Evolution/ change are a way of life. People evolve, cultures evolve, and so do our economies. And with every change comes a considerable amount of resistance. The transition from feudalism to capitalism gathered its momentum in Western Europe in 18th and 19th centuries. Along with came chaos, ambiguities and insecurities. Numerous theories on Capitalism as good or bad also came along. Some include famous works by premier sociologists: Karl Marx and Max Weber.
Though Karl Marx’s most popular theories on “class and conflict” made him a capitalist critique, it is mainly Max Weber who’s considered to have developed a more rational theory on capitalism.
Defined in Max Weber’s term, Capitalism is a process where money becomes an end in itself consequently changing the values of society. Although capitalism is an age old phenomenon what makes it younger even now is the global face it has assumed over the past two or three decades. It is now used in combination with globalization hence, termed as global capitalism.
It has largely dominated the discourse on poverty and human development. Patrik Aspers (1) defines global capitalism as, “an economy that connects capitalistic actors from all over the world via production and consumption markets. ” The common attack on this phenomenon is that it has increased the disparity between the rich and the poor in the developing world and widened the gap between the developed and the developing world. What’s perplexing is to see how the same phenomenon that is acclaimed for the growing GDP in many emerging economies is also seen as the culprit in raising world hunger.
Global capitalism does not function in isolation. There are many other factors that determine its nature making it good or bad for human development. This paper will delve on those factors that have made this phenomenon so unpopular especially in the developing world. Also, to establish that global capitalism is not alone a cause per se of world hunger. Free Trade: Global capitalism means integrating the national economy into the world economy through breaking down of artificial trade barriers. In other words, allowing a free flow of capital across the globe.
A more popular term given to this phenomenon is that of “Free Trade”. Joseph Stiglitz (2)defines it as “the closer integration of the countries and peoples of the world which has been brought about by the enormous reduction of costs of transportation and communication, and the breaking down of artificial barriers to the flows of goods, services, capital, knowledge and people across borders. Free Trade versus small –scale Farmers: There have been tall claims made on the benefits gained by the emerging countries out of free trade looking at their GDP (Gross Domestic Product) growth over the past decade.
While determining the effectiveness of Free Trade, most evidences are based on the number of jobs generated in emerging economies through this system. But this is also dovetailed by another question on whether these jobs also generate a livelihood option for the last common denominators in the developing world. The answer is quite evident from the Agreement on Agriculture (AoA) that has taken a centre stage on the ongoing WTO (World Trade Organization) negotiations.
The most affected lot of the multilateral trading system are the small scale farmers in developing countries who are largely being affected by huge subsidies provided to farmers in U. S and Europe. This in turn helps these farmers to sell their products at much reduced rates in international markets than the small- scale farmers of developing countries can afford to sell even in their own domestic markets. Hence, forcing these very farmers to sell their produce at a lesser price than that involved in production.
One could argue that despite the farmer’s grievances, large flow of cheap food in developing countries could also mean that the poor and hungry benefit from floods of cheap food. The following fact answers this argument. World hunger strings from the current situation of small – scale farmers in the developing world: The UN report on World Hunger 2000, revealed failure of the 1996 target of halving the number of people who do not have enough to eat within 15 years. Robert. Drinan (3) in National Catholic reporter, states that a total of 842 million hungry in the world during 1995- 1997 increased by 13 million in the 1999- 2001 period.
The First Food Program Director, Kirsten Schwind points out that a vast majority of the world’s poor make their living off agriculture. Hence, failure in this sector also suggests that 50 percent of the people who live with hunger globally are these same small – scale farmers. United States and Europe: are they alone responsible for world hunger? Undeniably, the huge subsidies offered to farmers in the United States and Europe disrupts the global market. But this reason is not alone responsible for devastating farmer’s life in developing world.
This era of global capitalism also calls for a global accountability. It isn’t right to put the entire blame on the US and Europe. Kenneth AJ (4) clearly states that “hunger is a multi-dimensional problem that requires a multidimensional approach and intersectoral interventions in relevant areas, such as health, markets, learning and emergency preparedness. But too often the necessary investments have not been made. National level strategies usually exist, but they often need to be modified to take hunger into greater consideration. ”
Simply judging the interventions made by international institutes, such as the World Bank and the International Monetary Fund is not enough. Unless country’s own systems such as, domestic policies, their implementation, and their transparency are not evaluated, the current situation on world hunger will not improve. It is a stated fact that serious policy mistakes are dovetailed by crisis in the economic sector. What keeps many developing countries from benefiting despite numerous development projects are their own infected methods. Many people and many governments have misunderstood the meaning of liberalization.
They have mistaken it to mean liberating themselves off their responsibilities. The idea behind globalization was to make competition healthier. This could be done when each country facing an international competition ensures improvement on its infrastructure and provides its workers with latest knowledge on their skills. It is after all a country’s own responsibility. Unfortunately, the latest trend is to blame it all on the unhealthy competition led by free trade. Little have these governments done enabling their own citizens to face the global competition.
It is after all these policy makers who hold key to development of their own nation. They are the wheelers of the society who link the modern, pre – modern and postmodern together. When we talk about agricultural competition, besides looking at debates engulfing the distortion issue, it is also important for us to assess the country’s own performance in these areas. It is after all government’s responsibility to improve upon its agricultural production meeting market needs by assisting its farmers with latest techniques and knowledge on new variety crops.
