International Task Force For the Rural Poor - INTAF
Amarpurkashi Rural Polytechnic,
Via Bilari, Dist. Moradabad,
Uttar Pradesh - 202 411, India.

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Vol 6 No 2 Oct 1999
GLOBAL ECONOMY AND THE THIRD WORLD
Martin Khor

Abstract
When confronted with growing joblessness, Americans and Europeans often blame competition from low-wage Third World countries, or the influx of immigrants from those countries. In fact it is more directly the new round of economic colonialism that is the culprit, as it sets into motion the kinds of changes that cause the immigration and also have dire effects on the poorest countries themselves - countries whose economics have fallen under the control of foreign corporations and whose resources are raided and shipped north to the wealthiest industrial nations. The new trade rules leave Third World countries with little ability to resist or protect themselves, or seek alternative economic strategies. In this chapter, Martin Khor presents a summary review of the negative impacts on the environment and social structures.

Formerly a professor of political economy, Khor is now president of the Third World Network in Penang, Malaysia, one of the world's leading voices of opposition to the present globalization pattern, with offices in Asia, Africa, and South America. He has been research director of the Consumer's Association of Penang and vice president of Friends of the Earth-Malaysia. He is editor of Third World Resurgence magazine and author of Malaysian Economy: Structures and Dependence (1983).

Before Colonial rule and the infusion of Western systems, people in the Third World lived in relatively self-sufficient communities, planted rice and other staple crops, fished and hunted for other food, and satisfied housing, clothing, and other needs through home production or small-scale industries that made use of local resources and indigenous skills. The modes of production and style of life were largely in harmony with the natural environment.

Colonial rule accompanied by the imposition of new economic systems, new crops, the industrial exploitation of minerals, and participation in the global market (with Third World resources being exported and Western industrial products imported) - changed the social and economic structures of Third World societies. The new structures, consumption style, and technological systems became so ingrained in Third World economies that even after the attainment of political independence, the importation of Western values, products, technologies, and capital continued and expanded. Third World countries grew more and more dependent upon global trading and financial and investment systems, with transnational corporations setting up trading and production bases in the Third World and setting products there. With the aid of infrastructure programs funded by Industrial governments, multilateral institutions such as the World Bank, and transnational banks, Third World governments were loaned billions of dollars to finance expensive infrastructure projects and to import highly capital-intensive technologies. They were also supported by foundations, research institutions, and scientists in the industrialized countries that carried out research on new agricultural technologies that would "modernize" the Third World - that is, that would create conditions whereby the Third World would become dependent on the transnational companies for technology and inputs.

To finance the import of modern technology and inputs, Third World countries were forced to export even more goods, mainly natural resources such as timber, oil, and other minerals, and export crops that consumed a larger and larger portion of the total agricultural land area: Economically, financially, and technologically, Third World countries were sucked deeper and deeper into the whirlpool of the world economic system and consequently lost or are losing their indigenous skills, their capacity for self-reliance, their confidence, and, in many cases, the very resource base on which their survival depends. But the Western world's economic and technological systems are themselves facing a crisis The Third World is now hitched onto these systems, over which they have very little control. The survival and viability of most Third World societies will thus be put to the test in the next few decades. Even now, there are numerous examples of how the Western system has caused the degradation of the environment and the deterioration of human health In the Third World.

IMPORT OF HAZARDOUS TECHNOLOGIES AND PRODUCTS

Many transnational companies have shifted their production operations to the Third World, where safety and environmental regulations are either very lax or nonexistent

. Some corporations are also concentrating their sales efforts on the markets of the Third World, where they can sell lower-quality products or products that are outright toxic and thus banned in the industrialized countries.

As a result, Third World people are now exposed to extremely toxic or dangerous technologies that could potentially cause great harm.

