The globalization of economic life

Challenge to the church

Gordon K Douglass
March 25 2003

Forms of economic globalization
Globalization trends
The consequences of globalization
Where should power reside?
Theological and ethical considerations
Policies for justice in a globalizing world
Questions for discussion
Want to know more?

Mary Jo stood contentedly in her front yard, as firmly planted in Middle America as any of the cornstalks out back. "I wouldn't invest in Asia," she said, shaking her head decisively. A 59-year-old secretary with big, sparkling eyes, a plaid shirt and no pretensions, she added, "investing in Asia frightens me."

Yet Mary Jo, who has never travelled outside the United States, is in fact invested in Asia and all over the world, although she does not know it. After retiring in April from her job as a secretary with the state government, she has relied on a pension fund that has large investments abroad, giving her indirect ownership of stocks in Indonesia and Russia and Brazil. And the cash she tucked away in an AG Edwards money market account was funnelled to big banks, which helped build elegant hotels and office towers from Argentina to Vietnam.

Meanwhile, sitting on the ground beside her hut, Bangon chopped up wild plants for lunch and pondered a wrenching question: What does her 4-year-old daughter need more, food or a mother? A gentle woman whose soft face is framed by thick black hair, she explained that the family cannot afford both. As a result of the Asian financial crisis, her husband has lost his job as a construction worker, and so the family earns only a trickle of cash through odd jobs in this tiny village in north-east Thailand. That money can be used to buy rice and milk for the little girl, Saiyamon, who has become anaemic and malnourished. Or Bangon can try to save the tattered small-denomination bills to pay for a stomach operation that she needs to save her own life.¹

In its broadest sense, globalization refers to the rapid growth of linkages and interconnections between nations and social communities that make up the present world system. While this world system involves many aspects of society, its economic dimension - the erasing of national borders to allow the free flow of goods and money - is the subject of this essay. As economic globalization occurs, decisions and activities taking place in one part of the world have more and more consequences for people and communities elsewhere in the world.

Forms of economic globalization

Economic globalization takes many forms. It may involve trade between individuals or businesses in one country with those of another. Globalization of this sort is as old as recorded history. Ancient coastal tribes traded with those in the mountains and deserts, each gaining prized goods they could not otherwise have enjoyed. Today, we take for granted the fact that much of what we consume or use originated elsewhere, often in a strange foreign land.

Or businesses may decide to produce their products not only at home but also in other countries, either to evade the tariffs or quotas of countries where they wish to sell their products, or to cut their costs of production by, say, hiring cheaper labour. Then globalization involves the bundling together of financial capital, technology, and other strategic inputs in order to transfer them as direct foreign investment (hereafter, direct investment) in another country.

Direct investment implies control over the assets transferred abroad. Foreign investments that don't involve control are called foreign portfolio equity investments (hereafter, portfolio investment). They are more likely to be made by financial institutions or investors like pension funds, insurance companies or investment trusts, which are interested only in a return on their investments commensurate with the risks they are taking. If returns fall or risks rise, portfolio investment is much less dependable than direct investment as a source of longer-term finance for a country's development.

The activities of transnational corporations are a still deeper form of globalization. They coordinate their activities with many entities throughout the world, producing in many places with complex networks of production and finance. This form of globalization has recently been named "alliance capitalism," in order to stress the growing importance of strategic alliances between business entities, as businesses search for ways to protect their competitive advantages and global market positions.

Governments also compete for economic advantage globally. They often support private research and development activities, finance worker retraining, protect the environment, and promote inter-firm alliances. When governments decide it is in their interest to cooperate rather than compete, they may form supranational organizations, like the International Monetary Fund (IMF) and the World Trade Organization (WTO), or less formal regional bodies, in order to achieve shared objectives, eg, stable macroeconomic conditions, more growth through trade, or "market-friendly" economies.

Globalization trends

Rapid growth of trade

Since the second world war, trade between nations of goods and services has grown much faster than world economic output, primarily for three reasons. First, rapid improvements in transportation and communications made it easier and cheaper to reach new markets. The cost of a three-minute telephone call between New York and London, for example, has fallen from $55 (in 2002 dollars) in 1950 to less than $1 today. Second, successive rounds of tariff negotiations have virtually eliminated border barriers among developed countries, and many less developed countries have unilaterally reduced their tariffs and quotas, even without prodding from the IMF or World Bank. Third, processing trade - trade that involves goods whose components cross borders more than once before reaching final buyers - expanded rapidly. An F-140 Ford truck is assembled from parts originating in at least forty-five countries. Trade is widespread for almost all nations, and its importance is rising virtually everywhere. A quick review of the labels in one's clothing is a good reminder of the pervasiveness of trade.

