Globalisation and the Level Playing Field, Reconciling the Geometry

 

by Earl Mardle earl.mardle@kn.com.au

What is Globalisation?

Globalisation is not a strategy, nor is it a practice or a process. Globalisation is a perception, an act of very substantial imagination. Even today, there is nowhere we can stand from which to experience “The World”. At best we could stand on the moon and see half of it, and the detail would be minimal. The world, globalisation, is a mental construct, and a vastly more difficult place to do business than we have been led to believe.

Canadian Academic Northrop Fry said that the biggest problem for post-colonial authors, is that the question “Who am I?” slides inexorably into the absurdity of “Where is here?” For the global entity the answer to that question is the even more absurd, “Everywhere is here”. This presentation is about dealing with the realities of Everywhere, being Here.

I have heard a number of speakers refer to the different kinds of globalisation. There is, they say, economic or social, political or environmental globalisation. I suggest that they are telling only half the story. There are different kinds of globalisation in the same way as there are different kinds of pregnancy. You cannot be partially, intermittently or occasionally global.

The problem that most of us have is that we identify ourselves with a specific place. That gives us a centre, which implies a periphery. There is here, and somewhere else. I call this “Level Playing Field Thinking”. It is two dimensional, bounded in space and time, it has an edge and a middle. It is a workable approach for a local business and wholly at odds with any notion of globalisation which is 4 dimensional, unbounded in space and time, with no periphery, and no centre.

To feel comfortable as a global entity, its members must work within a kind of Globalism Uncertainty Principle which states roughly that, if you know who you are, you cannot be sure of where you are. If you know where you are, you cannot know exactly who you are and if you know both who and where you are for certain, you are simply not a global enterprise.

In deciding to become a global enterprise, any business is taking a huge step into the uncertain. Everywhere else is not like here, everyone else is not “just like us” but in different languages. There is no MBA process that will enable you to become a global organisation.

Introduction

Globalisation is at a turning point. Most of the easy gains have been made and the success stories are being balanced by failures that are exciting criticism and opposition from many quarters. As with any radical revision of human relations, the initial promise was overblown, the downsides minimised and the reality is likely to be more mundane than the prospectus painted.

The thesis has been offered, the antithesis is being written and we now must synthesise. I want to propose some ideas that will support that synthesis but I will first be critical of the premise, the promise, the process and the outcomes of Globalisation. This process is not only about business, it will decide whether or not life on this planet is worth living.

I believe nevertheless that we have no option but to carry the process through and that, with a global, ethical perspective, it can be reformed to meet the criticisms and fulfil its potential. Some ideas for that process will be the aim of the second part of this paper.

The Promise

The promise of Globalisation is that the whole world can achieve standards of living similar to those enjoyed by post-industrial, capitalist western economies. This has been the implicit and sometimes explicit objective of the WTO[1], the World Bank, the IMF[2] and the WEF[3] among others

The Process and the Consequences

Although rarely completely stated, to achieve this outcome:

n        the poorest economies will have to grow faster than the wealthy ones in order to catch up,

n        the tools of capital investment, market and legal reform must produce greater wealth for recipients than for their investors.

This outcome will probably mean that:

n        the consequent reduced advantage will be unacceptable to the current beneficiaries

n        the environmental costs of raising global consumption levels will be prohibitive.

Furthermore, to standardise the global economy on a single model is both ecologically irresponsible[4] and practically unachievable.

The Mechanism

The proponents of Globalisation state that free trade across borders on a “Level Playing Field” is a necessary condition for success. This sporting metaphor assumes that all participants are equally equipped, resourced, trained and experienced and that it is therefore appropriate, in fact “fair” to demand that all participants meet and be bound by the conditions acceptable to the most able players. Another assumption is that each participant will be able to benefit from their assumed unique “comparative advantage”.

Problems With The Promise

It Isn’t Working

The crucial criticism of Globalisation is that it doesn’t deliver. If this is true we must wonder whether the reason is that its proponents ever intended that it should, or that its process is inadequate. In either case, to reconcile its objectives with its outcomes it needs to be reformed.

Proof that Globalisation is not working so far can be found in a number of significant statistics. After 20 years of Globalisation we should see reduced poverty in all participating nations and better stewardship of the human and material resources needed to generate wealth. Instead of which the statistics now strongly indicate that the poor are getting very poor and the comfortably off are losing ground.

The Poor Are Getting Poorer [5]

The income gap between the world’s richest 20% and the poorest 20% increased from 30:1 in 1960 to 74:1 in 1997. For 59 countries, mainly in sub-Saharan Africa and the countries of the former Eastern Bloc, GNP per capita declined from 1980-96.

20% of the world’s people have 86% of world GDP, 82% of world export markets, 68% of foreign direct investments and 74% of telephone lines: the bottom 20% has about one per cent in each sector. This is entirely at odds with the premise and the promise of Globalisation

Even in America

After 10 years of economic growth the majority of US workers are making less in inflation-adjusted dollars, than they made in 1973. [6] In large companies, some employees earn $1 for every $416 paid to the CEO. In 1940, it was $1 for every $12. The financial wealth of the top 1% of households exceeds the combined wealth of the bottom 95%. I don’t know about you, but when I start talking about the bottom 95%”, I begin to get very uncomfortable.

All Work No Play

The reduced standards of living are not only in financial terms. Al Gore’s presidential campaign rhetoric about "hard-working middle-class families" pointed to a central fact of American life: most of the nation's 72 million families feel overworked and under paid. Rising working hours are the cause. From 1989 through 1998, middle- income families added 3.4 weeks to their work year.[7]

The problem is so bad that Fire-fighters in Connecticut recently challenged the constitutionality of mandatory overtime, arguing that it violated the 13th Amendment ban on slavery. New laws being proposed will increase rather than decrease worker liability to unpaid, compulsory overtime.

A Nightmare for Developing Countries

The blame is now falling squarely on flaws in the process itself. A United Nations study on the protection of human rights[8] has labelled the World Trade Organisation (WTO), a 'nightmare' for developing countries, saying that its 'open trading' rules are based 'on grossly unfair and prejudiced' assumptions. The report says that rules of the WTO 'serve only to promote dominant corporatist interests that already monopolise international trade'. It will find many ready ears.

