Global Policy Forum

By Elfren Sicangco Cruz

"Globalization today is not working. It is not working for many of the world's poor. It is not working for much of the environment. It is not working for the stability of the global economy ... the West - acting through the International Monetary Fund and the World Trade Organization - has seriously mismanaged the processes of privatization, liberalization and stabilization, and that by following its advice, many third world countries and former communist states are actually worse off now than they were before."

If these words were said by a Filipino or by any Asian or African, it would be considered a radical statement. In fact, when I expressed these thoughts more than a year ago, I was viewed, by some readers of my column, as being leftist and ultranationalistic. In fact, I remember a reader, a Fil-American residing in the United States, angrily wrote that I was wrong to blame the West for the problems of the Philippines.

However, those comments which I quoted in the first paragraph did not come from a radical, leftist third world citizen. It came from Joseph Stiglitz, a highly respected member of the American business and political establishment. Stiglitz is the former chief economist at the World Bank and former chairman of the Council of Economic Advisers of President Clinton. His book Globalization and Its Discontents won for him the 2001 Nobel Prize for Economics. According to him, his book was based on his personal experiences in the World Bank.

Early this year, President Gloria Macapagal Arroyo gave a policy speech after declaring that she was not running in the 2004 elections. We can assume that her policies and programs would now be dictated by the best interests of the people rather than the interests of powerful groups like the United States.

In her policy speech, the President said, "I am adopting tariff policy signals to encourage the manufacturing sector. Our tariff policies were crafted a decade ago in the heyday of globalization. Unbridled globalization is no longer the vogue. The 1997 Asian crisis and 9-11 have since hit us. Our tax collections are short. I am instructing NEDA, DTI and the Tariff Commission not to be married to the idea that our tariff programs can no longer be revised. I am adopting the policy to slow the program pace only to the AFTA and WTO minimums, and to take full advantage of all exception windows allowed, such as for the petrochemical industry."

The reason for this dramatic change in economic policy is very obvious. The main economic concern of this country is poverty which can only be solved by increasing employment opportunities for the poor. GDP growth has remained constant, interest rates have remained low, inflation rates also low and the balance of trade has remained favorable. In spite of all of these so-called favorable economic fundamentals, UNEMPLOYMENT has become higher.

There was a time when unemployment was the problem of the poor and the unskilled. Now, it is increasingly becoming the problem of the middle class and even college graduates!!!

The poverty and unemployment rates today are among the highest in the entire history of this country. There are certainly many reasons for this economic disaster. However, one of the main reasons is certainly a set of misguided policies imposed on this country by the IMF, WTO and the World Bank, with the collaboration of Filipino economists in love with free trade and Western economic fads like global trade liberalization.

In recent years, trade liberalization has led to drastic decrease in the manufacturing sector. This phenomenon has led to closures and retrenchments of many manufacturing plants. This, in turn, has led to hundreds of thousands of people, mainly in the lower socioeconomic income classes, to lose jobs.

President Arroyo understands that ways must be found to encourage the manufacturing sector if the economy expects to create jobs for the poor in the short term. There are only two immediate solutions to this crisis situation. The first is to drop the trade liberalization policies imposed by the WTO and the US government. The second is to launch a sustained Buy Pinoy Movement with the active support of the government.

One of the root causes of all these problems is the misunderstanding of the meaning of the word "globalization." I think the best way to make the term understood is by explaining what it is not. Globalization is not trade liberalization. It also does not necessarily mean a universal culture or a global economy. All these are possible consequences, but it is still up to each country and each economy to determine the extent to which it will allow itself to be affected by the consequences of globalization.

Globalization is the result of a process of rapid innovation and technological change which allows the increasing integration of economies around the world and the movement of people, goods, services and ideas across boundaries.

If one closely studies the definition, it will be obvious that Western countries choose only to encourage those aspects of globalization that is beneficial to them. For example, they will demand the lifting of barriers to the movement of services across boundaries, but, at the same time, will impose strict barriers on the movement of people across the same boundaries.

It would seem to me that the hypocrisy of the West is very obvious. The US and Australia will impose tariffs, provide subsidies and give quotas to protect their own industries like steel in the United States and fruits in Australia. However, if the Philippines uses the same methods, there will be warnings and threats from their officials.

After President Arroyo's speech regarding globalization and reviewing tariff rates, a US assistant secretary for commerce claimed that all countries are now moving towards trade liberalization and that "arguing against WTO is like arguing against the law of gravity."

The American official was either tragically ignorant or blatantly hypocritical. Obviously, he conveniently forgot that even his own country was guilty of going against the WTO unless he assumed that the United States was above such things as international agreements.

Third World countries must heed Joseph Stiglitz's warning when he wrote, "I have written this book because while I was at the World Bank, I saw firsthand the devastating effect that globalization can have on developing countries, and especially the poor within these countries."

Stiglitz gives several examples in his book of countries that did well by defying these international institutions controlled by the West. After the Asian financial crisis, Malaysia imposed capital controls. The IMF and Western economists predicted disaster, saying foreign investors would be scared off for years to come. They expected foreign investments to plummet, the stock market to fall, and a black market in ringgit. In fact, the outcome was different.

Malaysia weathered the Asian financial crisis even better than Thailand. Foreign investors actually increased. Investors are more concerned with economic and political stability and Malaysia had maintained that stability better than its neighboring countries.

China is the other country that Stiglitz uses as an example for following an independent course. China imposed capital and import controls despite the pressure of IMF and the West. It joined the WTO when it felt it was ready and entered under its own terms. Even now, no one can claim that China has fully accepted a policy of trade liberalization.

On the other hand, Russia completely swallowed the liberalization, stabilization and privatization programs of the IMF and the West. The contrast between the two former communist powers is very stark. China has been able to reduce poverty. Russia has seen its poverty rate increase from 2% under communism to 23.8% in 1998.

The lessons for the Philippines are very clear. Globalization and trade liberalization are not laws that need to be obeyed. These are simply economic tools. The goal of our country must be economic growth and political stability. This can only be achieved if we can eliminate poverty.

We can adopt trade liberalization policies if we can provide safety nets for the poor. Since this country does not have the means to do so, then we must aspire for full employment in our economy. This means that the government must take the necessary steps to provide jobs for everybody. If this means abandoning trade liberalization and imposing controls, then let it be so.

Our vision must be a nation where there is an employment opportunity for anyone who needs and wants a job.

Elfren S. Cruz is a professor of Strategic Management at the De La Salle University Graduate School of Business. E-mail comments to This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

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