Trade between nations also has been transformed in recent years, from transactions over which national governments exercise significant control - international trade, if you will - to a form of globalized trade engineered and managed by large, dominant transnational corporations - transnational trade. Well over one-third of all US imports and exports, for example, takes place between the divisions and subsidiaries of the same company. This distinction is important for the reason that it signals a transfer of power and control away from national governments that, for all their failures, can be influenced by the general public. Transnational corporations, on the other hand, are not set up to serve others than their stockholders.

Even faster growth of foreign direct investment

By latest count, there are at least 39,000 transnational corporations owning production facilities outside their home country. Direct investments by these large firms, which are growing more than twice as fast as trade, are probably the best indicators of the growth of deep cross-border economic integration. In fact, worldwide sales of the foreign subsidiaries of transnational enterprises now exceed the value of all internationally traded goods.

Most direct investment decision-makers are in the leading industrial countries, although investment decisions by firms in developing countries like South Korea, Taiwan and Brazil are increasing quite rapidly. The largest 100 transnational corporations (excluding those in banking and finance) are estimated to control about one-third of the assets held by transnational corporations abroad.

Foreign direct investment also is a primary means of transferring technology across borders. In this case, the technology is transferred within the firm, where it becomes part of the investing firm's significant and continuing financial stake in the success of a foreign affiliate. It, too, has been growing rapidly - by some measures even faster than trade; but its growth has been concentrated in relatively few large firms with strong technological and brand-name assets.

The flood of portfolio investment across borders

Encouraged by "market friendly" policies of developing countries - policies often imposed on debtor nations by the International Monetary Fund - individual investors, pension plans and mutual funds increased their stakes five-fold in the equity shares and bonds of third world companies in the early 1990s. Such rapid growth contrasted sharply with the experience of the 1980s when equity investments were rare and many poor countries staggered under the weight of the debts they owed to outsiders.

But by 1997, equity investors suddenly began to reassess the risks of their exposure, and the Asian crisis was born. In retrospect, the flow of portfolio investments was too fast to be absorbed into productive activities. It created bubbles in stock and real estate prices and encouraged luxury consumption that gave the illusion of prosperity unrelated to real increases in productivity. The faster portfolio investments flowed into Thailand, Malaysia, Indonesia, South Korea, and Hong Kong, the faster money was sucked out of the productive sector to join the speculation. When investors finally sensed their risk, they rushed to pull their money out. Hence, the flood of portfolio investments reversed direction by the end of 1997, ushering in severe recessions in many countries from which few have fully recovered.

Or consider the Russian crisis of 1998, the Brazilian crises of 1999 and 2002, and the ongoing Argentine crisis, all of them aggravated by fickle changes in the attitudes toward risk and reward of foreign investors. A rumour can trigger a self-fulfilling speculative attack, eg on a currency, that may even be baseless and far removed from the economic fundamentals. This can cause a sudden shift in the herd's intentions and lead to unanticipated market movements that create severe financial crises. (For deeper analysis of the financial aspects of globalization, see the essay on "Casino Capitalism")

The proliferation of business alliances

Cross-border agreements between firms based in different countries have become increasingly important complements to traditional trade and direct investment activities, with the range of such agreements growing ever wider. Their rapid growth since about 1985 is explained by the fact that technological changes are becoming more deeply science-based and that in some fields - notably information technology - few (if any) large firms are any longer capable of generating all the research needed to remain competitive. Thus, many transnational corporations have been driven to mutual sharing of knowledge about new technologies, production processes and distribution techniques with others. A flurry of mergers and acquisitions in the late 1990s, boosted direct investment flows substantially, despite a slowdown in global economic activity.

The institutions of globalization

As transnational trade and investment soared in the last fifteen years, so, too, did the regulatory machinery for assuring their continued growth. During this period, the World Trade Organization emerged as the dominant arbiter of trade; the IMF was transformed into a bank of last resort; the IMF and the World Bank sorted out their respective roles in deeply indebted countries; the Organization for Economic Cooperation and Development (OECD) negotiated a Multilateral Agreement on Investment (MAI) designed to restrict a nation's ability to regulate foreign investment; and the sophistication of business alliances between dominant corporate players metastasized throughout the multinational business community.

There is little doubt that these bodies exert enormous influence over the societies and economies of peoples everywhere. Because their design and coordinated management accords with the Washington consensus described below, they are best described as proponents of trade and investment as a means of encouraging the growth of markets throughout the world. Their stated aim is "prosperity broadly shared." Whether or not these institutions deliberately favour economic over other human aspirations, their preoccupation with economic ends has been widely criticized as "an ideology ordering our thought and action" - to the detriment of other individual and social purposes. Alternatives to the institutional design of the Washington consensus are summarized in what follows.