Supreme Court Justice Louis Brandeis wrote: "We can have a democratic society or we can have the concentration of great wealth in the hands of the few. We cannot have both." The US is well down the second track. The rest of the world is close behind and the potential impact on Globalisation strategies will be important.

It is Unsustainable

A second major area of the current unworkability of Globalisation is that of economic and resource sustainability. Western Fuels Association General Manager and CEO Fred Palmer recently said,[9] “There's a correlation between our energy consumption and our success. We succeed in the United States because of energy consumption.” There is little doubt that the US and similar economies are very dependent on cheap energy, although it is not always put quite as blatantly as Mr. Palmer states it.

The current oil crisis is a direct effect of Globalisation [10] which has both increased demand for oil and reduced investment in capacity development.[11] In 1990 the oil business had 20% over-capacity. That has now gone and the economic effects of increasing demand and static supply are affecting global businesses. The energy issue shows that the numbers are too big for the promise. Total annual energy consumption is about 10 trillion watts. The "business as usual" projection for the next 100 years means energy demand will increase 400% to 30 or 40 trillion watts.

To illustrate the point, if we assume that growing global prosperity enables its beneficiaries to use just one extra cup of oil products per day. The increased daily requirement for oil would grow approximately as follows.

1 Billion people 1,572,452 Barrels/day
3 Billion people 4,717,357 Barrels/day
6 Billion people 9,434,715 Barrels/day

In the light of these figures, the recent proposed rise of 1 million barrels per day in oil production will not even cover 1/6th of the world’s population increasing oil use by a cupful a day. The effect of successful Globalisation in the current mould will place much higher demands on energy production and because of its linkage with the US dollar, drive global energy costs much higher.

While the US economy may be insulated from some of the cost driven effects on business, its global partners will not be. For a global business, serious challenges can come from disruption to any market. When nations can’t afford their oil, they very quickly turn nasty. Britain and Europe have shown how quickly social and political unrest can happen when a critical threshold in energy costs is reached.

The first major casualty of Globalisation may be the cheap-energy economy. The second casualty will be any process based on extending that model globally. In either case we will need to re-examine the proposition. While I don’t propose to deal with the ecological effects of escalating energy use, they should also be part of a rational Globalisation plan.

Problems With The Mechanism

The Wrong Metaphor

As I have suggested, the necessary condition of a globalised economy is assumed to be the healthy, vigorous one of the Level Playing Field. It presumes free and fair competition among equals. But the metaphor is flawed and its application is both inconsistent and biased. It takes no account of the issues of boundaries, unequal players, cheating, adequate rules, external interference and outmoded business practices. I will now look at each of these in turn.

Boundaries

A playing field is bounded both in space and time. Outside the playing area the rules of the game do not apply, reserves can be called into play and casualties can be cared for, treated, recuperate in safety and play again another day.

Under Globalisation, boundaries have no place by definition. As the process is currently played out there is no sanctuary, no-one is deemed to be out of play, anyone can be tackled anywhere, any time. This is not a description of field of fair play, it is a field of war and it is no way to extend and enhance the quality of life on the planet.

Unequal Players

The next problem is gross mismatches. The newest players are matched directly, without protection or support, against world champions who play very hard ball.

Cheats

The inequalities among players are further magnified by powerful governments applying state resources to ensure that ‘their’ teams are even better protected.

Overt Subsidies

American companies, including Boeing and General Motors, already avoid an estimated $4 billion a year in taxes by sheltering foreign sales in offshore shell companies. [12] The new US tax plan exempting certain kinds of foreign-earned profits from US taxes would increase these tax breaks alone for American companies to an estimated $6 billion annually.

The Cato[13] Institute estimates that the US Government provides corporations with $75 billion in direct subsidies and $60 billion in tax breaks. [14] The lean, mean corporate warrior is revealed as very flabby but safe from new players who are kept out of the market or quickly neutralised.

Hidden Subsidies

Those numbers are a trifle compared with the externalised costs of global corporations in terms of substandard wages and working conditions, worker health and safety, environmental damage and unsafe products. Estimates place the value of these subsidies around $10.7 trillion per year of which about $2.7 trillion is in US subsidies, about 5 times corporate profits. [15] These subsidies are invisible for the very reason that business is not obliged to account for them.

Rules

There are two problems with the rules of Globalisation. The first is that there seems to be an assumption that every kind of human interaction can be governed by a single set of simple rules and measured by only one scoreboard, money. The second is that the Level Playing Field metaphor assumes a contest governed by universally agreed rules. While acceptable rules might equalise the players, the 90’s has been a decade of de-regulation.

What rules have been written were created by existing players for their own protection. They insist on strong banking and contract law, but human rights and employment, public health, education and political legislation are highly optional, opening the way to exploitation. The clear message is, money matters, people don’t.

Since most of those affected are not consulted about these rules, an ethical issue arises very quickly. “Companies that move or relocate production capacity are in effect trading system quality and security for lower cost inputs. … The question ..is whether the corporate world should be willing to roll out or support an economic model when the differences between nations on matters that go to fundamental human rights are so great”[16]

A community is not a playing field from which the participants can walk away when they are finished. A brain surgeon who treated operations as a sport would be struck off, a teacher who tried to win against the students would be a failure and a business that goes to war with the world on which it depends for resources and customers is delusional.

The best games are in doubt till the last second. They are great dramas in which neither side deserved to lose and is honoured in defeat. The winner can take all because with the new season, the counters are reset to zero. There are no proposals to reset the Globalisation counters to zero, so the rules need to be far more complex and ethically based.

External Interference

When it comes to raw materials or primary production in which most of the world’s economies operate, the field is often tilted.

To facilitate development, European nations gave Caribbean ex colonies preferential access to their banana markets because it is better to trade with impoverished nations than simply to hand out aid. This practical response to a problem of poverty has been forbidden by the WTO at the instigation of the world’s largest banana producers with US government support, none of which organisations feels any responsibility to do anything about the original poverty.

