Globalization and Its Contradictions
New York University
Paper Presented at the British International Studies Conference
University College Cork
The implications of globalization for development and democracy are the subject of
much contention. It has been said of globalization that it is a "buzz" word that has no
precise definition. It takes on many meanings, drawing both fervent support and
opposition (Cooper 2004).
The advocates of globalization claim that it has contributed to a period of sustained
economic growth and development, spreading the benefits of prosperity and welfare
around the world, including in some of the most impoverished regions of the third world.
Jagdish Bhagwati, for example, in his recent bookIn Defense of Globalization focuses on
the economic dimensions of globalization and concludes that its effects are
unambiguously beneficial and that the poorest regions of the world need more
globalization rather than less.
The critics of globalization, by contrast, point to the "globalizing juggernaut" as the
source of increasing impoverishment produced by the unfavorable conditions imposed on
third world countries by global financial institutions and by predatory corporations that
undercut labor, lower wages, promote child labor, and imperil democracy. Thus Joseph
Stiglitz, in his recent bookGlobalization and its Discontents portrays the devastating
effects of globalization on some of the poorest and least developed countries of the
It is these issues of the effects of globalization on development and democracy that are
examined in this paper in the context of the Indian subcontinent. The question to be
addressed is whether globalization, in its current framework of neo-liberal principles,
with the emphasis on free markets, free trade, and the free flow of capital advances or
endangers the cause of development and democracy. Adopting definitions that are
admittedly selective, given the diversity of interpretations of the terms 'globalization',
'development', 'democracy', the discussion centers on the broader conceptions of
development as human development and of democracy, in its substantive rather than
procedural aspects, as the economic empowerment of the majority, the disenfranchised
Defining globalization as "the closer integration of the countries and peoples of the
world…the breaking down of artificial barriers to the flow of goods, services, capital,
knowledge…", Stiglitz points to the international institutions—the World Bank, the
International Monetary Fund, the World Trade Organization, and the transnational
corporations that are the agents and directors of the forces of globalization-- writing the
rules, setting the agenda, mandating change (2002: 18-19).
In "Models of Democracy", David Held defines democracy as "a form of government in
which, in contradistinction to monarchies and aristocracies, the people rule" (1987:2).
What does it mean for people to rule? Held suggests a partial list of common meanings,
from which, for our purposes here, I select the following:
--"that rulers should be accountable to the ruled; they should, in other words, be obliged
to justify their actions to the ruled and be removable by the ruled
--that rulers should be chosen by the ruled
--that rulers should act in the interests of the ruled".
The idea of democracy as popular political participation raises substantive and procedural
issues: substantively, democratic regimes promise goods, services, social and economic
opportunities to the people, that is, to a substantial majority of the population on an
egalitarian basis; procedurally, the emphasis is on fair and open elections, held on a
regular basis, based on universal franchise.
Definitions of development too are diverse in that some conceptions emphasize
economic growth, the growth of national productive capabilities. Others, such as Dudley
Seers and Amartya Sen, question the conception of development in terms of economic
growth alone, the expansion of production, the growth of a nation's GDP. In
"Development as Freedom", Sen defines development in terms of human capabilities; the
freedom to lead a life of well-being—freedoms that include the acquisition of sufficient
food, freedom from disease and ill-treatment, access to education, freedom from
unemployment. The concerns of development are ultimately about what people can or
cannot do: whether they are well-nourished, whether they can read and write, whether
they can escape avoidable illness, whether they can live long. Seen in these terms,
development is a broad process of social transformation, the elimination of poverty, the
reduction of unemployment and inequality, rising levels of schooling and literacy.
The development project was understood as a nationally-organized, nationally-directed
process of economic growth with a prominent, in some cases dominant, role for the state.
The developmental state as an activist state was based on the idea that state planning and
public investment were necessary in third world, underdeveloped countries given market
imperfections and the need to finance, through state enterprises, the building of the
infrastructural prerequisites of industrial development.
This idea of development as a project of national economic management has been
profoundly transformed under the auspices of the Bretton Woods system and the neoliberal
agenda. A nationally directed and autonomous path of development has been remade
to one of globally directed economic policies with ever-increasing global economic
integration. This has led to profound adjustments in the economic and social priorities of
third world states. The goal of development as managed national economic growth has
been transformed into a globally-managed program in line with a neo-liberal agenda
emanating from the major industrial economies of the (then) G-7, primarily the U.S. The
economic policies of neo-liberalism—fiscal austerity, free trade and free markets,
privatization, minimizing economic regulation—has had the effect of shrinking the role
of the state and increasing the role of global institutions in the management of national
economic policy making (Cohn 2005: 208).
