Globalisierung – Chance oder Risiko?

Globalization – Chance or Danger?
11.06.08
This second essay by Ulf D. Posé is rather long – but no less worth reading! (RMD)
Due to its length, this translation has not been checked with the customary care. (CBW)
More than a few enterprises practice globalization according to three aspects: Firstly, where can I find the best conditions for production, i.e. low costs for the buildings, labor, and getting my product to market? Secondly, where do I get the best political conditions, low taxes, low additional costs of labor, et cetera? And thirdly, where are the natural resources best available, i.e. giving me low costs for using the environmental?
These days, the only guarantee for survival of an enterprise is a profit rate above average. At the same time, there is constantly the reminder that you should prepare as best as possible for future developments.
This preparation is determined by growth (we can only be sure nobody will take us over if we are huge, so we should get into partnership with another company as soon as possible) and economically (the only way to remain independent is by having adequate capital profit rates). Basically, everybody acts as if remaining competitive and thereby remaining alive is determined by those three criteria. Whether these criteria are socially acceptable is ignored. This is where globalization has become corrupt.
Globalization creates a world-wide network, integrating continents and nations through trans-national enterprises. This happens through products, commerce and communication. In your dreams! The problem is that all countries are forced to reduce wages and taxes because of the extreme competition. Consequently, the wealth of nations is at risk. Thus, economic forces make politics their national agents. Through import taxes, grants and free use of the environment, there is a free for all in terms of protection. Paradoxically, wherever politics do not act economically appropriately in the patriotic sense, it turns out to be a failure. Times have become hard for socially acceptable capitalism.
The costs of labor and environment must be kept low in order to optimize the capital. This leads to the question whether making employees redundant is ethically permissible.
A friend of mine who is the managing director of a global enterprise with about 7,000 employees worldwide told me recently: “Currently, the messages I receive are definitely too profit-oriented for me! I know what even our management consultants say: ‘Unless you get at least ten per cent return on capital, you will disappear from the scene within a few years’. But in the last 136 years, there were few when we had that kind of profit! And anyway: 95 per cent of our added value goes to the employees (as of 2004), about three per cent goes to the shareholders!”
What happened? Why are we discussing capitalism? First let me describe how Globalization developed. The term “Globalization” was first used in an English dictionary in 1961. It means a development strategy that regards the entire world as an economy and liberalizes commerce and financial transactions. Basically, Globalization is just a network into which continents and nations have been integrated through international enterprises and their products, commerce and communication.
Exactly this kind of situation was described by Karl Marx in his Kommunistischen Manifest: “By exploring the world market, the bourgeoisie have given production and consumption in all countries a cosmopolitan shape. To the reactionaries’ great regret, they removed the national ground on which industry stood. The ancient national industries have been and are still being destroyed. In their place, new industries have risen to be a vital factor for all civilized nations. These new industries no longer process the natural minerals of our regions, but import them from far away. Instead of being sold at home, their products are exported to all parts of the world. Rather than being content with what our own country can produce, we now desire products from the most remote countries and climates. Instead of the old local and national self-sufficiency and insularity, we now get common interaction and dependence upon each other of all nations. And what is true for material products is also becoming true for intellectual products. Each nation’s intellectual products become universally accessible. National one-sidedness and limitations will be less and less possible and universal literature will develop out of many national and local literatures”.
What is special about Globalization is its inherent, extraordinary competitiveness. Apparently, in this kind of competitive society, only politics giving the national enterprises a chance in the world market through low wages or low taxation have a chance of influence. That means that politics are made to serve the economy. This is what – using moderate language – can be termed structural adaptation. If necessary, countries are forced to embrace the benefits of Globalization.
Argentina, for instance, was forced by the International Monetary Fund to privatize most of its public services, sell enterprises to foreign capital owners and economically open their borders to internationally active enterprises. In the year 2000, about 90 per cent of all Argentinean industry belonged to international investors. In 2000, Argentina was indebted to foreign countries nearly four times as much as in 1983. The average real wages were about half of what they had been in 1974.
In Globalization, we seem to talk about an increase in power, influence and prestige for a few people. But is that really true?