The Bhopal gas tragedy, in which six thousand lives were lost and another two hundred thousand people suffered disabilities, is the most outstanding example to date of what can happen when a Western transnational company adopts industrial safety standards far below acceptable levels in its home country. There are hundreds of other substandard industrial plants sold to the Third World or relocated there by transnationals to escape health and pollution standards in their home countries. The Batoon nuclear plant in the Philippines is one such example.

Hazardous products are also being pushed on the Third Word in increasing volume. There are many examples of these: pharmaceutical drugs, contraceptives and pesticides banned years ago in Europe, America, or Japan but sold by companies of these same countries to the Third World; cigarettes with a far higher tar and nicotine contents than in the rich countries, and most recently, milk products contaminated with high radioactivity resulting from the Chernobyl nuclear disaster. The health effects on Third World peoples are horrendous. For example, it is estimated that forty thousand people in The World die from pesticide poisoning each year. Moreover, millions of babies have died of malnutrition or illness from diluted or contaminated baby formula pushed by transnational companies that persuaded mothers to give up breast feeding on the argument that infant formula is a superior form of nourishment.

The hazardous technologies and products imported from the industrialized countries often displace indigenous technologies and products that may be more appropriate to meet the production and consumption needs of the Third World. Labor intensive technologies that provide employment for the community and are in harmony with the environment (traditional fishing methods, for instance) are replaced with capital intensive modern technologies that in many instances are ecologically destructive. Appropriate products or processes (such as breast feeding) are replaced by modern products that are thrust upon the people through high powered advertising, sales promotions and pricing policy. The Third World is thus losing many of its indigenous skills, technologies, and products, which are unable to survive the onslaught of the modem world.

THE GREEN REVOLUTION

The modern industrial system has changed the face of Third World agriculture. In many Third World societies, under the new plantation system, much of the lands formerly planted with traditional food crops have been converted into cash-crop production for export. If export prices are high, the incomes obtained could be higher for export-crop farmers; but when prices fall, as they have in recent years, the farmers are not able to buy enough food with their incomes, and also many agricultural workers lose their jobs.

The so-called Green Revolution is a package program that makes it possible to grow more than one crop per year through the introduction of high-yielding seed varieties (especially of rice), high doses of chemical fertilizers and pesticides, agricultural machinery and irrigation.

While its stated purpose was to increase food supply, the entire Green Revolution was little more than a market expansion program of the U.S. chemical industry, largely paid for by U.S. aid programs

. In many areas where this "revolution" was implemented there was an initial rise in production because more than a single crop could be produced in a year. But the corresponding rise in farmer's incomes was soon offseet by the increasing costs of imported chemical inputs and machinery. High-input agriculture favoured richer farmers who could afford to pay for the chemicals and drjve out poorer farmers who could not. The pesticides exacted a heavy toll in thousands of poisoning cases. In addition, the high-yielding crop varieties are very susceptible to pest attacks as insects become resistant to the pesticides. Yields in some areas have dropped. Meanwhile, thousands of indigenous rice varieties that had withstood generation of pest attacks have been abandoned and are now only preserved in research laboratories, most of which are controlled by international agencies and corporations in rich countries. Third World farmers and governments will increasingly be at the mercy of the transnational food companies and research in situations that have collected and patented the seeds and germ plasm originating in the Third World itself.

BIOTECHNOLOGY THE LATEST WEAPON

Although it is still relatively new, the application of biotechnology to agriculture has already had severely detrimental impacts on Third World economics. A few examples will illustrate this point.

Fructose produced by biotechnology has captured over 10 percent of the world sugar market and caused sugar prices to fall, throwing tens of thousands of sugar workers in the Third World out of work

. Seventy thousand farmers in Madagascar growing vanilla were ruined when a Texas firm produced vanilla in biotech labs. In 1986, the Sudan lost its export market for gum arabic when a New York company discovered a process for producing gum.

It is now estimated that biotechnology can find substitutes for $14 billion worth of Third World commodities now exported to the rich countries. This will dramatically reduce the Third World's income.