Stiglitz points out the problems of governance, of representation and of legitimacy in the
dominance of global institutions in the national development of third world states: "who
decides what they do? The institutions are dominated not just by the wealthiest
industrial states but by commercial and financial interests in those countries, and the
policies of the institutions naturally reflect this…While almost all of the activities of the
IMF and the World Bank today are in the developing world (certainly, all of their
lending), they are led by representatives from the industrialized nation ….The institutions
are not representative of the countries they serve" (2002:18-19).
The debt crisis of the 1980's led to this new global configuration in which national
economic policies are globally managed, in which governments adopt policies advocated
by global institutions, shaped in accord with global rather than national considerations,
significantly eroding the sovereignty of third world states (McMichael 2000:133-137;
Khor 2001: 10). Central global institutions, corporations and international agencies wield
enormous authority over a majority of third world governments that depend on them for
loans and capital for development.i Most developing countries ran into debt service
difficulties in the 1980's after borrowing sprees in the 1970's. The creditors, the World
Bank, the IMF, private banks made the re-negotiation of their debt conditional upon the
acceptance of global management and oversight of national economic policies.
The financial power of these global, multilateral institutions enabled them to extract
major concessions from the states that turned to them for assistance to meet their debt
repayment obligations; they were required to adopt more open economic policies, trade
liberalization, de-regulation, privatization, fiscal austerity. As The South Commission
declared in 1990:
"What is abundantly clear is that the North has used the plight of developing
countries to strengthen its dominance and its influence over the development
paths of the South. Developing countries have been forced to reshape their
economic policies to make them compatible with the North's design…. The most
powerful countries in the North have become ade facto board of management for
the world economy, protecting their interests and imposing their will on the
South. The governments of the South are then left to face the wrath, even the
violence of their own people, whose standards of living are being depressed for
the sake of preserving the present patterns of operation of the world economy"
The debt regime imposed on third world countries stripped the developmental state of
much of its role in development. Keynesian ideas of public investment and state
intervention in the economy were discarded in favor of dismantling the state apparatus of
development—in the interests of efficiency, ostensibly—and increasing the role of the
market, in line with neo-liberal ideas of privileging private initiative.
"In sum, the debt regime reformulated the terms of economic management,
shifting power from former third world states to global agencies. Countries
surrendered economic sovereignty as First World governments and financiers,
both private and public, concentrated managerial control of the global economy in
their own hands" (McMichael 2000:145).
The social and distributional effects of the dismantling of the developmental state were
indeed severe, as pointed out by the aforementioned South Commission. The renegotiation
of the debt of third world countries was made conditional upon the
acceptance of structural adjustment loans that were basically a re-organization of
economic priorities, requiring governments to balance their budgets by cutting what are
considered non-essential expenditures, that is social expenditures on food subsidies,
nutrition, education, healthcare. The drastic reduction in public spending on social
programs brought about radical "adjustments in economic and social priorities…These
adjustments overrode the original development goal of managednational economic
growth with managedglobal economic growth….In effect, these actions stabilized
indebted economies so that they could at least service their debt—that is, repay the
interest due to the banks and the Bretton Woods financial institutions" ( McMichael
The result of these stabilization measures was to drastically reduce public spending on
social programs, such as public subsidies for the poor, and to increase unemployment
with the laying off of workers with the sale of public companies, often to foreign
ownership, through privatization. The developmental state committed to social welfare
principles was transformed into a compliant state managed by global institutions
committed to neo-liberal principles—free markets, privatization, reduction of social
entitlements, and foreign investment concessions. It brought with it the gradual
disembedding of the national social contract between state and society (Falk 1999:40).
It weakened considerably the state's capacity to pursue a path of autonomous national
development in the interests of the majority of its citizenry.
Globalization and Poverty: India
India's economy is among the world's 5 largest economies. We have heard a great deal
recently of the robust economic growth in India in the late 1990s and early 2000s. The
principal beneficiaries of these remarkable economic gains have been India's relatively
small middle class; poverty, hunger, disease continue to remain entrenched,
undermining India's much vaunted open, competitive electoral system. The paradox of
both an expanding sector of high tech industry and the existence of mass poverty
exemplifies these persistent economic disparities.
The question of whether poverty and inequality have been mitigated or worsened by the
neo-liberal policies of the Indian government in the 1990's has been the subject of much
discussion and dispute. Robert Wade's comment in the context of global poverty and
inequality are equally apt in relation to the issue of poverty within India: "perhaps all the
thunder and lightning about trends diverts attention from the main issue: the sheer
magnitude of poverty and inequality….The magnitude is unacceptable…" (2004: 441).
Over 40% of the population in the late 1990's lives on less than $1 per day in conditions
of desperate poverty, according to World Bank estimates. 45% of children are stunted
from malnutrition according to a 2006 World Bank Report (New York Times March 3,
2006, A6). Nearly 50 percent of adults are illiterate (Human Development Report 2002).
