World View: 'Sutherland extols benefits of globalisation for poor nations' read a recent headline in The Irish Times, writes Peadar Kirby.
It reported the assertion of the former EU Commissioner and first director of the World Trade Organisation, Mr Peter Sutherland, that high levels of foreign investment offer the best prospect for developing countries to reduce poverty and grow economically.
Unfortunately, however, as I report in my new book*, this benign view put forward by proponents of globalisation is not at all borne out in reality, at least in Latin America. The book presents extensive evidence that high levels of foreign investment and of trade have undermined the region's development and worsened prospects for most of its people.
In many ways, Latin America is a perfect test case for the claims of pro-globalisation advocates. As a middle-income region with relatively high levels of education and infrastructure and a well-developed private sector, it is far better positioned than most African or some Asian countries to avail of the benefits of increased investment and trade.
Furthermore, all the region's governments (with the exception of Cuba) have enthusiastically implemented the neo-liberal reform package promoted by the World Bank and the International Monetary Fund, opening their economies, slimming down their states and offering many perks to the private sector.
These reforms led to a big surge in foreign investment, from $18 billion in 1990 to $103 billion in 1999, though it fell back to $59 billion in 2001 reflecting the recession in the US. Over the same period, trade has grown by an annual average of about 9 per cent, in both volume and value.
To this extent, therefore, the claims made by the advocates of globalisation are borne out. However, it needs to be asked whether such flows are benefiting the region's development and here the evidence is far more disturbing.
Economic growth, at an annual average rate of 2.7 per cent over the past decade, has been sluggish at best and only about half the rate the region achieved from 1950-73 before economic liberalisation.
The UN Economic Commission for Latin America and the Caribbean (CEPAL), the region's most prestigious and best-resourced research institute, has identified what it calls the "new Latin American economic model" that has resulted.
In South America, this is based on the production and processing of natural resources, from iron, steel and oils, to wine, fresh fruits and vegetables and fish meal. Much of this uses little labour or seasonal and low-paid labour, so unemployment has been growing.
In Mexico, Central America and the Caribbean, the profile is somewhat different, as these countries have become platforms for largely US assembly line industry, importing inputs and exporting the products, such as clothes, electrical goods and computers. Though unemployment is lower as a result, these maquiladora plants, as they are called, are notorious for paying low wages, using coercive labour practices and forbidding trade unions.
Meanwhile, the secure and relatively well-paid jobs available to workers in the past, many of them in the public sector or in state companies, have effectively disappeared.
Instead of creating jobs in local economies, foreign investors import most inputs. This means that Latin America has a growing trade deficit, importing more than it is exporting.
In this situation, it is not surprising that six out of every 10 new jobs created are in the "informal sector" such as domestic service, self-employment, unpaid workers in family enterprises and micro-enterprises with fewer than five employees. These are characterised by lack of contracts, low pay and the evasion of state social security cover.
The structural conditions of this new economic model, therefore, ensure that economic growth is not alleviating poverty which has remained stubbornly high. Recent figures from CEPAL show how 75 per cent of the region's labour force does not earn enough to keep an average sized family out of poverty, thus reversing the trend towards becoming middle-class societies which was a feature of Latin America up to the 1980s.
Furthermore, the gap between the incomes of high earners and average incomes has been growing, thereby worsening the inequality that is already such a marked feature of Latin-American societies.
Public unrest at this situation is fuelling what some commentators call "a crisis of governability". Over recent years, public protests in Argentina, Peru, Paraguay, Ecuador and Bolivia have forced the resignation of elected presidents while in Venezuela, Ecuador and Brazil, more radical presidents have been elected.
The first signs of a new agenda are also emerging, not against globalisation but seeking a form of globalisation that is more equitable. CEPAL's recent ground-breaking report Globalisation and Development, prepared for the region's governments, outlines what it calls "an agenda for the global era".
Echoing the demands of the Third World in the 1970s, this calls for "the construction of a new international order", new global and regional institutions to help correct what CEPAL calls "the asymmetries of the global order" and an international social agenda to protect people's economic, social and cultural rights.
Such a view also seems to inform practical politics. A summit between President "Lula" da Silva of Brazil and President Nestor Kirchner of Argentina earlier this month was hailed as marking the emergence of a new common purpose in South America to counter the dominance of the US in current negotiations for the Free Trade Area of the Americas.
President Hugo Chavez of Venezuela and even the normally reluctant President Ricardo Lagos of Chile have expressed positive support.
Latin America is realising that the present form of globalisation benefits global capital more than the region's economies and peoples.
Its response, increasingly, is not to seek more globalisation but a different form of globalisation.
- Dr Peadar Kirby is co-director of the Centre for International Studies in Dublin City University. His latest book, Introduction to Latin America: Twenty- First Century Challenges, is published by Sage Publications (UK£60 hardback, UK£18.99 paperback).