The consequences of globalization

This summary of the spread of economic globalization - and of its sponsorship by the Washington consensus - suggests why it has grown so rapidly. The first reason is the pressure felt by business firms from customers and competitors continually to innovate and upgrade what they produce. As firms discover the limits of their own core competencies, they are recognizing the need to combine their skills with those of other firms, often in other countries, in new forms of "alliance capitalism."

The second reason is the spread of market-oriented policies by national governments and regional authorities. In the last fifteen years, thirty countries have given up central planning and a hundred others have liberalized their policies governing trade, foreign exchange, and/or capital transfers. The privatization of state enterprises in many countries and the relaxation of government regulations have added incentives for cross-border integration, both within transnational corporations and between independent firms or groups.

There is no doubt that the expansion of international trade, direct and portfolio investments, and networks of business alliances have benefited many people. The political changes and technological advances of the decade of the 1990s provided a stronger basis for economic growth than at any other time since the mid-1940s. This was because a globally integrated economy can lead to a better division of labour between countries, the advocates for the Washington consensus argued, allowing low-wage countries to specialize in labour-intensive tasks while high-wage countries use workers in more productive ways. It allowed firms to exploit bigger economies of scale. And with globalization, capital can be shifted to whatever country offers the most productive investment opportunities, rather than being trapped at home financing projects with poor returns.

But globalization also has its costs, and these must be weighed along with its benefits in order to assess its true consequences. As growth of the world economy sputtered and disillusionment over the advantages of privatization grew during the last few years, the costs of globalization became more apparent.

Heightened inequality

Competitive pressures and more market-oriented policies create pockets of unemployment not easily corrected in the short-run. The structural changes causing unemployment tend to exaggerate the differences between those with the education, skills, and mobility to flourish in an unfettered world market, such as the owners of capital, highly skilled workers, and many professionals, and those without such attributes. Globalization has a way of eroding the bargaining power of groups that cannot move, leading to greater instability in their earnings and hours worked. The apparent "losers," unlike the highly skilled "winners," are made increasingly anxious about their place in an integrated world economy, whether they are blue-collar workers in textile factories in the southern US or subsistence farmers in Mindanao.

The best evidence of this is found in growing income inequalities. The gap between rich and poor countries has long been the major source of inequality among people of the world. Somewhat surprisingly, this gap has closed slightly over the past couple of decades. Income distribution within countries, on the other hand, has widened rapidly, and this has had a deleterious effect on many parts of the world. Almost everywhere in the west, despite "social safety nets," the youngest, poorest and least educated are significantly worse off than their counterparts were twenty years ago. Many poor countries also are becoming less egalitarian in the face of globalization. The rural poor, especially the smallholders and the landless of Asia and Latin America, are being ruthlessly dispossessed and displaced.

What forms of globalization are responsible for these disruptive changes in the markets for workers? Many people blame the changes in more developed countries on competition from low-wage countries. Most economists, however, blame the losses of lower-skilled workers on technological changes (eg, computerization) that are biased against the demand for low-skilled labour.

While both of these reasons no doubt have contributed to the widening of income-gaps within countries, the much larger reason appears to be the dramatic policy changes described as "liberalization" that commenced at the end of the 1970s. In the richer countries, these changes included a move from macroeconomic policies that tried to control the levels of aggregate demand (Keynesian policies) toward ones that tried to control money supplies (monetarist policies), and a shift from state-provided welfare toward pay-as-you-go social services. At the same time, the public provision of basic services such as water and electricity, frequently at subsidized prices, has been replaced by privatized providers at "economic" prices; industrial interventionism and labour protection have given way to laissez-faire; and tax systems whose major purpose was to correct inequalities have been transformed into systems mainly intended to promote incentives and economic efficiency.

There were parallel changes for developing countries, where policy was subject to the same paradigmatic shifts largely as a result of the influence of the richer countries, most directly through conditions imposed by the IMF and the World Bank. When in the 1980s many developing countries no longer could generate sufficient income to meet their debt obligations, they were faced with the choice of retreating into complete economic Isolation or seizing the life-line thrown them by the IMF and the World Bank - a life-line composed of "stabilization" and "structural adjustment" loans available only if they agreed to far-reaching and "market friendly" changes in national economic policies.

These stabilization and structural adjustment programmes took scarce economic resources away from other possible uses by poor countries. Consider, for example, the costs of implementing western financial codes and standards, one of many requirements to be met. Here the choice for countries starved for development was between training more bank auditors and accountants in order to meet the standards of financial liberalization, and using these resources, say, to hire more secondary-school teachers or boost spending levels for the primary education of girls. These programmes seem to hit the poor the hardest, with the urban working class particularly at risk.