To take another example, the economically disadvantaged Australian state of Tasmania spent millions to develop salmon farming and a local market for the product. Canada used the WTO to prise open the market which they did not help create and which they will now plunder at the cost of local jobs and investments.

When small nations do have strong competitive advantages they are regularly prevented from exercising those advantages by political interference. New Zealand and Australian lamb producers are more than able to compete on the Level Playing Field of meat production. US and European farmers used political power to protect them behind quotas and tariff barriers. Antipodean manufacturing industries however are forbidden from protecting the jobs of tens of thousands of poor, unskilled, usually women workers.

For a generation the wealthy and unscrupulous have hidden money in some 40 nations with relaxed banking laws, the better to avoid paying legitimate taxes in their home nations. Now that corporate taxes are so low in their home nations, avoidance is no longer worth it and there are efforts to close down these conveniently secretive banking operations, except for those in Switzerland and Belgium.

These examples demonstrate that powerful governments and vested interests work to ensure that the advantage remains with the already successful. If the objective of Globalisation is genuinely to reduce the inequalities between societies through trade, it is not happening.

A Cannibal Economy

The results of Globalisation so far show that there is an inherent inequality in the structure designed to prevent peripheral economies from catching up with the core economies. This is exactly the opposite of the promise. Where there is unequal wealth there is poverty and where there is poverty there are no consumers.

When we force a net profit from Globalisation “someone” makes a net loss. This parasitic recipe is born out by the figures from the UN and the World Bank. How close can we go to concentrating all value in one place before something breaks? Apart from the economic insanity, the ethics are unacceptable.

Eating the Customers

To extend the sporting metaphor, consider Tlatchli, played by the Aztec Indians. It was a combination of basketball, volleyball and soccer. Sometimes as part of religious ceremonies the losing team was sacrificed to the gods. In our current, outmoded business model, not only does the winner kill the loser, it eats the customers.

Competitive businesses become lean and efficient by downsizing and job exporting.[17] In effect, “If I fire your customers (my staff, who are consumers of your goods and services) faster than you fire my customers (your staff) I win” Eventually there is only one player in the market who has all the customers who haven’t been fired yet. [18] Which is why expansion has been so important. While you are decimating customers in one market, you can always move into new markets to consume the opposition and customers there. But once you have globalised, you have reached the end of this strategy. As more benefits are corralled by a few businesses, we will start to run out of the most precious commodity of all, customers.

Reality Check

The Airline Experiment

In the US, the only single economy big enough to test the theory, the field was leveled for air travel in the late 70’s. Deregulation of the airline business produced 51 new airlines, apparently vindicating the theory. However, in the same time, 50 of those new airlines have gone under. Of the preexisting group, several more have gone and there are predictions that in 5 years there will be only 2 or 3 airlines in the US.[19]

This process should nevertheless have benefited the aircraft manufacturers but Boeing is also essentially the only one left. The free trade in aircraft on the Level Playing Field has, as predicted by the WEF, produced one winner and no competition. The Level Playing Field has been tested in the best available arena and it has failed.

The China Card

Globalisation has operated on the basis that the world could rise to a western standard of living. But that is not a guarantee and other, perhaps unexpected forces are at work.

At the recent WEF meeting in Melbourne one of China's top business executives, [20] Shanghai Tang chairman David Tang, said trade liberalisation would enable Asia to devastate the labour markets of western countries. In his opinion the world should be concerned about coping with the impact of lower trade barriers to China in their own markets.

"China's going to completely devastate your whole labour force. They have labour costs 15 times, 30 times lower than America…the entire Seattle problem was because the unions realised that that's the threat," Tang said.

There is no proposal for Chinese incomes to rise significantly in the near future and erode their very competitive margin. As China continues to accept high levels of pollution and further agrarian aggregation drives 150 million surplus farmers into the cities to compete for industrial work with more millions from bankrupt government enterprises, the effect of opening the Global marketplace to China will be very important.

It will change some cosy assumptions about the markets for high value, high cost products and services created by businesses outside China. The human rights card is off the table so Chinese exports of products and working conditions will be hard to restrict and the underclass in all other countries will swell further with the loss of even more customers.

Backlash

The opposition to Globalisation I mentioned in the introduction is gathering pace and power and includes not only the disaffected and the morally outraged. The acknowledgment of failure comes from Globalisation’s most avid proponents.

An Early Warning

The WEF said in 1996, [21].

n        Globalisation is causing severe economic dislocation and social instability

n        Although productivity increases are supposed to produce more jobs and higher wages, technological change has eliminated more jobs than it has created

n        Globalisation leads to “winner take all situations; the winners win big, the losers lose even bigger

n        Globalisation tends to de-link the corporation from its employees, higher profits no longer mean job security or better wages.

n        Unless serious corrective action is taken soon, the backlash could turn into open political revolt that could destabilise western democracies.

These are the strongest supporters of Globalisation[22] and their predictions were spot on. The alarm was sounded 4 years ago. The only suggested solution so far is better education in the absent benefits of Globalisation. There is no point explaining the greater good to someone who is not benefiting from it. There has to be a trade, what is it? The failure manifests not only in protests at corporate gabfests but also in real violence to people and assets. There are many examples to illustrate this.

Panguna [23]

In 1964, copper ore was discovered at Panguna in Central Bougainville, Papua New Guinea, leading to the biggest open cut mine in the world. Mining company, CRA and the Australian and Papua New Guinean governments offered the mostly women landowners no participation. After MP Sir Paul Lapun fought on their behalf they eventually received 0.05% of the mine's revenue. In addition to the insulting financial return the mine polluted the Panguna river system destroying the fishery and food and cash crops were poisoned by airborne toxic mine chemicals. There was no compensation for these costs.

A 10 year civil war closed the mine. The people of Bougainville are no worse off than they were before the mine, unless we count poisoned water, depleted resource and 20,000 dead. Globalisation cannot afford resources at this price.