MODERN FISHING DESTROYS FISHERY RESOURCES

In many Third World countries, fish is the main source of animal protein, and fishing was once a major economic activity. In traditional fishing, the nets and traps were simple, and ecological principles were adhered to: The mesh size of the nets was large enough to avoid trapping small fish, the breeding grounds were not disturbed, and fish stocks could multiply. Fishing required hard work and tremendous human skill, passed on through generations. Boats and nets were usually made from local materials, and the whole community was involved in fishing, fish preservation, mending nets, the making of boats and so on.

The modern trawl fishing was introduced, in many cases funded by aid programs. (In Malaysia, for instance, it was introduced through German aid program.) There was an explosive increase in the number of trawlers, usually owned by non-fishing, businessmen and operated by wage-earning crews.

This led to gross overfishing, and much of the fish caught by trawlers was not used for human consumption but sold to factories as feed-meal for animals. The criterion in trawl fishing was maximum catch for maximum immediate revenue. The mesh size is usually small so that even small fish could be netted and sold and crews used destructive gear that scraped the bottom of the seabed and disturbed breeding grounds. As a result, there was a decrease in fish stocks in many parts of the Third World for both traditional and trawl fishermen.

Meanwhile, river fishery resources have also been destroyed by industrial toxic effluents, which kill off fish life and poison villagers water supplies. In the rice ponds, where farmers used to catch fresh water fish to supplement their diet, the pesticides introduced by the Green Revolution have also killed off fish life. Thus the livelihoods of millions of small-scale fishermen in the Third World have been threatened, while an important source of protein for the general population has been depleted. In Malaysia, where fish used to be abundant and considered a poor man's meat, the depletion of marine life has caused seafood to become one of the most expensive items on restaurant menus, seriously reducing poor people's access to fish protein.

LOGGING OF TROPICAL FORESTS

Another fast-disappearing Third World resource is the tropical forest. Traditionally, forests were inhabited by indigenous peoples practicing swidden agnculture, which, contrary to modern propaganda, was an ecologically sound agricultural system that caused minimal soil erosion in the hilly tropical terrain and endured for millennia.

Massive logging activities have threatened this system, as trees are chopped down by transnational corporations for log export to the industrialized countries or for conversion of primary forest to cattle-grazing land for the U.S. hamburger industry

. Between 1900 and 1965, half the forest area in developing countries was cleared, and since 1965 the destruction has further accelerated. Many millions of acres are destroyed or seriously degraded each year, and by the end of this century little primary forest will be left.

The massive deforestation has myriad ecological and social consequences: the loss of land rights and way of life (or even life itself) for millions of tribal peoples throughout the Third World; massive soil erosion due to the removal of tree cover, thus causing the loss of invaluable topsoil; much-reduced intake of rainwater in catchment areas, as the loss of tree cover increases water runoff to rivers; extensive flooding in down-stream rural and urban areas, caused by excessive silting of river systems; not to mention its contribution to climatic change.

MODERN INDUSTRIAL PLANTS AND ENERGY MEGAPROJECTS

The introduction of Western consumer goods, industrial plants, and energy megaprojects has also greatly contributed to the loss of well-being in the Third World.

The indigenous, small-scale industries of the Third World produced simple goods that satisfied the basic needs of the majority of people. The technology employed to manufacture these goods was also simple and labor-intensive. Many of these indigenous industries have been displaced by the entry of modern products that, when heavily promoted through advertising, become glamorized, rendering the local products low in status by comparison. With modern products capturing high market shares, modern capital-intensive industries (usually foreign-owned) set up their bases in Third World countries and displace the traditional, locally owned industries.

But many Third World countries were not content simply with modern consumer-goods industries. They also copied the cities of the industrial nations and set up large infrastructure and industrial projects: steel mills, cement plants, vast highways, big bridges, and super-tall buildings. The political leaders and elites of the Third Word feel their countries need to have all this in order to appear "developed", just like the industrial countries.