Globalization nurtures the rule of economy over everything with ever narrower restrictions. It thereby neglects and ignores the political structure. If two enterprises merge or one enterprise buys up another, then this is none of politics’ concern. At Bank Austria, all board directors were at the same time members of parliament. Instead of acting politically, they chose the economically sensible alternative and all voted in favor of merging with Hypo.
Today, Globalization represents the predominance of economics over politics. This is one more central problem of politics the reaction to which, so far, at least in Germany has been merely a mixture of goodwill and incompetence. The attempt by Müntefering seemed to start in such a polemic way that its combination with the requirement: “we must think about social acceptability of global capitalism” remained practically unheard. That means that the political control gets more and more negligible. Globalization creates its own realities, which happens in different markets.
The money market was deep into Globalization a long time ago, a lot earlier than the capital market. They must not be confused. Capital is money that has been invested or is ready to be invested. Money can be a vagabond. Especially money that is on the roundabout is a characteristic of the globalized money market. Every single day, about 1.5 billion dollars are transferred on the exchanges around the world. Around 80 per cent of this money has a running time that is shorter than two months. For some of them, it is only a few hours. In 1998, the entire world trade was 6.9 billion dollars. That means the financial centers of this world would need no more than five days in order to finance the entire world trade. Let this suffice to outline the enormous importance of money markets in the Globalization process. The stock market, too, is mostly – though not altogether – globalized. After all, there are still some third-world countries to which the local currency may not be imported, neither can it be exported from there. All non-local currency you carry in those countries is still entered into your passport.
The changes in production processes.
The sales market, too, shows a strong tendency towards Globalization. Let numbers speak. There is a gigantic world-wide change in production processes. Here, the production networks play an outstanding role. They have changed dramatically during the Globalization process. Besides the sale of products to the consumer, there is now also the company-internal sale. In the year 1992, around 250,000 filial companies of around 38,000 parental companies have had a world-wide worth of business of more than 5,200 billion dollars. During the same year, the total world export was around 4,900 billion dollars. One third of this was intra-company sales.
As early as 1993, about 2,135 billion dollars worth of world-wide direct foreign investments were made. There is one problem about these investments: rather than creating new production venues, they simply take over what is already there. Between 1992 and 1998, the world-wide total of registered fusions and take-overs increased nearly tenfold from 250 billion dollars to 2,400 billion dollars. And that is not the end of it
In 1994, the World Investment Report published by UNCTAD estimated the turnover of the international companies as twice that of the early 1980ies. The one hundred biggest multi-national companies were in the range of 3,400 billion dollars of company turnover. Around 40 per cent of this was invested in third-world and developing countries. This high number is due to the need to find countries with low labor costs and long working hours. In Globalization that is what counts when you select a production locality.
The choice of locality has an enormous effect on the employees of the established production places. Prior to Globalization, less production meant less profit. Today, this is no longer so. The enterprises active in the world market choose their production venues according to their own interests. They can improve their profit massively through friendly tax laws, low labor costs and investment-friendly conditions in the areas of environment, labor, and employee dismissal, while at the same time intensifying the work drastically. This has caused a huge reduction of the quota of salaries in the total gross income of most “industrial nations” since the mid-70ies. While, for instance, the total profit of Swiss companies increased by an average of 17.7 per cent per annum between 1994 and 1999, the salaries only improved by 1.7 per annum.
Today, the major enemy of Globalization is the USA. As soon as a foreign company starts to compete with an American one, import tax is raised. That means that the trade market is not included in globalization. The USA take import tax even from third-world countries, which means that globalization, is actually hindered by American activities.
The fourth market to consider is the labor market. It is not yet totally internationalized, but tendencies can be seen in migration movements. Most young people act according to the principle: “I will go where I can earn most money”. The fifth market is the international market, which, in Germany, is determined by the national export market. We try to build this market by Globalization strategies, such as fusions with other enterprises, but – as mentioned before – we miscalculate. In the end, it turns out that we all are national egoists. National egoism is the main reason for Globalization not happening. There is enormous pressure from the economy on politics. Politics react as required by introducing import and export taxation. It might be interesting to see what would happens if all import and export taxes were abandoned and all state subsidies were taken away. That would be a necessary requirement for actually achieving Globalization of the sales market.
