Why did a chicken cross the globe?

On the Edge
September 29, 2000

On the Edge offers a dozen essays on "global capitalism", ranging from insightful and incisive to ill-conceived and ill argued. The authors include sociologists, international finance experts, policy analysts and journalists from the rich countries and a well-known activist from India. With rare exceptions, the common message running through the essays is that globalisation has been a mixed blessing and that it must be tamed along one or more dimensions. This view is presented as a superior alternative to the neo-liberal view, which in its unvarnished and crude version advocates more, not fewer, open markets.

The easiest case against globally free markets is to be found in the area of short-term capital mobility. The Asian financial crisis indelibly etched in our minds the qualifications to fully free capital flows that must be considered, along with the need for prudent monitoring, regulation and capital controls in the course of shifting to capital-account convertibility. The most forceful reminder of this lesson has come from none other than Jagdish Bhagwati, the foremost modern-day advocate of free trade, in his much-cited article in the May-June 1997 issue of Foreign Affairs . Contrary to the suggestion by the editors of this volume, this article was not a "concession" by Bhagwati; instead it was a pointed reminder that, despite similarities, free trade in widgets and life-insurance policies is not the same as free flow of short-term capital, which inevitably gives rise to costly financial crises.

Not surprisingly, coming from the left, the influential journalist Robert Kuttner expresses agreement with this view. More interestingly, even Paul Volcker, a former chairman of the board of governors of the US Federal Reserve system, admits the role for "limited efforts to restrain inflows", but argues sensibly that if a country wishes to participate in open markets for goods and services, it cannot opt out of financial markets. Citing the examples of Argentina and Mexico, he favours encouraging the participation of foreign banks in the domestic banking system as the key solution.

When we move from capital flows to free trade, however, the anti-globalisation critics are on more shaky ground. Jeff Faux and Larry Mishel contend that free trade hurts the poor. While the evidence of increased inequality in the rich countries during the past two decades is not contentious, its cause is. The authors argue simplistically that the re-allocation of resources induced by globalisation necessarily hurts the groups at the bottom of the income distribution. They ignore much of the recent analysis by international economists that suggests strongly that, at worst, trade accounts only for a small fraction of the increased inequality (Paul Krugman) or that it is likely even to have moderated the decline in real wages caused by other factors (Bhagwati). It is odd that Faux and Mishel do not even touch on what most economists regard as the leading explanation of the increased inequality: technical change that has shifted demand from unskilled to skilled labour.

Yet another issue that has evoked much passion, especially in developing countries, is the globalisation of intellectual property rights (IPRs) under the World Trade Organisation's Agreement on Trade-Related Aspects of Intellectual Property Rights (Trips). This agreement requires all WTO members to establish a 20-year patent regime for all innovations by the year 2005. As some of my own work has argued, since innovators are concentrated in developed countries, this global patents system will result in substantial income transfers from developing to developed countries.

In her essay "World on the Edge", activist Vandana Shiva notes correctly that the Trips agreement recognises IPRs as private but not common rights. While developed-country corporations can reap higher returns on their innovations everywhere, villagers, farmers and tribes who generate knowledge and innovations as intellectual commons are unable to do the same. Instead, with minor modifications, their ideas are "pirated" and patented by corporations.

On the question of the environment, which she also discusses, Shiva takes a more extreme position. She deplores globalisation for causing increased pollution ("The average chicken travels 2,000km before being eaten") and for turning developing countries into the dumping ground for developed-country pollution ("Asia remains the largest dumping ground for the West's waste"). But she does not back these assertions by compelling economic analysis. What if geographical specialisation reduces the pollution generated before the chickens are shipped so that net pollution declines even as they travel 2,000km? And even if pollution does rise, what if the social benefit from lower chicken prices exceeds the social cost of pollution?

The Guardian journalist Polly Toynbee offers a fascinating discussion of "cultural globalisation". She makes no apologies if globalisation leads everyone around the world to drink Coca-Cola or watch Basic Instinct on video. If people enjoy the drink and the movie, why should they be deprived of them? She also sees cultural globalisation as a means of advancing women's rights: "Cultural globalisation means global feminism, freeing women everywhere."

But Toynbee is quick to draw a line. She sees much danger in the press and broadcasting being globally controlled by a small number of individuals, such as Rupert Murdoch, who controls 41 per cent of the total newspaper readership in Great Britain and may use this power to promote his political ideas. This would seem to be a legitimate concern and one with general implications for democratic developing countries, which often lack the institutions to develop their own media.

The sociologist Arlie Hoch- schild analyses the provocative phenomenon of global care chains whereby third-world mothers migrate to take care of first-world children, leaving their own children in the care of other third-world mothers. She views this critically, arguing that the poor migrant mother's "child may be getting less motherly care than the first-world child", and favours policies that will discourage such migration.

Arguably, this is wrong diagnosis and, hence, wrong prescription. It is entirely possible that while the migrant mother brings her loving care to the first-world children, not available from their super-busy mom, her own children back home are reared under the loving care of her extended family that is so common in traditional cultures. Moreover, even when this is not true, one must ask whether the educational and other opportunities opened by the migrant mother's earnings do not outweigh the cost of the children's being reared by someone else.

The volume thus offers much food for thought. The icing on the cake is the introductory chapter, written in a debating format, by the editors. Here we have two acute minds in a lively dialogue. The reader will surely feel pleasure, while being instructed, at the chance to sit in on the conversation.

Arvind Panagariya is professor of economics and co-director, Center for International Economics, University of Maryland at College Park, United States.

On the Edge: Living with Global Capitalism

Editor - Will Hutton and Anthony Giddens
ISBN - 0 224 05937 8
Publisher - Cape
Price - £16.99
Pages - 241

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