The Global Race to the Bottom

By Philippe Heitzmann

The proclamation in 1992 by American President George H.W. Bush and Russian President Boris Yeltsin of a new era of “friendship and partnership”[i] between Moscow and Washington signaled the end of the Cold War and the consolidation of the age of globalization. Yet as the loss of biodiversity in our food supply stemming from global crop standardization “severely compromises global food security”[ii] according to UN Food and Agriculture Organization (FAO) Assistant Director-General Alexander Müller, it has become apparent that globalization may introduce broad risks of a food crisis.

In addition, the corrosive effect of corporations on emerging economies, alongside the environmental damage and growing income inequality introduced by globalization, all suggest that this increasing interconnectivity has not been beneficial to the majority of the world’s peoples.

Although globalization has been celebrated as an agricultural triumph, its standardization of the genetic makeup of crops has undermined the security of food markets. In China alone, efforts to boost yields and meet immediate hunger needs have resulted in the disappearance of an estimated ninety percent of wheat varieties over the past century.[iii]

While this standardization has allowed for the feeding of millions of more people, our food supply is now more genetically vulnerable to pestilence, such as the fungus Ug99, which has been destroying wheat crops across Kenya, Ethiopia, Uganda and Yemen since 1999.[iv] Scientists estimate that if the strain is to reach American fields, an estimated one billion dollars’ worth of wheat would be at risk,[v] leading many analysts such as Jim Peterson, a professor of wheat breeding and genetics at Oregon State University, to describe the situation as a “time bomb.”[vi]

At a time when, in the words of Abdolreza Abbassian, a senior economist with the UN’s FAO, global food “reserves are at a very low level,” leaving “no room for unexpected events,”[vii] world governments cannot allow for the economic players driving globalization, such as the IMF or the World Bank, to pressure farmers into adopting policies that could jeopardize our food supply and create unrest, such as in Egypt or Tunisia where rising commodity prices caused protests in 2011.[viii]

Globalization allows firms to relocate in “pollution havens” with lower environmental regulations. Fully aware of their crucial economic impact on such developing nations, multinational corporations (MNCs) often coerce such governments to abandon environmentally-friendly legislation. For example, the multinational mining company Rio Tinto recently developed the Oyu Tolgoi mine in the South Gobi Desert, which, while located in a “fragile ecosystem”, according to a 2010 report by the OECD,[ix] will increase Mongolia’s GDP by 30% by most estimates.[x] However, no Environmental Impact Assessment (EIA) was conducted before the purchase, leading many Mongolian NGOs not only to worry that the industrial activities would deplete and contaminate the water supply, but also to wonder how such a deal could have been passed.[xi]

In fact, high-level corruption was recently uncovered in the Mongolian case,[xii] leading many to speculate more broadly on the future of democracy under the shadow of MNCs. If one is to take the United States as, in the words of Emma Lazarus, a beacon for the “huddled masses yearning to breathe free,”[xiii] that epitome has already been muddied by the 2010 Supreme Court case Citizens United vs. Federal Election Commission, which deemed unlimited corporate spending in politics an extension of free speech.[xiv] And the legislative branch has not resisted the rolling tide of corporate interests either, as the North American Free Trade Agreement (NAFTA) passed Congress in 1994, essentially creating a “Bill of Rights” for MNCs under Chapter Eleven, such as the right for a corporation to sue a country interfering with its profits.[xv] A famous example is the 1994 case of Harken Energy, in which the Louisiana-based oil-drilling company sued the government of Costa Rica for $57 billion in damages, simply because the Latin-American country had ruled Harken’s offshore platform not in accordance with environmental laws.[xvi] The dispute has still not been settled, with the Costa Rican claiming that it won’t recognize arbitration by the World Bank, leaving many to worry about the integrity of the nation state in a world of profit-driven corporations.[xvii]

While many contend that globalization has lifted millions out of poverty, higher household incomes have seldom been beneficial to the majority of the world’s peoples given how higher inequality has undermined social stability. Eric Maskin, the 2007 Nobel Laureate in Economics and professor at Harvard University, believes that a higher demand globally for skilled workers by multinational corporations (MNCs) polarizes incomes between skilled and unskilled labor.[xviii]  For example, income inequality increased in China by about two percent in the 1980s and two point five percent in the 1990s, one of the fastest rates of growth of inequality in the world.[xix] During the same period, the contribution of wage inequality to total income inequality in China was between one third and one half.[xx]

While research suggests that high income inequality correlates with financial crises and slows growth,[xxi] the divisive trend has also fomented social instability in China, apparent in the one hundred eighty thousand “mass incidents” of civilian protests reported by Chinese sociologists in the past year,[xxii] which led the Peoples’ Republic to spend more on internal police force than on its military in 2011.[xxiii] Although globalization has lifted nearly five hundred million Chinese citizens out of poverty over the past three decades,[xxiv] these gains might soon be outweighed if the “harmonious society” cannot keep its civil unrest in check. 

The economies of developed countries also mirror the Chinese case, as today’s national distribution of wealth resembles that of 1929, suggesting an unsustainable model of growth. Today, the top point one percent of Americans own as much as the bottom ninety percent.[xxv] Meanwhile, the driving forces behind globalization have only afforded the American middle class a one percent increase in income since 2000.[xxvi] Similarly, all European countries, except for France, Hungary and Belgium, have seen their Gini coefficients, which scores national income distribution out of one, rise on average by 0.05 between 1980 and the 2000s.[xxvii]

This inequality has already created a divide in health standards within the populations of rich countries. For example, the difference in average life expectancy between the richest and poorest neighbourhood of Glasgow, Scotland is twenty eight years, with the life expectancy in the poorest borough being eight years shorter than that of the national average in India.[xxviii] This “social gradient of health” is causing alarm internationally, with the Commission on Social Determinants of Health of the World Health Organization (WHO) calling to “close the gap within a generation” in the name of social justice and economic improvement.[xxix] In addition, given the aging of the population in Western countries, many are concerned that retirement pensions of old people will place an unsustainable burden on already struggling economies.[xxx]

In conclusion, the cost-benefit analysis of globalization should be reassessed by the World Bank and the United Nations. In light of globalization’s threats to the food supply and its extensive environmental damage, nation states should deal more cautiously with worldwide integration, lest we want future generations to bear the consequences of our unsustainable growth.

Similarly, developing countries such as China should pass legislation meant to improve the education of their workforce, so that the wage gap between skilled and unskilled workers might be bridged, thereby slowing the dangerous global trends of growing income inequality. Lastly, in order to reinvigorate falling a middle class, developed countries should introduce more social welfare programs that would counterbalance globalization’s polarization of incomes, which is slowing economic growth. Although globalization’s reduction of trade barriers and increased technological exchange have benefited many people around the world, the long term picture is now grim, and it is the duty of the World Bank and the United Nations to take active roles to erase these shortcomings through universal environmental benchmarks and strong legislation on corporate identities.

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