Disintegration of national economies
(a post to the electronic conference of the World Bank Institute, May, 2000)From: Herman E. Daly <hd22@umail.umd.edu>
To: Globalization E-Conference <globalization@lists.worldbank.org>
Date: Tuesday, 9 May 2000 7:14
Subject: [globalization] Disintegration of national economies
This is from Herman Daly, professor at the University of Maryland, formerly senior economist at the World Bank. I started following this discussion late, but have found it stimulating, and wanted to make a small contribution. I hope that the Bank will entrust the task of responding to the discussion to the office of the Chief Economist, not to the Public Relations Department.
The IMF-WB are/were chartered at Bretton Woods in 1944 as federations to serve the common interests of their members, which are nation states--not global citizens, not corporations, not NGOs. The present rulers of the Bretton Woods institutions have subverted their historically reasonable and noble charter. They, along with their new partner, the WTO, are now in the service, not of their member nations, but of some ideological abstraction called "the global economy". In the clear and honest words of Renato Ruggiero, former director of the WTO, "We are no longer writing the rules of interaction among separate national economies. We are writing the constitution of a single global economy." The new goal is "globalization" (global economic integration through export-led development, free trade, and especially free capital mobility). In exchange for globalization's fatuous promise of unlimited growth of the single global economy, the cosmopolitan rulers of the IMF-WTO-WB are quite willing to give up, on our behalf, hard-won national standards of fair income distribution, decent wages, and national environmental protections. They arrogated this power to themselves under the phoney mandate of "global economic integration".
Integration of the global omelet logically requires the disintegration of the national eggs-- the dis-integration of the separate national economies. There is a loud silence on this. Does the IMF-WTO-WB believe that the economic disintegration of their members is in the interests of their members? Whose interests are they serving? The interests of the "global economy" we are told. But what concrete reality lies behind that abstraction? Who benefits? Overwhelmingly it is transnational capital--not labor, not small business, not peasant farmers, not the environment. Already some 52 of the 100 largest economic organizations are corporations and 48 are nations.
As Nobel economist Ronald Coase told us, "Firms are islands of central planning in a sea of market relationships". As the islands merge to become larger relative to the remaining sea, in order to "compete in the global economy", the within-firm principle of central planning becomes more dominant, replacing the between-firm allocative principle of the market. Nations rely more on external trade rather than internal trustbusting to limit monopoly. At the same time the income distribution within firms has become vastly more unequal, and less subject to market discipline. The ratio of CEO compensation to that of the average worker in the US has passed 400, on its way to infinity. This is a gross subversion of true market principles, as is the dogma that development must be export-led, and require cheap labor, international debt, and unfettered capital mobility. The dogma also tolerates externalization of environmental costs because that presumably will be automatically cured by more growth that will eventually make us rich enough to afford the cost of cleaning up-- the "environmental Kuznets curve". It is especially ironic that so-called global capitalism should be based so heavily on the drawdown of global natural capital (forests, fisheries, mines, wells, and atmospheric absorptive capacities), falsely accounting their depletion as growing income. The World Bank has made some small efforts to correct national accounts, but does not really take it seriously. GNP has become, in John Ruskin's prescient phrase, "a gilded index of far-reaching ruin". Globalization makes it more far-reaching and more ruinous.