Conflicts over social priorities

Globalization also creates conflicts between governments over domestic social priorities and the social institutions that embody them. Indeed, it is precisely the convergence of the policies just mentioned that has forced countries into what Thomas Friedman calls a "golden strait-jacket" but others call a "toxic straight-jacket" - a standardization of policies world-wide that vastly narrows the ability of single countries to honour their more unique political and cultural preferences. In Friedman's terms, "your economy grows but your politics shrink." Deviate too far from the new globalization rules and a country soon will see its investors stampede away, interest rates rise and stock market prices fall.

Put another way, the argument against unrestricted global freedom of trade and movements of financial capital is not primarily an economic one. Rather, It is that the economy should serve the needs of society, not society the imperatives of the market. There is not much doubt that free markets are the most economically efficient type of capitalism. For most economists that ends the matter. Yet what "social market economies" do, like those of Japan and most of Europe, is in no sense irrational. Policies in those countries to maintain social cohesion are just as important as efficiency in the allocation of scarce resources.

Consider, for example, the struggle the European Community has had over the harmonization of policies on employment, welfare, immigration, and competition in order to create a common market and a common currency and to remain internationally competitive. In Japan, large corporations have started to dismantle the post-war practice of providing lifetime employment, one of Japan's most distinctive social institutions, in order to adapt to the pressures of globalization. In South Korea, labour unions have taken to the streets to protest the government's relaxation of firing restrictions. And Latin America countries are competing with each other to liberalize trade, deregulate their economies, and privatize public enterprises.

Efforts by developed countries in North America and Europe to "harmonize" labour standards are motivated only in part by the fear in developed countries of losing jobs to workers earning much less in developing countries. International labour standards have become a point of contention in trade disputes not only for economic reasons, but also because low wages and weak safety standards abroad violate the human rights of workers. The US and others are finding it increasingly difficult to negotiate worker protections for the charters of multinational institutions like the World Trade Organization. The failure of the WTO meeting in Seattle in December, 1999, was more the result of this policy straight-jacket than of the violent protests in the streets.

Disagreements also are rising over the environmental consequences of globalization. Because pollution is generated most often by industrialization, the countries that are soon becoming the most industrialized, like China, Brazil, and India, are the likeliest sources of future global pollution. They are unlikely to throttle back their industrial plans in order to protect the environment, as some in the US and Europe have suggested. That would raise their costs and erase their comparative advantage. Arguments in Kyoto at the December, 1997 Summit on Global Climate Change vividly illustrated the political tensions wrought by globalization, as has the abrogation of the Kyoto accords by the US administration recently.

Fragmented safety nets

The "invisible hand" of the market is acceptable to most people only if the losers from market forces are compensated by the winners. A central function of government has been to assist in this transfer by helping the losers to adjust to change - usually by means of unemployment compensation, severance payments, and adjustment assistance. In essence, governments have used their fiscal powers to insulate domestic groups from excessive market risks, particularly those originating in international transactions. This is the way governments have maintained domestic political support for liberalizing trade and finance throughout the post-war period.

But recently, the idea of giving support to the losers has come under withering attack. Employers no longer grant job security, partly for competitive reasons and also because they are more mobile and less dependent on the goodwill of local work forces. Governments are less able to help the losers because the slightest hint of raising taxes leads to capital flight in a world of heightened financial mobility. Moreover, the ideological onslaught against the welfare state has paralysed many governments and made them unable to respond to the domestic needs of a more internationally competitive economy.

Accordingly, at the very time increased integration into the world economy has raised the need of governments to redistribute tax revenues or implement generous social programmes in order to protect the vast majority of the population that remains internationally immobile, governments find themselves less able to raise taxes. The heightened mobility of financial capital has led to competition among nations to attract foreign investment, and a key tool of competition is to offer a relatively low-tax environment. Tax competition, in turn, threatens to undermine the individual and corporate income taxes. The US and other affluent countries have responded, first, by shifting the tax burden from (mobile) capital to (less mobile) labour, and second, when further increased taxation of labour becomes politically and economically difficult, by cutting the social safety net. This is bound to jeopardize social stability. Even governments with significant budget surpluses, like the United States until the aftermath of September 11, seem unwilling to protect the weak against the cruelties of the market.

Where should power reside?

Into whose hands are the powers to set society's goals being delivered as the forces of globalization continue to expand? Virtually everyone concedes that markets are a useful instrument for implementing certain goals. As mechanisms for delivering goods and services to the people at the lowest possible prices, they have yet to meet their match.

But unfettered markets may not be the best instrument for setting the goals of society or for implementing many others. Unregulated markets often lead to spoiled environments. Nor do markets provide for the national or collective defence. They will not eliminate the scourge of unemployment. They rarely distribute income and wealth in accord with most people's conception of fairness. And they're not usually designed to protect other cultural values. Markets don't care for fairness or community, but only for efficiency.