For a functioning world-market, the regulation of environmental use is also mandatory. It is a form of subsidy to permit free environmental abuse. There should be a market for selling environment. The problem is that the environment is no longer a free commodity that may be used by whoever wants it, but rather an economical property with a value that has to be paid for. Our environment is owned by the entire population of this planet, which is why a central control panel should be created for selling environmental abuse.
Here, we have a situation where the Cobb-Douglas-formula can be applied. Environment must have a price in every country of the world that makes it attractive to replace the cost of environmental abuse by labor or capital. As I see it, there is hardly another way of solving the environmental problem. There is a great risk that in 20 years this world may already no longer be habitable for a huge part of humanity. A battle for potable water will erupt. In the Near East, this battle will be about the water of the Jordan. Indian rivers are already in such a state of contamination that potable water has to be artificially processed. The price of drinking water is going up everywhere. We in Germany still hold it for granted that using potable water both for drinking and flushing the toilet is an acceptable luxury.
I have browsed the colored brochures of company values and ideals. My personal impression is a very sobering one: there are light-years between theory and practice. In the course of Globalization, more and more people are suppressed by the companies.
But the logical arguments of market economy differ from this: the more economical success a company has, the more it can and has to do in order to become socially compatible.
Two issues must not be confused: a company must not be blamed for making or wanting to make a profit. However, what is reproachable is how some companies make their profits. Especially if they “make employees redundant” despite huge profits. If someone dismisses employees although the profits are excellent beyond expectations and the capital income is way beyond what is usual in the field, then this is extremely unethical. The concept underlying such methods is one that puts economical success above all else. If, above all, you declare that this is happening in order to make sure the company will survive when in reality there has never been the slightest de-facto threat to the company, then you are insincere.
The difference between theory and reality
The credibility of an enterprise does not depend on what it says in its official guidelines. Rather, what matters is whether what the company does matches what it says, the correspondence between theory and reality.
For example, there is the energy company BP. A few years ago, the enterprise hit the News when an oil pipeline of theirs burst and more than a million tons of oil leaked out. Consequently, roughly 16 miles of the pipeline had to be put to rest and replaced. The stock market for BP went up. The company only checked their pipeline after the American authorities put pressure on them. It had not been checked since 1992, although the oil industry had declared a monthly check to be common standard. What is interesting is why BP had stopped checking the pipeline. It is said that the pipeline had been so congested for 14 years that the control robots could not longer make any progress.
Let us look at BP’s official guidelines: “Being one of the leading energy suppliers, we also see our responsibility in seeking solutions for the environment problem and applying them”. And later: “A properly managed enterprise should be competitive, innovative, and beneficial to everybody. No matter what we do, we always want to do it in a way that represents a significant step towards the increased world-wide demand for energy and raw materials. Two more notes: “Being one of the leading enterprises in the world, we see our responsibility in setting high standards in order to be an enterprise which has made integrity its duty and to be recognized as such”. “We protect the natural environment and the safety of the townships where we are at work, and we guarantee the continuing health, safety and protection of our people.”
Most of the profit goes to the employees.
What can we learn from this? Economic success has to be paired with a social and environmental conscience. That is the basis of social market economy. The conclusion can only be: the more economic success an enterprise has, the more it can and must do socially and environmentally. Everything else is insincere and unethical and will ruin the social aspect of our market economy.
Today, Globalization draws some enterprises towards unethical behavior. But, you should not condemn Globalization as such. Instead, you should analyze it carefully, objectively and critically. Enterprises should understand: using Globalization as an excuse for being anti-social and environment-unfriendly, even though an enterprise is extremely successful economically, is highly unethical. All enterprises have an inner responsibility they cannot disregard, because it means that the values advertised by the enterprise will always have some influence on those of their employees. By this influence on their employees, they also have an influence on the entire society, which means that the social responsibility of an enterprise towards their employees cannot be separated from social responsibility for the entire society.