Even if we agree for a while that many developing countries cannot afford the latest technologies, how do these governments then account for the dramatic increase in their GDP growth? India stands as the best example, where on the one hand many reports reveals the increased suicidal rate of the farmers, on the other hand there are reports flashing India’s growing GDP rate. A country with 60 percent population involved in agriculture, accounts for only 22 percent of its total GDP growth. Fair Trade involves paying a fair wage to the growers for their goods.
Ironically, the larger retailers involved in the selling of these goods exploit these growers by buying their goods, like coffee, cocoa and sugar, at world low prices and then selling the same goods at international markets at highly marked – up prices. The unequal ratio between the production cost and selling cost forces the small – scale farmers in developing countries to borrow money from the local lenders. These lenders decide their own interest rates which unfortunately keeps the farmers in perpetual poverty.
There is no supervisory authority that can help these farmers get a fair share for their produce. Caught between the vicious lenders and retailers, these farmers are constantly facing a blow. The government does little in bailing out these ill – fate stricken farmers. The borrowing chain does end with the farmers. This trend continues even with the government who borrows money from international bodies to finance their development through several development projects. The supervisory authorities spend little time in monitoring the international capital inflows.
These authorities also do not collect information on external borrowing by private corporations in their respective countries and in turn to use this information for managing their domestic policies. The excessive borrowing has direct link to hunger as these payments back to creditors outside the country are drawn from funds that should instead be invested in areas that need greater funding to lift people out of poverty and hunger. The money that is initially borrowed to invest its large portions in areas like agriculture, health care, education, job creation, etc.
helps little in elevating these spheres and is rather used up in dealing with the fluctuating market interest rates. Asian Crisis : a result of excessive borrowing: Prior to 1997, eight East Asian countries-Japan, South Korea, Taiwan, Hong Kong, Singapore, Thailand, Malaysia, and Indonesia – experienced a rapid economic growth often called the “East Asian miracle”. Between 1965 and 1990, the GDP in these countries doubled. Their success was attributed to many factors such as free trade, macroeconomic policies and discipline, high saving and investment rates that attracted many foreign investors looking for a high rate of return.
With increasing pressure felt in the foreign exchange market there was a sudden flow of Thai baht in market against the US dollar (the currency speculators rushed to buy US dollar against the Thai baht). This resulted in Thai currency devaluation followed by withdrawal of foreign capital from other East Asian countries as well. What followed was the Asian crisis in mid – 1997 affecting currencies, stock markets and other asset prices of several Southeast Asian economies. Foreign investors lost confidence and withdrew their invested money from these countries.
Extensive borrowing in foreign currencies by corporations and other financial institutions while turning blind eye to currency fluctuation was the main culprit for this crisis. The ineffective financial supervision that encouraged short – term borrowing underestimating while the risk involved in exchange rate proved fatal. Role of the National Government: In several working papers much has been said about the international bodies and their role in the Asian Crisis. What is even a greater matter of concern is the role of national governments during the crisis. Nobody ever talks about their intervention.
It is true while dealing with global market; one normally expects the global bodies to be accountable for its success or failure. If that being the case, why don’t we abandon the idea of even being governed by national bodies if every downturn is expected to be addressed by the international ones? It is evident from the East Asian case that the supervisory authorities spent little time in monitoring the international capital inflows. The authorities did not collect information on external borrowing by private corporations in their respective countries and in turn to use this information for managing their domestic policies.
In earlier times whenever there was a failure in any sector, the only remedy seen for it was nationalization. Any failure in a sector in today’s time is handed over to privatized bodies with national government taking a back seat. The national governments have completely turned a blind eye and a deaf ear to its citizen’s problems. In fact for any rising problem it is the international market that is held responsible. Conclusion: The facts stated above clearly points out the loop holes existing in domestic policies and governance. Lian Greenfield (2001) has argued that the driving force behind capitalism is nationalism.
Many countries saw a strong economy as a way of strengthening the nation making capitalism as a means in this process. Hence, it wont be wrong to say that it isn’t global capitalism that is the primary cause of world hunger, it is the improper governance that has led to this disaster. Food availability, food access, and asset creation are virtues of a responsible government for which we cannot hold world systems alone accountable. A good government is one that ensures a proper and organized lending to its farmers helping them to cope with international prices through establishing local banks with reasonable interest rates.
This is just one of the many solutions a government can adopt to encompass failures in the agricultural sector considered one of the most important sectors of the emerging economies. A democratic country is one that lets the state make some of the economic decision, and the market and the civil society do others, though with different emphasis on these spheres.
References: Aspers P, Edling C, Hobson B. A Note on Global Capitalism. Sweden: Department of Sociology, Stockholm University; 2005. Stiglitz J. Globalization and its Discontents.
New York: Norton; 2002. Jesuit Fr, Drinan R. Report Shows World Hunger Increasing. USA (MO): National Catholic Reporter Publishing Company; 2004. Shwind K. Going Local on a Global Scale: Rethinking Food Trade in the Era of Climate Change, Dumping, and Rural Poverty. USA (CA): Institute for Food and Development Policy; 2005. Kenneth AJ. World Hunger Series 2006: Hunger and Learning. Italy: World Food Programme and Standford University Press; 2006. Reuven G, Moreno R. Government intervention and the East Asian miracle. Business Economics; 1997.