Zimbabwe

The “War Veterans” of Zimbabwe are portrayed as dumb thugs who occupy land they don’t own and kill or terrify the residents. The existing landowners are descended from Europeans who occupied land they didn’t own and killed, corralled or terrorized the original residents. The original owners received nothing. Now their descendants are taking back the land, by the same methods.

The market shakes its head because they don’t have the skills to run the farms as revenue earning units. In a few years they’ll be back to subsistence farming. The full equation however goes like this. After being kept in poverty, herded into city slums and forced to work as wage slaves if they are lucky, subsistence farming looks like a good deal.

This was not the Globalisation promise and the price of failure is very high. Look for more of this as more people in third world nations reach the point of absolutely nothing to lose.

The Oil Business

The most valuable commodity in the world today is oil. Nigeria is well supplied with the resource yet hundreds of Nigerians burn to death stealing it from pipelines because they live in grinding poverty. Venezuelans have voted in a strongly socialist government, in part because the majority of citizens gain no benefit from the nation’s oil wealth.

We have to ask, “If those sitting on valuable resources live in poverty, how valid is the process that manages it?

On the Streets

After 20 years of Globalisation, its opponents have found their voice and the vocabulary to fight back. In the US a new wave of students have had their consciences pricked by the human costs of their designer clothing and corporatised Universities. Organisations such as WRC, USAS and SEJ[24] have sprung up as their members realise that they are benefiting from the misery of others.

There is vandalism in Seattle, beatings at the WEF in Melbourne, panicky conciliation in Prague, trashed MacDonald’s in France. [25] There is a change in the tide[26]  and the diverse agendas of the coalition of left and right wing, environmental and social opponents will not be satisfied by piecemeal reforms.

They also have a wide and continuously available range of targets including the WEF, WTO, IMF and World Bank. These organisations attract increasingly energetic protest which casts globalisers as secretive, unresponsive and in ever greater need of armed protection. This opposition needs to be taken into account in a Globalisation plan. They are well informed, well co-ordinated and they are gathering power.

Economic Refugees

The worst hypocrisy of the Level Playing Field is that while goods, services, profits and dividends flow easily across borders, people may not. Britain, Europe, Australia and the US spend billions to protect themselves against Economic Refugees who want a better life and arrive in filthy ships or suffocating freight containers looking for economic benefit. In global terms they are looking for the exported wealth created in their own lands.

And why should they not? The Level Playing Field implicitly demands mobile work forces, a free market in wages and conditions as much as any other commercial freedom. If the agenda is to limit the benefits to certain geographically privileged populations it is unethical and needs reform.

The Mexican Solution [27]

Mexican President Vincente Fox set a cat among the pigeons in August when he suggested that a truly open business environment would remove the barriers to the flow of people across borders. US Politicians eventually “confirmed” that he meant, “when Mexican standards of living reach US standards, ‘in about 30 years’”. So the time frame is, benefits for the rich now while the poor wait a generation. Why would anyone support that process? Especially as current standards outside wealthy countries are falling, not rising.

An estimated 30 million illegal immigrants per year cross borders in search of a better life. Many are stigmatised as “Economic Refugees”. They are however, exactly the kind of people who are supposed to be in greatest demand. They are enterprising, take initiatives and risks. And in a global economy it doesn’t matter if governments wont allow human migration because Globalisation ensures that their working conditions can. There is a race to the bottom. It is happening largely out of sight and unmeasured by the tools of the marketplace and it has to stop.

Ethics

The biggest criticism of Globalisation is that it has no ethical basis for anything. It does not value what it can’t, or refuses to, measure and its stance in the face of uncomfortable evidence is denial and attacks on critics. There is a long list of businesses whose ethics are unacceptable and as long as their practices are glossed over or discounted, it will remain a potent issue. The responsibilities must be commensurate with the rewards.

A Lethal Asymmetry

The greatest loss of ethical high ground occurs in the distribution of products that damage the health of communities. The difference between the criminal and the legal too often comes down to a meaningless distinction.

White Powder Addicts

In the third world the dairy industry sold the image of the healthy, milk powder fed, baby. Millions of impoverished women paid money they couldn’t afford for a product they didn’t need, mixed it with contaminated water and fed it to their infants. Ethical business practice requires that they should have worked with the communities to ensure a ready supply of safe water. They did not.

The essential difference between illegal drugs and the tobacco and alcohol industries is that the last two are protected by law[28]. But these Global organisations all want the same thing. The consumers right to choose and a Level Playing Field..

In reforming the process of Globalisation these ethical double standards need to be dealt with.

We Can See the Bottom from Here

When the economic dislocation identified by the WEF occurs, the most disadvantaged victims become vulnerable to exploitation and, in the worst cases, slavery. A conservative estimate puts global slave worker numbers around 27 million and growing. [29]  Unlike the traditional form of slavery which treats people as chattels which are owned and to which the owner has an economic responsibility through his very substantial investment, modern slavery treats people as disposable consumables because the individual cost is low and quickly recovered. In this model the owner can keep maintenance to a minimum and when their economic benefit is wrung out they are simply discarded.

India’s low cost structure is underpinned by cheap food produced by bonded agricultural slave labour. Brazilian steel, sugar, rubber, cattle and timber industries use slave labour. Thailand’s tourism industry is underpinned by slave sex workers. The world’s garment industries exploit women who live so close to slavery that it barely matters.

The variety and low prices of the global economic miracle are paid for in human misery. When a business benefits from slavery or its near cousins, and most do, they either turn the blind eye or take action. Investors in global business have the most powerful tool of all, money.

If it can’t be used to benefit the most disadvantaged of our neighbours, it has no worthwhile function. As slavery and near slavery increases, if we have not reached the bottom, we can see it from here.

A Way Forward

We have an inequitable process creating exactly the opposite outcome to that originally proposed. If Globalisation is about taking the broad view let us do that. In the last 20 years we have rewritten the rules of trade and government regulation. All we are asking is that these rules be revised to account for their defects. The world is not governed by a shadowy elite interested in no more than its own enrichment, there is no conspiracy to drive people into poverty, sickness and environmental destitution, those are unpredicted outcomes of the process and we can fix it.