Huge amounts of energy are required by modern industrial plants and infrastructure, hence the need for the megaprojects in the energy sector particularly large hydroelectric dams and nuclear power stations. Each such project has its problems: The huge dams require the flooding of large tracts of forest and agricultural land, causing the displacement of many thousands of people living there. In any case, the dams do not last for long due to siltation, so they are usually not viable financially. Their costs far outweigh their benefits. There are also health effects, as ecological changes associated with dams and irrigation canals spread schistosomiasis (carried by snails), malaria, and other waterborne diseases. Finally, there is the possibility of a major tragedy should the dam burst, as has occurred in India and elsewhere.

In the case of nuclear power plants, those sold to the Third World do not have the same quality and safety standards as those installed in industrialized countries, where there is stricter quality control and greater technical expertise. If a power plant installed in a Third World country is found unsafe, the government has a dilemma: stop its operation and incur a huge loss or continue using it but run the risk of a tragic accident. In the Philippines, Westinghouse Corporation built a nuclear power plant for $2 billion, but there were so many doubts about its safety that the Aquino government decided to "mothball" it. Even when a nuclear power plant is declared safe enough to start operating, there is the difficulty of disposing of its radioactive waste.

These huge industrial, infrastructrural, and energy projects often cost hundreds of millions or billions of U.S. dollars. The projects are invariably marketed by transnational corporations that stand to gain huge sums in sales and profits per approved project. Financing is arranged by the World Bank, by transnational commercial banks, or by First World governments, usually under aid programs

Such projects are rarely appropriate for genuine development, since they end up underutilized, grossly inefficient, or too dangerous to use.

Absorbing so much investment funding, they deprive communities of much-needed finance for genuine development projects while leading the borrowing Third World nations into the external debt trap. Finally, they cause widespread disruption and displacement of poor communities, especially indigenous peoples, who by the hundreds of thousands have to be "resettled" as their forests and lands are flooded out by dams.

THE DRAIN OF RESOURCES FROM SOUTH TO NORTH

In this way, via their powerful technological capacity and their domination of the new global systems of trade and finance, the industrial countries have rapidly sucked out forest, mineral and metal resources from the Third World and used its land and labor resources to produce the raw materials that feed the machinery of industrialism. It is worth reminding readers that

the industrial nations - approximately one-fifth of the world's population - use up four-fifths of the world's resources, mostly for making luxury products.

The Third World, by contrast, with three quarters of the world's population, uses only 20 percent of the world's resources. Since incomes are also unequally distributed within Third World nations, a large part of these resources are used to make or import the same luxury products as are enjoyed in the industrial nations and to import capital-intensive technologies required to produce such elite consumer goods. Thus, only a small portion of the world's resources serves the basic needs of the poor majority in the Third World, who sink deeper into the trough of poverty and destitution. This is the ultimate environmental and social tragedy of our age.

Worse yet,

the very processes of extracting Third World resources result in environmental disasters such as massive soil erosion and desertification, pollution of water supplies, and poisonings from toxic substances and industrial accidents.

The resource base on which communities have traditionally relied for both production and home needs has been rapidly eroded. Soils required for food production become infertile; forests that are home to indigenous people are logged; water from the rivers and wells are clogged up with silt and toxic industrial effluents.

The transfer of resources from South to North takes place through many channels. First, there is the transfer of physical resources. For example, only 20 percent of the world's industrial wood comes from tropical forests, but more than half of that is exported to the richest nations. The developed countries produce and keep 80 percent of the world's industrial wood but also import much of the rest of the world's timber harvest as well. Most of it is used for furniture, high-class joinery, housing, packing material, even matchsticks.

Thus the wood that is exported to First World countries mainly for luxury use is lost to Third World peoples, who now have difficulty getting wood for essential uses such as making houses, furniture, and boats.