There is great disparity within India in living conditions, with some regions as badly off
in terms of infant mortality, life expectancy, literacy as the most deprived countries of the
world (Sen 1999:100-101).
Conforming to a typical developmental state, India's development strategy till the 1990's
had been based on both nationalist and, rhetorically, socialist goals. Economic policy
was driven by a nationalist capitalism, the pursuit of economic autonomy, controls over
foreign investment and of foreign enterprise; state intervention in the economy was
legitimized on socialist grounds, to achieve social objectives such as the alleviation of
mass poverty (Udayagiri 1994: 221).
In 1991, unable to meet the requirements of international creditors, India bowed to
IMF/World Bank pressures and adopted the prescribed elements of structural adjustment
applied to third world countries experiencing debt repayment problems. The IMF/World
Bank "economic reform" package entailed the opening of India's previously protectionist
economy to foreign trade and investment, liberalizing imports, privatizing state
enterprises, and substantially reducing government spending and social subsidies in
agriculture, health, education, public employment.
These reforms amounted to a major re-direction of the Indian economy. They were
driven by an ideological perspective of substantially curtailing, if not eliminating, state
participation in the economy and dismantling the system of state-assisted development.
With the shift from state-directed to market-oriented policies, the role of the state was
usurped by the free market. The social impact of the cuts in social spending has been to
deepen poverty and increase inequality (Seddon and Walton 1994: 226-227;
Chossudovsky 1996: 126).
Structural adjustment has led to the emergence of the "new poor". As Mustapha Kamal
Pasha has stated it, the march of neo-liberalism in the subcontinent and
"the promise of material salvation is intensely refuted by the simultaneous
presence of grotesque concentrations of wealth and privilege on the one
hand, and an unprecedented scale of poverty, squalor, inequality and
marginalisation on the other. Above all, globalization exposes vast
populations in virtually all parts of the world to a relentless market
rationality, furthering already existing disparities and deepening social
destitution" (1999: 180-181).
These developments in the current wave of globalization—the ever-increasing degree of
economic integration in the global economy, the erosion of the sovereignty of the
national developmental state, the shift in power from the third world state to global
institutions, economic reforms and the restructuring of third world economies—has
profoundly altered the relations of the state to civil society and the nature of the
democratic process. These mechanisms may be seen to operate on two levels: that of the
state in relation to international global forces and secondly, the state in relation to the
In relation to the state and the global institutions that dominate the international economic
arena, the national developmental state has in effect become the compliant agent of
multilateral global institutions. By so doing, it no longer functions as the traditional,
nationalist autonomous developmental state acting as the agent of its citizens interests.
Stripped of much of its power and resources, accountable to external global powers, it is
accordingly less accountable to its citizens and less responsive to their interests. The
democratic commitment to popular empowerment is undermined by the unaccountability
of the state to its citizenry and the erosion of its capacity and resources to implement an
egalitarian vision of democracy.
The impact of these developments, the re-structuring of the state to reflect the interests of
global institutions, is reflected also in the shift in focus from issues of equity and social
justice, the broad general welfare aspects of development to the economic concerns of
efficiency and economic growth. Issues of distributive justice have once again been
eclipsed by the emphasis on economic growth.
In a society as highly stratified as India's, in both economic and social terms, economic
growth refracted through the prism of such stark inequality tends to perpetuate patterns of
inequality to the detriment of the goal of equal political dignity at the core of the
substance of democracy. For the large segment of the society that remains in conditions
of degrading poverty, that depends on the power of the state to support mechanisms of
redistribution, the globalization project has indeed eroded the promise of equality and
equal political dignity.
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Poverty in World Politics. Whose Global Era?
Edited by Sarah Owen Vandersluis and Paris Yeros. St Martin's Press 1999
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CommissionZed Books 1993
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Wade, Robert "Are Global Poverty and Inequality Getting Worse?" inThe Global
Transformation Reader2nd edition edited by David Held and Anthony McGrew
Udayagiri, Mridula "The Asian Debt Crisis: Structural Adjustment and Popular
Protest in India" in Walton and Seddon 1994
Walton, John and David SeddonFree Markets and Food Riots
iOver the decades, the Bank has wielded enormous power and influence; it has become the deciding voice
in determining which countries will receive international loans. While the Bank's own rules, its Articles of
Agreement, state that it "shall not interfere in the political affairs of any member" and that "only economic
considerations shall be relevant to its lending decisions", the Bank has not abided by these principles. The
Bank's lending practices have clearly favored those countries that have agreed, usually under pressure, to
adopt policies that promote private enterprise, free trade, open markets—a free market orientation in accord
with the advanced industrial countries. This gives the World Bank and its sister institutions the power not
only to determine the countries considered ideologically friendly to be credit worth, but also to dictate the
terms on which development loans are given and the economic policies and development strategies of the
underdeveloped countries—a degree of intrusion in their economies that harkens back to colonial times.