Fundamental to any society is an ethical perspective. Based on the available evidence, ethical reform of the process is the top level agenda. Then let us also revise the promise to a realistic target and align the power we give it to match its genuine potential outcomes. We need clearly to define progress in terms of quality of life not levels of consumption and measure that quality as part of the process.

Then we need to revise the rules to discourage the abuses and steer the process more effectively towards its stated objectives. Legislate for a real world full of flawed players, not the idealized teams of the Level Playing Field.

Revise the Premise

Consumption was the old name for tuberculosis. It is an illness, it should not be a business strategy. As cheap resources dry up we will need to replace consumption for its own sake with more sophisticated modes of commercial relations. We will have to assign the highest possible value to any resource and apply to it tests of sustainability, appropriateness, recoverability, pollution and other costs.

This will require paying vastly more attention to existing cultural and economic management practices than we have shown so far. Global enterprises find many cultures that are uniquely appropriate to their environment. We must learn to respect that relationship and not immediately prescribe more unnecessary consumption of resources. [30]

Revise the Rules

Fundamental to any process reform will be to ensure the market is the servant of human needs and not the human as servant of the market. If it doesn’t provide for family involvement, community participation, recreation, reflection and above all rest, we can fix it.

The second consideration is that we have to place the efficient and effective use of human and environmental resources above the efficient use of money.

As a tool it can be used to dispossess the disadvantaged, or prise open the doors behind which destructive decisions are made. When we devalue lives to preserve the value of the money, we have the wrong end of the stick. We can fix it.

Monitoring and enforcement will be difficult to negotiate and hard to implement. No-one said this would be easy. A democratic and transparent process would be a good start. Press for it.

Any suggestion for a solution needs to meet the objections raised by the WEF and we can be fairly sure that more of the same will not do.

Revise the Process

A genuine market is a self sustaining process in which all the players can create something of value to the others and enough supply competition that no-one has to impoverish themselves to buy the basics of life.

The real challenge of Globalisation is to find business models that continuously and progressively increase the number of potential customers and enrich them enough to become consumers of sustainable goods and services. Which is precisely the opposite of what is happening.

We should be finding ways for these new “markets” to:

n        Create the wealth needed to afford our products

n        Continue to participate in the market

n        Equalise the trade by selling their goods and services at a sufficient price to cover the costs of their participation.

We need prohibitions against resource depletion but the fundamental description for a fully functional market has been around for a long time and is still, nominally, the foundation for the process. In was first laid out in 1776, by Adam Smith [31]

He set some basic rules for the operation of the invisible hand of the market and here I compare them with the warnings from the WEF

n        WEF Warning
Globalisation leads to “winner take all situations; the winners win big, the losers lose even bigger
Adam Smith
Buyers and sellers must be individually too small to influence the market
Complete Information must be available to all participants and there can be no trade secrets

n        WEF Warning
Globalisation tends to de-link the corporation from its employees, Higher profits no longer mean job security or better wages.
Adam Smith
Investment capital must remain within national borders and trade between countries must be balanced

n        WEF Warning
Globalisation is causing severe economic dislocation and social instability
Adam Smith
Sellers must bear the full cost of the products they sell and pass them on in the sale price. (This includes the elimination of predatory subsidies and a full accounting for the environmental and social costs; the triple bottom line accounting.)
Investment capital must remain within national borders and trade between countries must be balanced.

n        WEF Warning
Although productivity increases are supposed to produce more jobs and higher wages, technological change has eliminated more jobs than it has created
Adam Smith
Savings must be invested in the creation of productive capital

These are not pious prescriptions for a better world, they are among the many conditions needed to enable the market to operate efficiently. They are no longer sufficient conditions, but they are essential. These simple rules don’t govern global trade and the results are increasing poverty, environmental degradation, financial instability and a dysfunctional marketplace.

Build Networks

We live in a complex, mercurial world that cannot be described by simplistic sports concepts. Globalisation will require levels of flexibility and sophistication that we have never had to make explicit before and that will mean real changes in our thinking processes, the kind needed to shift from scavenging to stewardship. Valuable tools in this process will be networking and partnerships.

This does not however, mean a marketing programme, an awareness campaign or even ethical trade focus groups. It does mean actual profit and power sharing partnerships with others everywhere. There is good evidence that networks of small and medium sized holdings can work effectively and to the mutual benefit of all participants. Most of these are regional but with effective communications there is no reason that global ones will not work at least as well.

When you become global you say goodbye to nationality and parochialism. There are no foreigners at the global level. Network thinking and action is essential to the sustainability of a globalised economy and the enterprises within it.

Look at the Model

The Internet is a very effective model for Globalisation. It is the first genuinely global entity that has never been anything else and it has some very powerful paradigms we can use in thinking about Globalisation. It is significant that some of the most effective users of the internet are the opponents of Globalisation. This is partly because networks have benefits not available to centralised organisations, however widely spread.

The Network model is n-dimensional. It can manage inputs from many sources simultaneously and propagate them quickly through the system. Above all it is adaptable and responsive to change.

Every link in the network has its own unique value and essential contribution to make. Every one of them can teach all of the others something they need to know to make the enterprise a success. It is a knowledge market. How do you gain access to that through your strategy? Certainly not while you take from the market more than you give.

Metcalfe’s Law

This law observes that the power of a network rises as the square of the number of connections. A global network of self directed participants with a common goal quickly becomes a force to be reckoned with, as long as each connection is of roughly equal strength.

The downside of Metcalfe is that the last few gains and the first few losses create the biggest changes. If Globalisation is almost done, the modifying the final few additions could have a much bigger effect than any that have gone before. If it begins to unravel, the first changes will be the biggest.

The other lesson of the Internet is that a network of a few very powerful nodes and many weak ones is exceptionally vulnerable. [32] Networks among equals are more powerful than master/ slave ones. If you don’t find equals, you have to build them.

Low Entry Costs

Information networks have prompted an unexpected and unpredictable flowering of innovation. The vital lesson of Napster [33]is that when a closed mechanism encounters an open mechanism, the latter has huge natural advantages and the former has to employ massive resources just to stay in the game.

