Amiya Kumar Bagchi
The History Of Globalisation
The term globalisation is used in so many ways and in such varied contexts that it seems almost futile to attempt a universally acceptable definition for it. speakers and writers have discussed the impact of globalisation on practically every aspect of human existence, namely, politics, economics, religion, culture, knowledge and science. In this short essay I shall be mainly discussing economic globalisation.
In the economic context the term globalisation is interpreted in two or three different ways. In the first interpretation globalisation is seen as a world – wide phenomenon or process. In this sense globalisation would be like any other phenomenon of the external economic world and as such can only be described and analysed. The analyst would have to remain a passive researcher or a mere witness. The other definition of globalisation is that of a combination of some economic or monetary policies which, when adopted, may lead to the process of globalisation. At present everyone, starting from the International Monetary Fund and the World Bank to the financial advisers of most rich and poor nations, have become staunch supporters of pro-globalisation policies. They have the additional backing of a large segment of the press and the electronic media.
In the economic context the process of globalisation has many dimensions. The first among these is the expansion of international trade. Second is the migration of people to various parts of the world. Third is the flow of cash and other investments amongst nations. The fourth dimension is the capital investment by firms or citizens of one nation in another for purposes of producing industrial, agricultural and consumer goods in the latter and then marketing them there and in other countries. Another aspect of globalisation is the
* An extension of the original paper published in Manorama Year Book 1998 (in Bangla); translated by Bhashwati and revised by the author.
exchange of finance capital between nations or regions. The sixth aspect concerns the impact and influence of multinational companies or transnational corporations (MNCs/ TNCs) on trade, investment and production. Next is the exchange of technology between countries. And finally there is the expansion of international communication networks and the impact of electronic technology on the media in different lands.
It will be obvious from this list that a discussion on even one aspect of globalisation can fill volumes. This paper can merely sketch out a few broad features of the nature and trend of globalisation. It is necessary to mention at the outset that many strands of globalisation have existed since long before the origin of modern capitalism. The history of transcontinental and transnational migration is ancient. Some anthropologists believe that the human race originated in the African continent, and that races found in other parts of the earth have all evolved from groups that migrated from Africa at different points in history. The so-called Amerindian races of the western hemisphere probably have their origin in the East Asian peoples that migrated from Siberia via Alaska into America.
Similarly the spread of technology is also a matter of ancient history. When the ancestors of modern man progressed from the hunting-gathering-survival stage to the taming of animals and cultivation of food, those technologies spread to almost every human group more than five to six thousand years ago. This was followed by the globalisation of the use of copper, bronze, iron and other metal alloys. With the beginning of commerce came the exchange of goods and technologies between different civilisations. Evidence has been found of trade and commerce and technological exchanges between the Harappan and Mohenjodaro and Assyrian civilisations, as between the Gangetic and Roman and Greek civilisations. There is evidence of international flow of traders and settlers the world over. Since the 8th century A.D. and even earlier, Indian traders had formed their settlements in different regions of South-east Asia and a little later in East Africa and its adjoining areas. Likewise Arab traders had established their settlements in all regions along the coast of the Indian Ocean. Exchange of finance capital between countries is also ancient. The `hundis’ of the Indian traders and financiers and the letters of credit of the Armenian traders, or letters of credit from the rulers of the Italian city states of Florence, Genoa and Venice were commonly exchanged. These exchanges connected most European and Asian regions and peoples in a vast economic network. And the history of these international links is more than two thousand years old in many regions. There have been occasional disruptions in the links. Due to wars, revolutions, famines and other calamities, investors and the trading communities have vanished but at no point has international commerce come to a stand-still.
It is important to remember this history because today some writers and the press would have us believe that globalisation is an invention of the last two decades or even less. By committing history to such pits of forgetfulness, we fail to comprehend which aspects of globalisation are actually modern and which aspects of it are inextricably woven into our experiences through recorded and oral histories of the ages gone past.
The origins of a few modern, and the growth of some not-so-modern features of globalisation are linked with the evolution of the capitalist social system in the European continent. Experts believe that broadly speaking, this system evolved between the 15th and 16th centuries A.D. In the Western and Southern European nations, the combined effect of the rise of naval powers, support of the rulers and the enterprise of sailors and traders was such that it opened the routes of transatlantic passage to the two vast continents of North and South America and set in motion the exploitation at will of the human and natural resources available there. Almost simultaneously these western and southern European nations also `discovered’ the sea route to India and south-east Asia sailing from Europe around the southern tip and eastern coast of Africa. As a result of the opening up of these intercontinental sea routes, the control of European traders and ruling classes on overseas trade gradually increased as did the pace and flow of trade. With the total backing and support of their respective governments in 17th century A.D. emerged the East India Companies of England and Holland and a few others like the Ostend and Royal Africa Companies which may be considered the predecessors of the present day multinational companies. The East India Company of England and the East India Company of Netherlands in time established the British and Dutch rule in India and Indonesia respectively.
With the spread of capitalism, finance capital kept flowing outward from nations. First Amsterdam, then London and Paris and finally New York and Tokyo and Frankfurt became the centres of the Capital market. Prior to the 19th century A.C., foreign investments were restricted to cash crops like sugar cane, cotton and indigo and the manufacture of sugar from cane. From the 19th century A.C. onwards we see the beginnings of direct foreign investments in every country in many other areas like the manufacturing of handlooms, electrical and other appliances and machines, mineral oil and other mineral products and the production of consumer goods. It was at this point that a new kind of multinational company was born. These companies were able, without any direct governmental support to establish their production units, mines and offices in more than one nation purely on the strength of their economic power, ability to market their products and highly advanced technologies.