How to invest capital profitably – six steps
Investing capital profitably happened and still happens in the following six steps:
1st step: Exploitation of labor
2nd step: colonial capitalism. Growth has been motivated by exploring new markets.
3rd step: GATT and its consequences. After colonialism had been abandoned, new markets sprang up both for supply and demand. Karl Marx believed that capital exploited banks. Today, it is more like the other way round.
4th step: Exploitation of the state through subsidies. Tax reduction and active subsidies both in import and export. The state gives money that the enterprises no longer need (Werner Rapp). Sooner or later, that will cause state bankruptcy. Which leads to the
5th step: Internationalization and Globalization. Internationalization only happens in economically developed countries, including the “small tigers”, et cetera, that is, those countries moving towards the OECD countries..
Globalization will probably only work out if you exempt the third-world countries totally from taxation and skim subsidies on the borders of OECD countries. As a matter of principle, the importing country would have to skim the subsidies for imported goods. However, this is only possible in theory, since subsidies cannot de-facto be computed.
Globalization encourages cartel building. Prices can be fixed randomly.
6th step: As a consequence of non-existing liquidity, the system collapses (Karl Marx). This will cause deflation crises, because the market does not react to the supply. The system will break down. For an enterprise, inflation is not a catastrophe, but a chance for growth. Deflation, however, is dangerous. Supply vastly exceeds demand. It is not the energy or work invested in a product that determines its value, but the demand. Since now the production costs are higher than the economical value of a product, the company will try to reduce costs through a cost-effort calculation.
In a capitalist society, too, a lasting deflation will probably eventually cause a system breakdown. The European Central Bank and the USA will try to overcome the deflation crisis by lowering interest rates. The German National Bank has already declared openly that it has no model for dealing with a deflation crisis.
The impact of capitalism on Globalization.
Capitalism has considerable impact on Globalization, because capital tries to achieve a high profit. In order to achieve this, the capitalist manager will exploit labor. If you want to invest capital profitably, you first must buy foreign labor and accumulate capital for later investment. The laborer himself has no capital, but his work, which he wants to sell at a profit.
Work is created through markets and competition. Disregarding the social component, the only thing a director has to do is optimize the production process. An enterprise will see to it that the production costs decrease, so that the competitive position improves. If the production process is optimized, less and less labor will be needed for making a product. That is exactly what enterprises do, no matter what the capital owner himself does. The only “crime” the capital owner commits is to support this procedure.
Unfortunately, these days, employees who have been made redundant because the production process has been optimized in Germany find it harder and harder to find new work. The reason for this is not capitalism, but decreased demand (and the fact that the production process has been optimized). There is not enough demand for products or services. If you hold this against capitalism and call it inhuman, then you show that you are ignorant of how the market works. We know the influence of politics when it forces enterprises to adhere to legal requirements when employing new personnel. These legal requirements make it very difficult to supply employees with sufficient work even in times of high activity. This is why more than a few enterprises nowadays refrain from employing new labor they would not know how to pay tomorrow.
Politics is responsible for creating the legal framework for economical activities. Currently, they are more attractive in most other European countries than in Germany. Taxes are lower; the costs of labor are smaller, etc. If, as a result of these legal restrictions, we have an unemployment problem, then it is negligent – if not insincere – to put the blame for this on “radical” capitalism, because that is not what caused the problem
Causing unemployment can be ethically quite justifiable
If making one laborer redundant in our country creates two new working places abroad, then this is ethically acceptable. From a nationalist point of view, it might be undesirable, but ethically it is justifiable to give work to people in poorer countries who can then feed their families by relocating a working place abroad. In poorer countries, it is quite often the case that the social system is a lot worse than ours, which means that the people have less to fall back on than here. To accuse “capitalists” of unethical behavior if they do that is also insincere.
In the last seven years, the Private Equity Investors who have been the target of massive criticism by the SPD have created a total of about 6.5 million additional working places all over Europe. Even the blacklisted KKR (Kohlberg Kravis Roberts) saw to it that approximately 2,500 new, additional working places were generated at ATU (Auto Teile Unger) in 2004. Maybe some political brains still see the spirit of the elimination and butchering of the company Nabisco in the early 1990ies, when it was taken over by KKR and thousands of employees were made redundant However, those times are definitively in the past. These days, the Hedge Funds and Private Equity Societies are perfectly capable of generating a surplus in favor of newly created jobs over lost jobs.