The lower your partners’ entry costs the faster you can build a network and the more emphasis you can place on trustworthiness, energy, enthusiasm and local knowledge.

Co-operative Development

The network process is co-operation and collaboration. The Internet’s functionality was largely built and maintained by voluntary labour for mutual and collective benefit. The most effective tools were all created by consensus and co-operation. The irrationality of eCommerce is testimony to the waste and incompetence of competition in a collaborative environment. Globalising business needs to engage the former process, not the latter.

Learning Structures.

By distributing decision making and management processes while maintaining high value communications among agents, your network will teach itself, responding to new information quickly and effectively in terms appropriate to the local environment. The anti MAI [34] campaign is a perfect example of walking the walk. What has global business learned from this example?

The hacker mindset, Napster and its siblings are all responses to changes in the environment. Business needs these people and their thinking because what you learn today is being changed already and adaption is an essential survival mechanism.

The agency that develops on a global scale is the global organisation,[35] not any one part over another. Organisations with no centre develop more flexibly and inventively than centralised ones because they have more implicit wisdom.

Resistance to Force

The enormous computing and political power needed to control networked information flows is a measure of the power of the structure and the process. A full peer to peer global system will send the control costs ballistic. Peer to Peer might be a great idea for a global strategy.

Democracy

Open democratic processes are inherently inventive and development oriented. When high value information is allowed to flow and decisions are made transparently the highest value can be assigned to any resource. We have the networks, an ethical decision would be to use them.

A Global Economy in Action

There is already a powerful example of a peer to peer network in the global Chinese community.

The rules are something like this.

·         You have access to expertise, knowledge and global markets

·         Patronise community businesses.

·         Work long hard hours to achieve success.

·         Keep the fruits of your labours.

·         Offer help when it is requested by others in the community.

While we cannot elect ourselves into an ethnic network, we have the technology and the opportunity to develop and maintain multiple global networks based on almost any denominator you care to name.

Case Studies

These networks also already work successfully using distributed ownership and co-operation, shared resources, equal partnerships and collaborative processes.

Networks at Work

The furniture manufacturing networks of Emilia Romagna in Italy are centered on a producer owned association which provides warehouses, stockpiles, buying power and inventory control beyond the individual members’ means.

Danish Clothing manufacturers have networked to turn uncoordinated apparel lines into a uniformly tailored collection aimed at the German Market

Vermont Family Forests; sustainable woodlot farmers, portable sawmill contractors and hand crafted furniture manufacturers work together to disintermediate the broking costs and supply market needs directly.

VISA International is a global non-stock, for profit membership corporation owned by 23,000 member financial institutions. It is owned by its members in the form of perpetual, non-transferable rights which cannot be bought, traded or sold. It is a moderately successful way of doing global business.

They work anywhere

Through careful analysis of the value chain Appropriate Technology International (ATI) reorganises processes to add greater value at source and shift revenue upstream to the small-scale producers.

One of their many success stories is Anand Milk Producers Union which runs a modern dairy factory producing quality branded products to markets throughout India and is directly owned by rural women, some of whom have only one producing cow.

These networks create value through mutual benefit and ensure that the value remains equitably distributed throughout the chain.

Above all they enable the participation of the greatest number of potential consumers in that value chain and that is the foundation of the new promise of Globalisation, that we can all benefit through participation.

Any model that works for Indian milk producers and VISA International is clearly scalable and very effective.

Hope in the Pacific

A perfect example of the ideal marketplace at work comes from the rain forests of Fiji.

The custodians of forests of Mahogany and Kauri trees have been approached by global companies seeking high quality wood for their products. They need the wood because they have not managed previous timber sources sustainably.

The average price for this wood on the Japanese market is $1200 per cubic metre. The market offers about $10 per tree to the local Fijian agent, the tribe gets $1.20 per tree but the quantum for their useable wood still runs to hundreds of thousands of dollars. There are strong incentives for them to allow the strip mining of their forests.

Aside from the un-sustainability this pricing structure entails, the ethics are a disgrace.

The difference however, is knowledge. The community realised that more money than they have ever seen is nothing compared with what it will cost them to survive once the forest is gone. The difference between the sustainable poverty of today and the unsustainable poverty of tomorrow is that their forest resource remains intact. There is no contest.[36] Perhaps the buyer will offer better value now that it doesn’t have a monopoly on the information.

When the resource owners have access to the genuine value of their resource we fulfill the requirement for the marketplace to work effectively.

The trouble is that where there is equity, where there is equal knowledge, where there is a genuine market, no-one gets rich quickly and no-one gets excessively rich at all.

Call to Action

Inform Yourself

In the information age the only kind of ignorance is willful. We have the tools to discover the full costs and effects of our decisions and actions. There are books, periodicals, newspaper, websites, listservs and hundreds of global organisations dedicated to everything from children’s’ rights to ethical trade. In a Globalised enterprise, everything is your business. If you do not grasp the threats and opportunities presented by all the social, environmental and political issues surrounding you, you will be failing in your duty.

Inform Your Business

Make an understanding of the issues a mandatory part of your business practice. That means ensuring awareness among your colleagues, your shareholders and your business partners. It also means asking the hard questions of those with whom you do business. You cannot “outsource” your conscience to places where human rights are abused, environmental standards are ignored and corrupt palms are greased with your money.

The ethical environment is already changing. British business is just coming to terms with the incorporation of the European Convention on Human Rights into business law but at last count, 75% of British CEO’s knew nothing about the convention [37]. In the revised Globalisation that is dereliction of duty.

Inform Your Decisions

Practise triple-bottom-line accounting. By placing the full costs of your business into your annual report, even if you cannot affect the decisions immediately, you will change the climate in which they are made.

Make the triple bottom line part of the decision process. Even if you still have to make uncomfortable decisions, it is the first step. You can choose to build business partnerships with the corrupt or their victims, you can choose business models that take more than they return or balance the trade. It is your choice make it.