Who, then, ought to set society's goals? How are today's globalizing communities and nations governed? To what extent do their governance structures hold decision-making powers accountable for the consequences of their decision? The answer to these questions is rather different according to one's allegiance to one of three schools of thought.

The Washington consensus

This widely held point of view finds its leadership in the business community, the economics profession, and the IMF, the World Bank, and the World Trade Organization. The Washington consensus supports a "top-down" structure of global economic governance when crises occur, as during the debt crisis of the 1980s and more recently during the Asian, Russian, Brazilian and Argentine currency crises. Perhaps the best illustration of this has been the habit of these institutions to offer various kinds of debt relief, but only if the indebted countries agreed to adopt some combination of "stabilization" and "structural adjustment" policies that sharply reduce government services, free economies of regulation and encourage exporting and direct investment. Members of this consensus applaud the growing power of market institutions and the weakening of governments, and favour strengthening key multilateral institutions like the IMF and the WTO. Governments still have important roles to play, especially as providers of a legal framework, education, and stable fiscal and financial policies, but their importance is downplayed. Because this group says little about non-economic goals, it leaves the impression that it favours policies that place economic growth and trade above other human values.²

The Washington consensus has exerted enormous influence on the processes of change reflected in the global economic trends noted above. These trends strongly imply a heightened concentration of economic power in the world, centred especially in large transnational enterprises, a weakening of the countervailing forces of governments and civil societies, and quite probably a further separation of decision-making powers from public accountability for their consequences. Who sets society's goals in a world dominated by the Washington consensus? It is still a pluralistic world involving enterprises, governments, and civil societies. But the balance of these forces seems now to have shifted in favour of businesses, whose interests are vastly more focused on economic returns than on the health of people and their communities.

The human development consensus

This school of thought is best represented by Unicef and the UN development programme. It differs from the Washington consensus primarily by its readiness to highlight the ill effects on human and community life of many globalizing processes. It is blunt about the fact that "market friendly" development strategies usually produce losers as well as winners, and that social cohesion easily is lost when societies fail to find ways to assist the losers with retraining, relocation, and/or income transfers. It rues the growing gap between rich and poor. The human development consensus also has focused attention on the wastefulness of military expenditures and the human destruction wrought by the structural adjustment policies of the IMF and the World Bank.³

The human development consensus thinks that an economic system can remain viable over time only so long as responsible governance structures establish mechanisms to counter the abuses of market or state power and the consequent erosion of society's natural, social, and moral capital. This suggests that it believes in a form of democratic pluralism not unlike the framework that guided the economic boom of western nations after the second world war and resulted in the broad sharing of development benefits throughout their societies. Thus it supports a process of goal-setting that actively seeks the involvement of all parts of society, including the civil society. Even so, it shares with the Washington consensus a belief in economic growth through free and open markets, and therefore it too is hostage to economic power arrangements that produce outcomes especially favourable to business.

The people-centred consensus

This school of thought finds its leadership in various citizen alliances, such as the International Forum on Globalization, the People-Centred Development Forum, Focus on the Global South, and the International Group for Grassroots Initiatives, rather than any official governance structure. It is deeply rooted in the institutions of civil society, including some church organizations. While the people-centred consensus acknowledges necessary roles for markets and governments, it insists that the people must take precedence over the interests of either the corporation or the state. It therefore stands in opposition to the patterns of globalization that concentrate economic power in the hands of transnational corporations beyond the reach of public accountability.

Adherents of the people-centred consensus favour economic and political de-centralization, so that people retain the rights to organize and to participate in the decisions that affect them. In order to achieve this goal, they prefer greater community self-reliance - a drawing back from the deepening entanglements of globalization, not to the exclusion of specialization and trade, but with greater effort to nurture and control the use of local resources. Because the people-centred consensus regards the limits of the earth's finite ecosystem as more constraining than the other schools of thought, it also places greater emphasis on a means of livelihood adequate to assure every person's basic needs. Frugality for the well-off is a sine qua non of this point of view.⁴

The people-centred consensus draws strength also from the indigenous communities of developing countries, which resist the westernization of their culture. Their religious roots cause them to perceive their society's goals differently than, say, the elites who have allied themselves with the agents of globalization. For many of them, it is the dignity and sustenance of individual human beings that matters more than growth or even development of the local economy.

Members of these communities wonder too if the free-market paradigm of the Washington consensus is not an indirect method of organizing social and political relations and structures in society as well as a means of ordering the economy. It is not enough to have "friendly" economic markets and "socially concerned" business leaders. A society needs a healthy civil society first, lest the economic system be allowed to disrupt harmonious human relationships.