Johannes Huth, Chief of the European Division of KKR, said in an interview with Welt on May, 7th, 2005: “Look at the facts: we almost doubled the number of employees at Wincor Nixdorf to 6,300, nearly 1,000 of them in Germany. Secondly, we do not exploit a country and then leave it to its destiny. We invest on a long-term basis. When we bought the company, it did not have its own service department. We created it. Moreover, we bought enterprises that brought innovative technology to the company. For example, we introduced money machines that can also accept money and determine if a bill is a fake. Basically, we supported the enterprise on its strategic path towards expansion. At MTU, we strongly invested in new products and research. At ATU, most of our money goes into geographic expansion, i.e. new branches all over Europe, particularly in Germany. What we did with Dynamite Nobel was totally different: we merged it with the US enterprise Rockwood. Thus, both companies can benefit from synergetic effects. At the moment, we are still buying small firms in order to position ourselves better in the world market.” That sounds pretty good. However, KKR has fired a considerable number of former MTU employees.
But Huth is also aware of the fact that bleeding an enterprise would not really be beneficial to the private equity societies: “If a private equity society bleeds an enterprise to the bone by massively reducing labor, nobody would be willing to buy eventually. Who wants to buy a company that has lost all its value? The only way to make a profit is to sell at a higher price than we have bought. The selling price depends on how well a company looks today and what future prospective growth it has”.
Capitalism is an ideology, and nothing more.
Capitalism and democracy are ideologies. Ideologies always have a time limit. Feudalism has long since outlived itself. The same can be either hoped or feared for democracy and capitalism, dependent of where you stand ideologically. However, there is a time for every ideology, which is why democracy is probably the best concept of politics today and capitalism is probably the best concept of economy today. If you condemn this capitalism, then you must offer a reasonable alternative. So far, the alternatives (planned economy, etc) have been a failure. Thus, it might make sense not to hinder capitalism for nationalistic and patriotic reasons, but rather for social and humanitarian reasons. Currently, the criticism for nationalistic and patriotic reasons is poorly concealed behind social reasons.
Capitalism is sufficiently restricted by law and order
In Germany, capitalism cannot grow at its own convenience. Law and order do not permit that in our country. Rather, the “donkey enterprise” quite often suffers from very strictly bound front hooves in the international competition. If you try to make it run faster by flogging it, you only show ignorance.
It is absolutely permissible to start wondering if there should be a factor that answers the question how to adequately recompense a manager for the value increase he has inspired in a product and his own market value. Also, it is permissible and even desirable to start wondering if a laborer should, according to the same criteria, be paid according to a system other than ours. If you try to separate this process from the international and globalized market in order to promote national interests, then all you are doing is contributing to general amusement among the rest of the world. In order to be better equipped to win against us in future races, the rest of the world will encourage us towards ever increasing nationalistic sentiments.
Globalization integrates more and more regions and niches into the capitalist economy, thereby eliminating local (and national) independent economical zones. Trans-national companies, therefore, mostly are interested in weak countries that cannot hinder, slow down or restrict capital movement. These countries are politically not capable of creating an autonomous economy. The tension between co-operating trans-national states (like the EU) and the neo-liberal capitalism thus becomes more apparent.
Quo vadis, Globalization? Not wanting to be prophetic, let me still list a few theses.
1. The short episode of an existing service society (realized to some extent in the USA) has been replaced by the information society (i.e., the people working in an enterprise are paid according to how they generate, access and process information). This, however, means unemployment for many (even among the higher echelons). In the long run, the unemployment in Germany currently affecting around five million people will increase drastically. The social system as we know it will eventually no longer be able to support all of them.
2. As a consequence of economic Globalization, there will have to be a re-structuring of the political, social and cultural concepts. The systems are economically (and irreversibly) linked on a global scale and will look for niches in order to gain competitive advantages. Consequently, welfare and social states like Germany will spiral downwards. While the economy thinks on a trans-national level and therefore cannot be state-controlled, there will at the same time be more unemployment and poverty.