Many CEO’s will fear that this road will scare off shareholders. There is that risk but shareholders pay you to be innovative and think laterally, adapting to new realities and opportunities. If you are a business leader, lead. If your investors aren’t happy, find new ones. Ethical investment is a growing strategy. Talk to your shareholders about values researcher Paul Ray [38]whose life values survey received these responses from your American customers

Statement

Percentage Agreement

We need to treat the planet as a living system

86.97%

We need to rebuild our neighbourhoods and small communities

83.4%

Humans are meant to be stewards over nature and preserve it

82.05%

I want less emphasis on consumption and wealth

67.66%

Government should shut down air polluting industries

62.55%

What this reveals is that there is a constituency, there is a market, so get selling.

Make sure women can make a difference in your business. Do the same with your minority partners. They are a huge source of energy and innovation. Women start new businesses at twice the rate of men, minority women at three times the rate.[39] For more support and useful information join Business Leaders for Sensible Priorities[40] and call on Responsible Wealth.[41]

You wont be alone and you wont be any more likely to fail than the 50 airlines and thousands of other businesses that crashed on the Level Playing Field in the last 25 years doing things the old Globalisation way.

Lobby

You have the power to demand that your politicians refrain from expedient and unethical policies; do it. You can lobby industry and professional associations for higher ethical standards in everything from employment contracts to environmental audits; do it.

In a global economy, every hectare of land that is lost to production, every litre of pollutant that damages the DNA of frogs and fish and human children, every exploited worker costs everyone. In a global economy there are no externalities to trade off the foul ups. You can lobby your global partners to change their perspective and if they wont, find someone who will.

Embrace the Problems

If you are serious about Globalisation you have already decided to act globally, now turn on its head the environmentalist’s catch cry and think like a local.

Any review of the Globalisation agenda is less likely to happen unless those who benefit from the system take the lead in creating change. We can empower others to make informed choices that meet their needs or help them to make decisions that meet our needs. In the pantheon of possible strategies for Globalisation that choice is easy.

Nor is it soft business practice. Ethical investment funds are doing at least as well, and in many cases better than funds that take no account of ethical issues. Environmentally responsible companies find that wasteful use of resources is bad for business. Waiting for the playing field to be redrawn and the rules to be changed is a spectator strategy, not a player.

Do the Right Thing

Globalisation does do not require you to act ethically or ensure that your global partners share equitably in the benefits. But it does not prevent you from behaving as a global citizen for whom there are no foreigners, only neighbours. I’m not asking you to take it all on your own shoulders, but your shoulders are broader than so many others and in the words of Jack Kennedy, “If not us, who? If not now, when?

All I’m asking is that when you look at the global marketplace you abide by some simple principles.

n        those with the least resources are not responsible for your ethical behaviour

n        do not conceal the real value of a resource from its owner to increase your profit

n        your personal advantage should not depend on driving your neighbour into poverty

n        profit does not absolve you of your ethical responsibilities.

n        when you damage the environment, account for the whole cost

n        do not oblige others to poison their own air and land and water for your profit

n        markets and monopolies are contradictory terms

n        you are not obliged to use slave labour just because your competitors do.

These things are not mistakes, they are not poor judgement, they are not tactical errors, they are your choices. On the other hand:

n        share the benefits of your knowledge with others at a price they can afford.

n        enable others to grow and develop, even when it limits your maximum benefit

n        evaluate your business using triple bottom line accounting

n        develop partnerships that enable those partners to gain increased benefits rather than merely absorb costs.

These things are not for the weak or stupid or empty headed, they take empathy, courage, willpower and resistance to ridicule. They also demand an acknowledgment of your humanity and your temporary participation in this world.

There Is No Alternative

The one thing you cannot do is opt out. There isn’t anywhere to opt out to. I don’t believe we have any alternative now than to live constantly with an eye to the endless cascade of effects that we unleash into the world every time we act.

Chaos theory says the smallest act can have unpredictable and substantial effects. That doesn’t mean we should freeze like deer in the headlights, it does mean that at the first sign that we have made things worse, we must stop first and ask questions afterwards. It does mean that we can act as individuals and businesses to create small positive effects because they too can have disproportionate effects.

We don’t have to solve all the problems at once, and we are simply cowards if we refrain from acting ethically and responsibly until we can. Living on the planet means listening to all the feedback, even those things we don’t want to hear.

Conclusion

The metaphor of the Level Playing Field both reveals and conceals. It reveals a desire for the world to be a simple place where we can isolate the things we want from the ones we’d rather not consider. We love sport because it is simple and clean, excellence is easily defined and usually prevails and when the final whistle blows we know something for certain. It is a fine place to visit, but it is not where we live.

The metaphor also conceals a raft of dangerously simplistic assumptions and trying to force the world to conform to them is futile. Most importantly of all, the game does not end, the clock is never reset to zero so we can start again. An endless game of 6 billion players stuck to a globe with limited resources requires complex and constantly shifting rules and strategies. It is harder than we thought, we cannot predetermine the outcome and we must play as if all our lives depend upon it.

Globalisation is the end of the expansion model of business value. Global citizens no longer have anywhere to go, because we are already there. That figure approaching us on the horizon is no stranger, it is us, seen globally. Equally, there is nowhere to hide. [42]

Globalisation is not only something we do to our company, nor is it only what our company does in the market or the market to the planet. It is something we do to ourselves. It is a perspective.

Globalisation can be the outcome of responsible and sustainable use of world resources and equitable access to the benefits they offer. It can be the outcome of an ethical and sustainable relationship among the people who share the planet and with the planet itself. There is no alternative to it now; we have reached the end of the processes that led us here. We have no option but to try, in good faith, to make it work. And we have to start work now on whatever we will do after that.

Another perspective

I started by suggesting that Globalisation is a perspective more than anything else. I will end by asking you to take another new perspective. Cuneiform writing is constructed of small triangular impressions in clay. It fell out of use about 2,000 years ago but during the 3,000 years of its lifetime, it was used to write some 15 different languages.

Digital script was invented about 50 years ago. So in 2,950 years it will have been in use as long as cuneiform script. The digital equivalent of English script will lie 1,000 years beyond that and it will be another 1,000 years before the invention of “Digital” digital script, whatever that might be.