Second, there is a transfer of financial resources in that the prices of Third World commodities (often obtained at a terrible environmental cost) are low and declining even more. Between $60 and $100 billion per year were lost to Third World countries in 1985 and 1986 alone due to the fall in commodity prices. In human terms, this means drastic cuts in living standards, massive retrenchments of workers, and big reductions in government budgets in many Third World countries.

Third, many of the "development projects" that lead to the loss of resources are financed by foreign loans. It is rare for these projects to generate sufficient returns to enable repayment of debt, so debt repayments are ultimately met by the already impoverished Third World citizens.

THE NEW GATT

This deteriorating situation has been exacerbated by the passage of the Uruguary Round of GATT. The United State and other developed countries have expanded the powers of GATT (which formerly dealt only with the regulation of trade in goods) to include service Industries. The major areas included are banking, insurance, information and communications, the media, and professional services such as law, medicine, tourism, accounting, and advertising.

It is now possible to predict that

because of the new rules of GATT, many of the service industries in the Third World will come under the direct control of the transnational service corporations within a few years.

This means that the last sectors in the Third World that are still controlled by national corporations will be taken over by northern transnationals. In terms of manufacturing and agriculture, many Third World countries are already controlled by transnational corporations, either through investments or through dependence upon products from the global market.

Now the multinational service corporations are able to set up in the Third World and are not only given the freedom to trade and invest there but also to benefit from what is referred to as national treatment, which means that a transnational company must be given the same terms as those accorded to a national or local company. Some Third World countries formerly restricted the participation of foreign banks in the economy by, for instance giving a limited number of licenses to foreign banks or by allowing foreign banks to participate only in certain kinds of banking [See chapter on electronic money by Richard Barnet and John Cavanagh] Foreign banks may be prohibited from setting up branches in small towns so that local banks will have more of the deposit business. Now, under GATT, foreign banks are given total freedom and will be treated just like local companies. We are thus going to see the marginalization of local banks, local financial services, and professional services. It may even mean that media companies in the United States or Australia may be given the freedom to set up television and print media companies in the Third World and thereby actually control the cultures of Third World countries

GATT will also drastically affect people's health.

The commercial health care industry and the insurance companies of the Northern countries are launching a very big drive to commercialize health care services in the Third Word. Health insurance companies, in conjuction with the private sector (the big hospital establishments of the North), are beginning to buy up hospitals and accelerate the commercialization of health care in the Third World, thus making it unavailable to the vast bulk of its population.

Third World countries may believe that if they give way to the developed countries in areas such as services, investments, and intellectual property rights, they may benefit in other areas. For instance, they may be given better access to the markets of the industrialized countries through lower tariffs. But this may be an illusion. The industrialized countries have violated similar bargains with Third World countries in the past, and Third World complaints may be given especially short shift by the World Trade Organization.

Under the new conditions for trade and investments, neither the Third World nor the United States will have the authority to establish environmental, occupational health, or other safety regulations, some of which will be considered to be against the principles of free trade and free investment. For instance, Indonesia recently proposed to ban the export of rattan, which is a very important forest product. Rattan is getting ever scarcer, and the government wanted to retain rattan in Indonesia for domestic use. This of course was welcomed by environmentalists, who do not want to see the depletion of forest resources. Immediately, however, the United States and the European Community criticized the Indonesian government on the grounds that the export ban was against the principle of fair trade. They accused the Indonesian government of taking protectionist steps and threatened retaliation against its exports.

Under GATT rules, a government can theoretically propose to ban international trade in toxic wastes or in products that are banned in countries where they are produced because they are considered dangerous, such as pesticides, drugs and so on. But when some Third World governments actually tried to put trade in toxic wastes onto the agenda of GATT, it was resisted by the developed countries.