Thus, the kind of democratic pluralism preferred by the people-centred consensus probably implies markets with a significant degree of regulation, and trade policies that link national economies to one another within a framework of rules that maintains domestic competition and favours domestic enterprise employing local workers meeting local standards, paying local taxes, and functioning within a well-developed system of democratic governance. Foreign competition is not excluded; it simply does not share the preferred status of locally owned businesses that are rooted in place and serve the community in many ways that imported goods and foot-loose investors cannot.

Theological and ethical considerations

Globalization is not a new concept to the church. It is first prefigured in the Bible by the creation stories. What God has made is a unity; all belongs together. That creation is to be tended, protected and nurtured by its human participants who have unique creation responsibilities because of uniquely bearing the image of the Creator. That responsibility involves caring for both "the garden" - the environment itself - and the relationships of the created beings. In the unfolding of the biblical message, a sense of the goodness of community extends to include ultimately all the earth's people and all future generations.

Thus the moral test of today's globalizing economy is whether it serves adequately the human enterprise and the larger creation. Few would doubt that international exchange has made life easier, more pleasant and more interesting for those with the resources to participate. But huge segments of the world's population do not have such resources; worse yet, many are further impoverished by the ordinary functioning of the globalized economy.

Community is not encouraged by a competitive market system - even less so by its globalized version. Calls for free trade and free movements of capital, untouched by community constraints, are calls for individual, not community values. This insistence on social and moral autonomy has caused critics in the church to denounce "the market society in whose logic God's grace and God's justice cannot appear."⁵ To acknowledge a sphere of life from which moral scrutiny is excluded is to abridge God's sovereignty and create an absolute that rivals God. Biblical faith acknowledges no such rival.

An economic system in which business profits and high consumption in one society are based on exploitative relationships elsewhere runs headlong into a basic biblical concern. The ability to manipulate people and to play God through money was vehemently condemned by the prophets: "I will not revoke the punishment; because they sell the righteous for silver, and the needy for a pair of shoes." (Amos 2:6) Such words still have a prophetic ring in a time when producers of apparel and sneakers search the world over for a labour force that will work for a few pennies less in the drive to cut costs while protecting market share and profits.

Nor can the pain of heavily indebted poor countries be easily dismissed by Christians guided by the biblical witness. In recent years, governments and banks have offered some relief. Still, in dozens of cases, the remaining debt cannot be paid, or it can be paid only by imposing enormous human suffering. The biblical message is unambiguous. In the seventh year or the 49th year - "the year of the Lord" - there was to be a time of jubilee. Debts were to be cancelled, family land returned, and the impressed and oppressed set free. (Lev 25; Lk 4.18-19) There is debate about whether the law of jubilee was ever formally administered in the life of Israel. Nevertheless, the principle is clear. No economic decision or arrangement must be allowed to impoverish permanently; it must not make the future hopeless. Within history, periodic corrections are to be made that will re-establish right economic relationships and restore freedom, opportunity and hope. Such a principle has profound implications for the prophetic role of the church in today's global society.

The principle of jubilee is a reminder that biblical faith accords absolute status to no economic system. Nor does it sanction untended economic mechanisms. The biblical tradition assumes that an economy is subject to moral guidance and regular correction. That is no less true of complex international economic relations than of exchanges between individuals.

Facing such realities, the church need not pretend technical competence it does not uniquely possess. It can and should, however, engage in moral analysis of laws and economic proposals, denounce morally unacceptable economic outcomes, name the sin that is causing pain, and insist that more humane policies be sought and implemented. That is an authentic prophetic task of the community of faith in economic life - whether the market is local, national or global.

Policies for justice in a globalizing world

The growth of the world economy could be a great advance for humankind. It could be the beginning of a many-centred world, in which different cultures and regimes could interact and cooperate without domination or war. But that is not the world that is arising around us in the vain attempt by proponents of the Washington consensus to build a globally free market.

In a world in which market forces are subject to no overall constraint or regulation, justice and peace are continually at risk. Unregulated capitalism degrades the environment and kindles conflict over natural resources. It enriches the educated elites and owners of capital, often at the expense of less able and less mobile populations. By promoting minimal government intervention in the economy, it neglects those in greatest need. And in expanding parts of the world, it locks nation-states into competition not only for markets but for survival. The global market as it is presently organized forces nations to become rivals for resources while creating weak methods for conserving them.

History confirms that free markets are inherently volatile institutions, prone to speculative booms and busts. Overshooting, especially in financial markets, is their normal condition. The recent Implosion of the tech stock bubble is just the latest example. To work well, free markets need not only regulation, but active management. During much of the post-war era, world markets were kept stable by national governments and by a regime of international cooperation. Only lately has a much earlier Idea been revived and made into an orthodoxy - the Idea adopted by the Washington consensus that, provided there are clear and well-enforced rules of the game, free markets can be self-regulating because they embody the rational expectations that participants form about the future.

