Globalisation’s misguided assumptions

Markets, competition and free trade are all essential for healthy globalisation to take place. Or are they? Critics argue that while globalisation has the potential to become a positive force for economic growth, too many of the benefits go to well-off countries, while the costs of adjusting markets and institutions are being borne by millions of already poor workers worldwide. Others go further still and blame free trade for many of the woes of the poor everywhere, and farmers in particular. José Bové of France’s Confédération Paysanne (Small Farmers’ Federation) is one such anti-globalisation activist. In this article he explains what he considers to be the “false assumptions” underlying the arguments of the free-market camp. The article originally appeared in the French newspaper Le Monde*.

Humanity is grappling with a formidable creed, which, like so many others, is totalitarian and planetary in scope, namely free trade. The gurus and zealous servants of this doctrine (“responsible” people) are saying that the Market is the only god, and that those who want to combat it are heretics (“irresponsible” people).

So we find ourselves faced with a modern-day obscurantism – a new opium on which the high priests and traffickers are sure they can make populations dependent. Recent articles in the international press supporting new trade rounds and the like are quite clear on the dogma that some people would like to impose on the men and women of this planet.

More and more people are coming out against the free market credo advocated by the WTO, the damage inflicted by it being so plain to see, and the falsehoods on which it is based so blatant.

The first falsehood is the market’s self-regulating virtues, which form the basis of the dogma, but this ideological mystification is belied by the facts. In the field of agriculture, for example, since 1992 the major industrialised countries have embraced global markets with open arms – the United States enacted the FAIR (Federal Agriculture Improvement and Reform) Act, a policy instrument that did away with direct production subsidies, instead “decoupling” aid and allowing farmers to produce with no restrictions whatsoever – but this has done nothing to calm the wild swings in the markets.

It has, in fact, done quite the opposite, since markets have experienced unprecedented instability since the trade agreements signed in Marrakech in 1995. The most spectacular effect of this American “decoupling” has been the explosion of emergency direct subsidies to offset declining prices. These subsidies reached a record high of more than $23 billion in 2000 (four times more than the amount budgeted in the 1996 Farm Act).

So, contrary to free-marketers’ assertions, markets are inherently unstable and chaotic. Government intervention is needed to regulate markets and adjust price trends, to guarantee producers’ incomes and thus ensure that farming activity is sustained.

The second blatant untruth is that competition generates wealth for everyone. Competition is meaningful only if competitors are able to survive. This is especially true for agriculture, where labour productivity varies by a factor of a thousand to one between a grain farmer on the plains of the Middle West and a spade-wielding peasant in the heart of the Sahel.

To claim that the terms of competition will be healthy and fair, and thus tend towards equilibrium if farm policy does not interfere with the workings of a free market, is hypocritical. How can there be a level playing field in the same market between a majority of 1.3 billion farm workers who harvest the land with their hands or with harnessed animals, and a tiny minority of 28 million mechanised farmers formidably equipped for export? How can there be “fair” competition when the most productive farmers of rich countries receive emergency subsidies and multiple guarantees against falling prices on top of their direct and indirect export bonuses?

The third falsehood is that world market prices are a relevant criterion for guiding output. But these prices apply to only a very small fraction of global production and consumption. The world wheat market accounts for only 12% of overall output and international trade takes place at prices that are determined not by aggregate trade, but by the prices of the most competitive exporting country.

The world price of milk and dairy products is determined by production costs in New Zealand, while New Zealand’s share of global milk production averaged only 1.63% between 1985 and 1998. The world price of wheat itself is pegged to the price in the United States, which accounted for only 5.84% of aggregate world output from 1985 to 1998.

What is more, these prices are nearly always tantamount to dumping (i.e., to selling below production costs in the producing and importing countries) and are only economically viable for the exporters thanks to the substantial aid they receive in return.

The fourth falsehood is that free trade is the engine of economic development. For free marketers, customs protection schemes are the root of all evil: they claim that such systems stifle trade and economic prosperity, and even hinder cultural exchanges and vital dialogue between peoples. Yet who would dare to claim that decades of massive northbound coffee, cocoa, rice and banana exports have enriched or improved the living standards of farmers in the south? Who would dare to make such a claim, looking these poverty-stricken farmers straight in the eyes? And who would dare to tell African breeders, bankrupted by competition from subsidised meat from Europe, that it is for their own good that customs barriers are falling?

To achieve their ends, the proponents of free trade exploit science in the name of so-called “modernism”, asserting that the development of any scientific discovery constitutes progress – as long as it is economically profitable. They cannot bear the idea that life can reproduce on its own, free of charge, whence the race for patents, licences, profits and forcible expropriation.

Obviously, when talking about agriculture, it is impossible not to evoke the farce of GMOs. Nobody is asking for them, yet they must be the answer to everyone’s dreams! There is pressure on us to concede that genetically modified rice (cynically dubbed “golden rice”) is going to nourish people who are dying of hunger and protect them from all sorts of diseases, thanks to its new Vitamin A-enriched formula. But this will not solve the problems of vitamin deficiencies, because a person would have to eat three kilograms of dry rice every day, whereas the normal ration is no more than 100 grams.

The way to fight malnutrition, which affects nearly a third of humanity, is to diversify people’s diets. This entails rethinking the appalling state of society, underpinned by free market economics which strives to keep wages in southern countries as low as possible in order to maximise profits. It is therefore a good idea to throw some vitamins into the rice that is sold to poor people, so that they don’t die too quickly and can continue working for low wages, rather than helping them build a freer and fairer society. Jacques Diouf, Director-General of FAO, recently pointed out that “to feed the 8 003 million people who are hungry, there is no need for GMOs” (Le Monde, 10 May). No wonder the Indian farmers of Via Campesina, an international small farmers’ movement, destroy fields of genetically modified rice.

The FAO is not the only international institution to question some of the certainties and radical WTO positions regarding the benefits of free markets. The highly free-market OECD acknowledges in a recent report entitled The Well-being of Nations that the preservation and improvement of government services (healthcare, education) are a key factor underlying the economic success of nations.

We therefore have every reason to oppose the dangerous myth of free trade. Judging by the substantial social and environmental damage free trade has inflicted, before anything else, it is necessary for all of us – farmers and non-farmers alike – to make it subject to three fundamental principles: food sovereignty – the right of peoples and of countries to produce their food freely, and to protect their agriculture from the ravages of global “competition”; food safety – the right to protect oneself from any threat to one’s health; and the preservation of bio-diversity.

Along with adherence to these principles must come a goal of solidarity-based development, via the institution of economic partnership areas among neighbouring countries, including import protection for such groups of countries having uniform structures and levels of development.

The WTO wants to take its free-market logic even further. Next November, in the seclusion of a monarchy that outlaws political parties and demonstrations – Qatar – it will attempt to attain its goals. But if major international institutions are becoming increasingly critical and are casting doubt on these certainties, then mobilised citizens can bring their own laws to bear on trade.

Between the absolute sovereign attitude of nationalists and the proponents of free trade, there are other roads. To echo the theme of the World Social Forum that took place in Porto Alegre last January, “another world is possible!” – a world that respects different cultures and the particularities of each, in a spirit of openness and understanding. We are happy and proud to be part of its emergence.

* José Bové’s article originally appeared (in French) in Le Monde, 12 June 2001.

©OECD Observer No 228, September 2001 




Economic data

GDP growth: +0.6% Q4 2017 year-on-year
Consumer price inflation: 2.3% Apr 2018 annual
Trade: +2.7% exp, +3.0% imp, Q4 2017
Unemployment: 5.4% Mar 2018
Last update: 06 Jun 2018

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