AN ALTERNATIVE VISION

The analyses just given clearly show that a radical reshaping of the international economic and financial order must occur so that economic power, wealth, and income are more equitably distributed and so that the developed world will be forced to lower its irrationally high consumption levels. If this is done, the level of industrial technology will be scaled down, and there will be less need for the tremendous waste of energy, raw materials and resources that now go toward the production of superfluous goods simply to maintain "effective demand" and to keep the monstrous economic machine going. If appropriate technology is appropriate for the Third World, it is even more essential as a substitute for the environmentally and socially obsolete high technology in the developed word.

But it is almost impossible to hope that the developed world will do this voluntarily. It will have to be forced to do so, either by a new unity of the Third World in the spirit of OPEC in the 1970s and early 1980s or by the economic or physical collapse of the world economic system.

In the Third World, there should also be a redistribution of wealth, resources, and income, so that farmers have their own land to till and thus do not have to look for employment in timber camps or on transnational company estates.

This will enable a redistribution of priorities away from luxury-oriented industries and projects and toward the production of basic goods and services. If the poor are allocated more resources, the demand for the production of such basic goods and services would increase. With people given the basic facilities to fend for themselves, at least in terms of food crop production, housing, and health facilities, Third World governments can reduce their countries dependence on the world market.

Thus there could be a progressive reduction in the unecological exploitation of resources. With increasing self-reliance based on income redestribution and the resurgence of indigenous agriculture and industry, the Third World could also afford to be tough with transnationals; it would be able to insist that those invited adhere to other health and safety standards that now prevail in the industrial countries. It would be able to reject the kinds of products, industries, and projects that are inappropriate for need-oriented, ecologically sustainable development.

In development planning, the principles of such ecologically sustainable development should be adopted: minimizing the use of non-renewable resources; developing alternative renewable resources; and creating technologies, practices and products that are durable and safe, and satisfy real needs.

In searching for the new environmental and social order we should realize that it is in the Third World that the new ecologically sound societies will be born.

Within each Third World nation there are still large areas where communities earn their livelihoods in ways that are consistent with the preservation of their culture and of their natural environment. Such communities have nearly disappeared in the developed world.

We need to recognize and rediscover the technological and cultural wisdom of our indigenous systems of agriculture, industry, shelter, water and sanitation and medicine.

By this I do not mean here the unquestioning acceptance of everything traditional in a romantic belief in a past Golden Age. For instance, exploitative feudal or slave social systems also made life more difficult in the past. But many indigenous technologies, skills, and processes are still part and parcel of Third World life and are appropriate for sustainable development and harmony with nature and the community. These indigenous scientific systems have to be accorded their proper recognition. They must be saved from being swallowed up by modernization.

Third World governments and peoples in the developed world have first to reject their obsession with modern technologies, which absorb a larger and bigger share of investment funds for projects such as giant hydrodams, nuclear plants and heavy industries that serve luxury needs.

We need to device and fight for the adoption of appropriate, ecologically sound, and socially equitable policies to satisfy our needs for such necessities as water, health, food, education and information. We need appropriate technologies and even more so the correct prioritizing of what types of consumer products to produce; we can't accept appropriate technology producing inappropriate products. Products and technologies need to be safe to handle and use; they need to fulfill basic human needs and should not degrade of deplete the natural environment. Perhaps the most difficult aspect of this fight is the need to deprogram Third World peoples away from the modern culture that has penetrated our societies, so that life-styles, personal motivations, and status structures can be delinked from the system of industrialism and its corresponding creation of culture.

The creation and establishment of a new economic and social order, based on environmentally sound principles, to fulfil human rights and human needs is not such an easy task, as we know too well. It may even be an impossible task, a challenge that cynics and even good-hearted folks in their quiet moments may feel will end in defeat. Nevertheless, it is the greatest challenge in the world today, for it is tacking the issue of the survival of the human species and of Earth itself. It is a challenge that we in the Third World readily accept. We hope that together with our friends in the developed countries we will grow in strength to pursue the many paths toward a just and sustainable social and ecological order.

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