On the contrary, since markets are themselves shaped by human expectations, their behaviour cannot be rationally predicted. The forces that drive markets are not mechanical processes of cause and effect, as assumed in most of economic theory. They are what George Soros has termed "reflexive interactions." Because markets are governed by highly combustible interactions among beliefs, they cannot be self-regulating.

Thoughtful people have a right to be alarmed by the evidence that freer markets are unstable and that all people are not prospering from their spread. Whole communities, whole regions, whole nations are being marginalized by the inexorable forces of change brought on by economic integration. Poverty is rising, almost everywhere. Yet the power of governments to alleviate the suffering of those who are losing out is slipping away from them.

One evidence of this is that an appropriate balance is not being struck between the economic and non-economic aspirations of human beings and their communities. Indeed, the evidence is mounting that globalization's trajectory can easily lead to social disintegration - to the splitting apart of nations along lines of economic status, mobility, region, or social norms. Globalization not only exacerbates tensions among groups; it also reduces the willingness of internationally mobile groups to cooperate with others in resolving disagreements and conflicts.

What, then, can be done to share the benefits of globalization more widely and to ameliorate its social consequences? The answer to this question is not to disengage altogether from the processes of globalization. That would be foolish as well as impossible. Many of the underlying changes that have occurred in the global economy are now irreversible. Rather, the question is how to engineer a new balance between market and society - a balance that will require greater human control over the processes of change and the sharing of its fruit.

The following recommendations are meant to help strike such a balance. They do not conform precisely to proposals generated by either the human development consensus or the people-centred consensus, yet they draw from both groups. Nor do they represent a comprehensive blueprint for reform, which surely would include far more radical changes in the institutions of business, government and daily living than proposed here.

Things that governments should do

Reform begins with a rehabilitation of the modern state

In Liberia, Albania, Afghanistan, Tajikstan, Colombia, Siberia, Chechnya, and Somalia, the threat to peace and economic progress does not come from tyrannous or expansionist states. It comes from the absence of effective government of any kind. The Washington consensus neglects the many ways unregulated world markets threaten cohesion of society and stability in governments. The World Bank's recent repudiation of the dogma of minimal government is welcome; but it falls far short of the need to provide the institutions necessary to assure security from destitution, unemployment and exclusion.

Develop a regulatory framework for coexistence and cooperation among the world's diverse economies

As it is presently organized, global capitalism is supremely ill-suited to cope with the risks of geo-political conflict that are endemic in a world of worsening scarcities. If today's laissez-faire regime is not reformed, it is likely to fracture and fragment as mounting scarcities of resources and conflicts of interest among the world's great powers make international cooperation even more difficult. Free markets are creatures of strong governments and cannot exist very long without them.

More efficient and generous systems of social insurance

They would allow losers to secure more of the benefits of international economic integration and suffer less of its social costs. Indeed, the social welfare state is the flip side of the open economy; the more exposed is the economy to external shocks, the more certainly it will need a generous system of income transfers. Any movement towards freer trade and capital movements should be accompanied by more generous adjustment assistance policies, including unemployment benefits and retraining and relocation subsidies.

Taxation of footloose capital movements

Generous and appropriate systems of social insurance must be financed in some way. If national sources of taxation are no longer adequate to this task, then it may well be time to consider taxation of footloose factors at the global level, with revenue sharing among nations. The most radical reform would involve outright restrictions on speculative capital transfers, with all their potential for abuse and corruption. A more moderate reform might include measures designed to regulate the timing of capital transfers or ones that increase the cost of speculative transactions. Similarly, a uniform tax might be imposed on inter-currency transactions, eg, the "Tobin Tax."⁶ More exchange of information among tax authorities would be another step in the right direction. Better still, an international convention to restrict the ability of transnational firms to avoid taxation should be negotiated.

Global safeguards

A new system of global safeguards also is required to accommodate important differences in the social, political and cultural preferences of nations. Multilateral institutions like the WTO should permit selective disengagement from the discipline of multilateral treaties, under well-specified contingencies, when countries need breathing room to satisfy domestic requirements that are in conflict with trade policies, eg, to assist labour reallocation or to protect the environment. Similar provisions should be made in treaties governing foreign direct and portfolio investment..

Reform IMF and World Bank conditional lending policies

These multilateral agencies should replace bankrupt structural adjustment efforts with policies and programmes that more adequately meet the needs of the poor and promote sustainable, participatory, and equitable development. Among the conditions that should be included in loan agreements are:

• reduction of inappropriate levels of military spending
• preservation of spending on basic needs, including education and health care
• assurance of a safety net for those most severely affected by adjustment policies
• prevention of adverse environmental effects such as
• deforestation and soil degradation
• a system for monitoring and correcting (as may be necessary) the effects of adjustment policies

These agencies also must be more accountable to the people affected by their policies and projects through increased transparency, greater access to information, and greater participation in the development of projects, programmes, and policies.