3. Work will be exported to countries that are economically better adapted. Global capitalism is exclusively determined by the production factor capital (Shareholder Value). Obviously, the responsibility towards other relevant factors (such as labor, environment, creativity and company codes of honor) is neglected. The only chance to uphold these factors is on a political basis.
4. In a capitalist society, labor is replaced by capital. The executive director will try to keep labor costs at its minimum and reduce the cost of environment, thereby giving capital the best possible chance. This happens world-wide. The question is how to solve the labor problem in the future. First and foremost, the Cobb-Douglas formula should be extended by the factor environment. Then the issue is no longer to replace labor by capital, but to replace environmental abuse by capital and labor
5. That means that capital becomes the resource which in the long run costs least. Exception: in low-income countries, the substitution of environment by capital is not profitable. Directors still immersed in capitalism try to replace labor by capital as much as possible. This also happens if machines do the work that humans used to do. The factor “labor” will be needed less and less. In other words: global capitalism will need less and less workers, especially in areas where new fields of profitable production are opening.
The consequence: labor and the organizations representing labor will have ever less influence and importance. New forms of inequality will arise: people who have work and people who do not have work will face each other along a rift. Unemployment will be a structural element of our society. Moreover, the type of unemployment will change, because during the first (machines worked by people) and second (machines worked by energy) industrializations, unskilled labor was still needed. This, however, does not happen in the third (information) industrialization. The unemployment problem in the western hemisphere is caused by us replacing labor with machines. The question is: how to solve the unemployment problem? The answer is: through an environmental concept. The issue is not to replace labor by capital, but to replace environmental abuse by capital or labor. If we can replace environment by labor or capital, we have two results: firstly, the pure substitution of labor by capital is stopped, and secondly the environment becomes a production factor which, if possible, is replaced by labor or capital.
This means that the environmental abuse must be subject to taxation. A fair price for the environment is so high that an enterprise will seriously reconsider before abusing the environment. Instead, it might replace the environmental exploitation by capital and labor. In our post-modern society, this could be practiced by introducing CO2-vouchers that can be traded between enterprises. First attempts have already been made (emission legislation, etc.). But we have not yet succeeded in protecting the environment through these means. Therefore, a model which introduces environmental tax seems more promising, since the environmental exploitation can be measured as input. What an enterprise uses up in terms of coal, gas, noise and property can be measured. Humans must be winners of the Globalization, because games where humans can only be beaten are not very rational.
6. There is a chance that the connection between the globalized rich and localized poor will be broken, because we no longer have the obligation for solidarity and the social connections disintegrate. As opposed to the working class in the 19th century, nowadays the working class has lost everything. (Let us remember: all wheels come to a standstill at your strong arm’s will). What remains if they are capable of creating associations is pure violence. It will probably change the political, economical and social structures more than organized labor ever did in the 19th century.
7. As opposed to capitalism with exploited labor, capitalism without work does not generate utopian ideas. During the era of capitalism with exploited labor, many utopian concepts were created – the most influential of them (like Marxism) propagated socialism or communism. So far, capitalism without work has not created any utopian concepts. Hope and fantasies exist no longer; no political agent is born (like an organization of jobless people which is actually capable of action).
In the end, everything will depend on whether we will manage to create a socially acceptable legal frame for Globalization. These days, everybody is too much mentally focussed on national interests. We get excited about Nokia because of its reputed subsidy tourism. At the same time, we are happy to hear Herr Minister Tiefensee proudly declare that DHL could be convinced through subsidies to relocate in Leipzig, instead of Belgium. We could not care less about the loss of employment for Belgian workers. Do ethics stop at the borders of our country?
Globalization will turn out to be a blessing if we manage to make the efforts of various organizations, governments, enterprises, labor unions and political groups for a socially compatible capitalism something to get enthusiastic about. It will turn out to be a blessing if we fight for a world where all people have a life that is worth living, instead of just a privileged minority. This is worth fighting for.
UDP