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AFRO-NETS> Whither the World? (2)
- Subject: AFRO-NETS> Whither the World? (2)
- From: George Kent <email@example.com>
- Date: Fri, 20 Apr 2001 12:51:25 -0400 (EDT)
Whither the World? (2)
...Hence, market and religious fundamentalism are currently the two
most powerful world religions.
The following piece was published recently in Dr Majid's (Toda's)
Peace and Policy Journal:
University of Hawai'i
June 15, 2000
Many people believe that when rapid economic growth and other good
things happen in the global marketplace, it is because of the effec-
tive functioning of the free market. When bad things happen, such as
steadily widening gaps between rich and poor, it is because of market
failures, aberrations, and the foolishness of those who interfere
with the workings of the free market. Robert Paarlberg's recent essay
on The Global Food Fight and C. Ford Runge and Benjamin Senauer's
piece on A Removable Feast (in Foreign Affairs, May/June 2000) fit
the mold nicely. Their analyses are driven more by prior beliefs, by
faith, than by serious assessment of what is going on in the real
world. They display ideology or theology, not science.
The international trading system is not managed directly by a supra-
national government, but it is greatly influenced by nations with
enormous economic power, such as the United States, Japan, and Ger-
many, sometimes directly, and sometimes through international agen-
cies. Their heavy influence makes the global trading system an unfree
Adjustments such as reducing tariffs and other barriers to trade will
not create a system in which the trading partners are of approxi-
mately equal power, drawing more or less equal benefit from engage-
ment in a neutral market. Great disparities will remain, and the
global market will continue to be sharply tilted in favor of the pow-
To describe the global marketplace we need to look not to the imagin-
ings of neoclassical economics but to the realities of the world po-
litical economy, as lived. It is a political economy, heavily influ-
enced by power. The single most important feature of the global econ-
omy is the large and steadily increasing gap between rich and poor.
Gaps widen steadily because the players have very different levels of
power. When they trade, the more powerful have greater influence in
determining the terms of trade.
It is reasonable to assume that in every transaction, both trading
parties benefit. We know that because each party could have turned
down the deal. But the important thing from the point of view of po-
litical economy is that the benefits are not distributed equally. The
stronger party gets a larger share of the benefits. This means that
in the real world trading leads inexorably to a steadily widening gap
between the strong and the weak. It does not lead to a happy conver-
gence somewhere in the middle range.
Both the rich and the poor benefit, but the rich benefit more rap-
idly. Now add in the effects of inflation, which is almost always
higher in poor countries than in rich countries. Even though both
parties may appear to benefit in the short term, with inflation doing
its work, often the poor do in fact get poorer while the rich get
The market does not benefit everyone equally; it is strongly biased
in favor of the rich. What the poor need is not simply trade, but
trade on favorable terms. When their bargaining power is meager, they
get unfavorable terms. They are price takers, not price makers. Thus,
poor countries committed to exporting basic commodities regularly
suffer because they receive low prices for their products, but they
must pay high prices for their imports, including the factors needed
for producing their exports. Similarly, farmers in poor countries
regularly get paid less for their products than producers in rich
countries get for the same products.
The skew resulting from power differentials is most clearly evident
in the price of labor. If we had a free market globally, people eve-
rywhere would get equal pay for equal work, and there would be free
migration of workers. Instead, we have a system that appears to be
determined to maintain great wage differentials, since the willing-
ness of the poor to work cheap is of very direct benefit to the rich.
The realities of the global political economy do not fit the precon-
ceived model of idealized free markets, so reality tends to be dis-
missed as a temporary aberration resulting from failure to conform to
free market principles. However, power differences will not disappear
as a result of quasi-religious incantations in praise of free mar-
kets. There is not a level playing field in world markets, and we
should not pretend there is one.
Professor George Kent
Department of Political Science
University of Hawai'i
Honolulu, Hawai'i 96822
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