment in the deals. Fairness is reciprocal and therefore every country must make concessions (Kapstein).
After establishing free trade, the second main feature of Kapstein's plan is aid. Kapstein argues that aid being used in areas such as health care and basic education should be re-allocated to build infrastructure in the developing countries. Kapstein argues that once the infrastructure is set and the country is able to compete on the world stage, the education will come and health care will soon follow (Kapstein).
Third, Kapstein urges formation of an umbrella regime that covers the migration of workers from state to state. With increased global trade, the workers of one country will be tempted to move to another country. This umbrella regime will regulate rules and costs across the world to make sure the system stays the same. Consistency will be key in any world order that stresses equality. If the United States and Mexico follow different rule sets the world order will not be able to be successful.
Finally, Kapstein argues that the umbrella regime should be in charge of Foreign Direct Investments (FDI) and actually encourage them. The umbrella regime should promote foreign investors in lesser developed countries and create a code of conduct for governments' treatment of the investments. If there is an outside force making sure the FDIs are used for infrastructural use and not being recklessly used, this will attract more FDI. With such oversight, infrastructure will definitely pay off to the investors and attract even more FDIs. Kapstein also argues that states must get rid of subsidies on FDIs. These subsidies discourage people from investing. This will be an obligation of the umbrella regime.
Garrett would agree with Kapstein's system since it relies on aid and investments to build up countries. After infrastructure is set up and the country enters the world stage, the country will be forced to better its education system which is Garrett's goal also.
The only question that remains unanswered in Garrett's analysis is, why would the developed countries spend their time and money bettering lesser developed countries? The answer is very simple: national security. There are many ways globalization negatively effects national security.
First of all the most obvious and the most commonly known fact is that Globalization is not just for economic and political needs. In a shrinking world, language and cultures also travel across continents. This causes major conflicts with certain parts of the world. This was most evident by the September 11 attacks. Osama Bin Laden and countless other terrorists have waged a war against America and western culture's encroachment on their lands.
Proponents argue that this cultural globalization will never be able to be stopped, however, I disagree. Following Kapstein's plan we will see a decrease in accusations of cultural overstretch. The current system lets countries, mostly Western, dominate the debate and the terms of the deals. Under a free, fair, system where everyone has an equal voice, no one person or culture will be able to dominate and therefore could not force their way of life on others. This will decrease a lot of the terrorism that currently exists in the world.
Secondly, increasing a countries fiscal status and improving their infrastructure will cause the downfall of regional terrorism and violence. Latin America is a prime example of this. Violent crime in Latin America kills more people and wreaks more economic havoc than Aids, the head of the Organization of American States warned this week. Drug trafficking, gang warfare, kidnapping and other crimes pose one of the gravest threats to the region's stability, said José Miguel Insulza. "It is an epidemic, a plague on our continent that kills more people than Aids or any other known epidemic. It destroys more homes than any economic crisis (Carroll)." The violence has been blamed on factors including poverty, inequality, cocaine trafficking, the legacy of civil wars, a bountiful supply of guns and corrupt, ineffective state institutions, notably the police, prisons and courts (Carroll).
These violence acts tend to spill over boundaries and can be a problem for many other nations than just the ones the violence originated from. Following Kapstein's plan and creating the infrastructure of a country, it will decrease the rampant corruption in the government and reduce the problems in the government. Kapstein's plan also reduces poverty which eradicates another main cause for the violence.
More developed countries will therefore like to interfere and participate in this free trade process, if it will not only benefit them economically in the long run, but also help ensure the safety of their nation.
In conclusion, the current globalization system is a breeding ground for poverty and terrorisms. Developed nations have an obligation to step in and provide for lesser developed nations so they can one day be global power houses. This can be done by following Kapstein's plan. Kapstein's plan encompasses all of Garrett's ideology and implements it into society. Global trade, in the current state, suppresses the middle class and causes them to suffer financially and fall down in status to "poor." Poverty breeds crime and wastes society's resources that can be used to better everyone. In a generation or two, under the liberal-internationalist plan, poverty might become a thing of the past. However, to get to that state we must first reform our current ways.