And yet, at the end of those 5,000 years, as far ahead of us now as the beginning of Cuneiform is behind us, all the potential, all the possibilities of Globalisation will have to be available to us, intact ready to use. If it is not, we will be extinct.

How clever then do we have to be to reach that point at all? What do we have to do now that will help ensure that we make it? How much of that is embodied in your Globalisation Management Strategy?



[1] World Trade Organisation

[2] International Monetary Fund

[3] World Economic Forum

[4] I mean here the breach of a sensible diversity that will enable flexible responses to unforseen and sudden changes with which the standard model can not cope. We should not put all our economic eggs in one basket.

[5] UNDP Human Development Report 1999

[6] http://www.votenader.com/issues/livingwage.html

[7] New York Times September 10 2000

[8] If approved, the document will be presented to the annual session of the UN Human Rights Commission in March and April 2001. Financial Times, 15.8.00

[9] What's Up with the Weather? Broadcast Transcript PBS Air date: April 18, 2000 http://www.pbs.org/wgbh/nova/transcripts/27gwwarming.html

[10] September 9, 2000 (Reuters) - Mexican Finance Minister Jose Angel Gurria said high oil prices were a result of the limited capacity of producing countries to boost exports to meet the needs of a strong global economy.

[11] September 11, 2000 (Reuters) - OPEC President Ali Rodriguez said "We are approaching a crisis of great proportions because oil production capacity is reaching its limit…Exploration for oil at ever-deeper levels ..was proof that the planet's petroleum supply is not infinite.   These are signs that all is not right in production"

[12] New York Times September 14, 2000 President Delays New Import Duties for Europe Goods

[13] Cato Institute promotes high-level thinking from the US libertarian perspective. It is dedicated to promoting the ideals of limited government, private enterprise, free-market economics, open trade and immigration

[14] The End of Corporate Welfare As We Know It. Business Week, February 10, 1997 pp 36/7

[15] The Post Corporate World David C Korten. p. 194

[16] The Sydney Morning Herald Monday, 18 September 2000

[17] Even the new economy is not exempt, as 11,000 Qwest workers are finding out.

[18] See the WEF Warnings under ‘Backlash’

[19] CNN “Movers program on JetBlue August 2000

[20] Wednesday, September 13, 2000 IndustrySearch News

[21] Klaus Schwab and Claude Smadja, “Start Taking the Backlash Against Globalisation Seriously”. International Herald Tribune February 1 1996 p8

[22] The Post Corporate World p201

[23] Bougainville's Survival: Globalisation and War  Marcelline Tunim: Bougainville Women for Peace and Freedom http://www.pasifika.net/pacific-action/hap/marglobal.html

[24] Worker Rights Coalition, United Students Against Sweatshops and Students for Economic Justice

[25] José Bové, a French sheep farmer crusading against Globalisation has found widespread sympathy He was convicted of ransacking a McDonald's restaurant in 1999. He was protesting at US sanctions on French produce after the EU excluded US hormone-treated beef. His campaign quickly broadened to a general crusade against Globalisation.

[26] Sydney Morning Herald September 15, 2000

[27] Mexico's Fox Meets Gore in US  August 24, 2000 George Gedda, Associated Press Writer http://news.excite.com/news/ap/international/us-mexico

[28]  The Australian Government has started a clampdown on illegal tobacco sales on the grounds that it is losing millions a year in excise taxes. In 1999 cigarette companies were receiving state export incentives. The ironies escaped the government.

[29] Disposable People. Kevin Bales University of California Press 1999

[30] At the end of the first millennium the Vikings settled Greenland. They built a wealthy society based on the export of sheep and beef products. When a mini ice age occurred in the 1400’s, they quickly failed as their agriculture was stifled by the changed weather and died at appalling rates. The existing population of Inuit, who were hunters, had a surplus of food while the Norse settlers died of malnutrition.  In modern Australia we are doing the same. The Federal Government has put up $700 million over 7 years to counter salination of the land, currently 5%, rising to 22% of agricultural land in the next 20 years. Adelaide’s water will fail world standards 2 out of 5 days within that time. The cost is at least $65Bn and costs Australia about $3.5Bn a year. Starting with the answer instead of listening to the question is the major problem.

[31] Inquiry into the Nature and Causes of the Wealth of Nations

[32] http://www.it.fairfax.com.au/breaking/20000727/A33276-2000Jul27.html Internet nerves make a target for cyber-terrorists  Researchers from Notre Dame University in Indiana, analysed Internet connection maps  and found that it has a random, "scale-free'' structure which contains a few highly connected nodes that were dangerously vulnerable to a selectively targeted attack that could easily cripple the whole system.

[33] Controversial Music file swapping software that initiated the current wave of new Internet applications

[34] Multilateral Agreement on Investment, defeated by global networking among its opponents.

[35] The Ends of Globalisation Mohammed A Bamyeh p126

[36] Radio National Australia

[37] Tony Marks, CMS Cameron McKenna, World Business Today CNN Friday, 22 September 2000

[38] Paul H Ray. The integral Culture Survey. October 1995

[39] These and other useful facts at http://www.nfwbo.org/key.html and http://www.nfwbo.org/LocLink/BIZC/RESEARCH/

[40] 130 William St, 3rd Floor New York 10038

[41] c/- United for a Fair Economy 37 temple Place, 5th floor, Boston 0211

[42] Northrop Fry (Canadian Academic) In Post Colonial Nations (like Canada and Australia) the question “Who am I?” inevitable slides into the absurd “Where is here?”  Radio National Australia Arts programme


Earl Mardle is a 49 year old communicator with his own consultancy in Sydney. He is a writer, speaker and thinker on a wide range of topics covering the application of Information Technology in the real world, with a special interest in Education and Development issues, Justice, Equity and Ethics. This work has given him a global perspective and network that includes the US, Sweden, Holland, Colombia, the UK, India, Bangladesh, New Zealand and Australia. As a long-time broadcaster he understands the issues of the networked, globalised and information based environment.