What churches could do

Redouble individual efforts to support self-determination

As individual Christians and their congregations contemplate development of covenant relationships with particular non-governmental organizations or communities abroad, they should seek to support those whose projects are designed by the local community and controlled by its people. By the same token, individual Christians who hold stock in US domiciled transnational corporations should hold their companies accountable for conduct contrary to just and sustainable human development.

Encourage partnership relationships with local communities

All agents of development assistance, including USAID and the multilateral assistance groups, should be urged by churches to establish healthier partnership relations with local communities. The international mission programmes of most mainline churches understand that partnership involves mutuality and cooperation and aims at increased self-reliance with respect to essential needs. Self-reliance comes through broad-based local ownership and control of productive resources, land reform (as necessary), and encouragement of sustainable agricultural and locally-based business enterprises.

Support legislation that helps end sweatshops

The garment and textile industries are rank with labour exploitation, here and abroad. There is widespread non-compliance with labour, health, and safety laws, as well as stubborn unwillingness by many large retailers to adequately monitor labour practices by the contractors with whom they do business. Churches can help improve the lot of sweatshop workers by supporting local, state, and national legislation to regulate sweatshop practices.

Support programmes that forgive the unsustainable debts of impoverished nations

Recently the joint IMF-World Bank initiative for heavily indebted poor countries (HIPCs) was launched to much fanfare. Its terms and conditions expect applicants to demonstrate "good policy track records" - a euphemism for policies deemed appropriate by these agencies. Efforts to balance economic goals with other societal objectives are conspicuously absent from HIPC legislation. Recently, a forgiveness initiative for bilateral debts, along the lines of Jubilee 2000, has been announced by several creditor nations. Churches should study forgiveness initiatives and their members should let their representatives know their views on them.

Redouble individual efforts to live frugally and generously

Christians must lead the way to a basic re-conception of the "good life," one that is less materialistic and more frugal. The good life finds fulfilment in a genuinely caring and mutually supportive community in Christ, and through faithful responses to God's call to restore creation and discover the contemporary meaning of doing justice, loving kindness, and walking humbly with our God (Micah 6:8 NRSV).

Questions for discussion

1. How have the linkages or interconnections of the globalization process impacted your life? On balance, do you regard them as advantages or disadvantages for a healthy Christian life?
2. Most people agree that markets are a useful instrument for implementing society's goals. But should they be allowed to set the goals for society? Assess the strengths and weaknesses of how the Washington consensus, the human development consensus, and the people-centred consensus set the goals of society. Which accords best with your understanding of how Christians should establish priorities for the goals of community?
3. Is it too late to expect justice in a globalizing world? Since much of the direction the global economy has taken is irreversible, how can a balance between market and society be negotiated? How might Christians play a role in those negotiations?
4. The President's recent National Security Strategy document argues that American political domination is in the best interests of everyone, assuring global order and allowing for the safe development of global capitalism. How should thoughtful Christians respond to this assertion?

Want to know more?

See the fascinating debate in Foreign Policy, Fall, 1999, "Duelling Globalizations: A Debate Between Thomas Friedman and Ignacio Ramonet," pp. 110-127. Friedman, a foreign affairs columnist for the New York Times, also wrote The Lexus and the Olive Tree (New York: Farrar, Straus, and Giroux, 1999). William Greider argues for more managed globalization in One World Ready or Not: The Manic Logic of Global Capitalism (New York: Simon & Schuster, 1997). In his book, The Post-Corporate World: Life After Capitalism (San Francisco: Barrett-Koehler, 1999), David Korten stipulates that corporate capitalism could unravel the cohesion of society. See also "The Face of Globalism," a special insert in the Summer 2001 issue of The American Prospect. Refraining from taking sides, Dani Rodrik re-examines some of the faulty assumptions made on both sides of the globalization debate in "Sense and Nonsense in the Globalization Debate", Foreign Policy, Summer, 1997. The most comprehensive proposal based on the people-centred consensus Is the report of The International Forum on Globalization, Alternatives to Economic Globalization: A Better World Is Possible (San Francisco: Barrett-Koehler, 2002). For more about the roles of civil society and nongovernmental organizations, see "The Third Force: Civil Society's Challenge to Corporations and Governments", World Watch, Nov-Dec, 1999. For an explicitly Christian approach, see Progressive Christians Uniting, Progressive Christians Speak (Louisville: Westminster/John Knox Press, 2003)

Notes