At the end of the 19th century in many countries, specially non- white foreign ruled ones and in Latin America unrestricted trade policies gained ground with the total support of the British government. Thenceforth the flow of international trade changed its shape from that of a stream to a vast ocean. Between the 17th and 19th centuries A.C., the trade of another cruel commodity took on an enormous dimension and it was North America and Europe that became the users of this novel merchandise. This inhuman commodity was a huge mass of captive slaves brought from Africa. Every year thousands of men, women, children and youth were enchained and shipped across the Atlantic to the Caribbean islands, to Brazil, Mexico and the United States of America and deployed there as slaves. Many among them embraced death while at sea. About one crore and twenty lakh slaves were transported from Africa in this manner. This horrible aspect of globalisation almost devastated the whole of western, southern and eastern Africa.
Starting from the 19th century and continuing up to the second decade of the 20th century another stream of humanity spread all over the world. This stream comprised the ordinary European migrants and numbered more than 4 crores of people. These whites established their colonies in the Americas, New Zealand, South Africa and Australia by first eliminating or repressing the native inhabitants of these regions. Around the same time a few lakh people from India also migrated to Mauritius, Fiji, Trinidad, Barbados, Natal and other regions as bonded labour. In Europe after the second World War, migrant workers from Turkey, Greece, Algeria and Morocco were employed in post-war reconstruction work in Germany and France, just as lakhs migrated from the Caribbean isles and the Indian subcontinent to lives of hard labour and low wages in factories, buses, trains and ships of Britain. There was also the incidence of lakhs of people migrating legally and illegally into the USA from Mexico and Latin America to seek livelihood and sustenance. The World Bank, the International Monetary Fund, the United States, Britain, Germany, France and other wealthy nations are great advocates of globalisation in all matters. But in this one matter of the immigration of nonwhites to prosperous countries, they are forever eager to create new obstacles.
Different aspects of this march of globalisation gained momentum in different periods during the rapid advance of the capitalist system. From the second half of the 19th century trade and investments in white-ruled colonies and the migration of Europeans to other countries with the aim of establishing colonies, happened at a very fast pace. However, all of this movement stagnated during the period between the two World Wars, which was the longest critical spell faced by the capitalist system. Again in the post-second World War era, particularly in the three decades of fierce competition between the USA and USSR for the position of world superpower, direct and indirect capital investment, world-wide trade flows and the spread of multinational companies gained great speed. The competition between the US and the Soviet blocks was a powerful support for the governments of underdeveloped, non-white, poor nations. However, government aid from wealthy nations has often been employed for the furtherance of the interests of their MNC’s in the poor nations. One example of this in recent times is the purchase of helicopters from the Westland Company of England by India during the Indira-Rajiv period. The foreign aid which the British government gave to India was subject to the condition that India purchase these helicopters from Westland. Immediately after these purchases were made, Indian lives were lost in accidents involving these helicopters and the helicopters were declared unfit for use. The new government that came to power in Britain in the 1990s under the leadership of the Labour Party renewed the investigation into the matter because it was discovered that British experts were aware even at the time of their sale that the helicopters were unfit for use. At the cost of huge losses to the British government, the Indian defense force and human lives, one British company made vast profits. In the modern world, many MNCs build mountains of profit in a similar manner at the cost of great losses to other nations as well as their own.
Recent history of globalisation
In order to be able to understand the recent history of economic globalisation we need to start from the aftermath of the second World War. Just before the end of the second World War, in 1944, the governments of the Allied forces including the United States met at Bretton Woods in U.S.A. to create two organisations. One was the International Monetary Fund (IMF) and the other was the International Bank for Reconstruction and Development which later came to be known as the World Bank (WB). The chief aim of the IMF was to keep the exchange rates of currencies of different countries from plummeting and establishing the economies. The main objective of the World Bank was to help in the reconstruction of the infrastructures and restoration of the production systems of the war-ravaged countries and to help underdeveloped nations with developmental resources.
Though in name both are international organisations, in practical terms it was the U.S.A. and the allied powers, that is, Britain, France, Belgium, Netherlands and Italy and (1960 onwards) Japan and Germany, that controlled both. Initially the WB gave loans mainly to European nations devastated by war and East Asian countries like Japan, Taiwan, and South Korea which the U.S. considered as citadels to counter Communist China. The task of the IMF was to keep the exchange rates of different countries stable. When for some reason a country faced a deficit in foreign trade, the IMF granted loans to that country to cover the deficit and if the need arose, to accept a devaluation of the exchange rate. It has been shown that till the 1970s, that the IMF would give larger loans on softer terms primarily to the wealthy nations. From the end of the 70’s decade, however, it was mainly the Latin American, African and underdeveloped Asian nations that became the recipients of IMF loans. In the 1990’s were added to this list, the names of the independent nations of the erstwhile USSR.
Among the wealthy nations, the USA remained the most prosperous country through the greater part of the 40s and 50s. There was little visible damage from the wars and in all kinds of technology the U.S.A. was far more advanced than any other nation, its military prowess was the most awesome and it also enjoyed an overall productivity that was several times higher than that of all other nations. Since the onset of the Cold War, the U.S.A., under the Marshall and other plans, extended considerable financial and material support to all the war ravaged nations of Western Europe. After the Communist revolution in China, it offered similar support to Japan. All these nations had huge trade deficits with the U.S.A. but this was not a big problem, because the U.S. government minted more dollars, and made various American companies recover this deficit by investing in Western Europe and some countries of Latin America.
From the mid-60s onwards, however there were drastic changes in this situation. On the one hand, Germany, France and Japan recovered from war-induced destruction, and with the help of massive investments increased their productivity and foreign trade. On the other hand, the productivity growth of the American labour force could not keep pace with that of the major competitors, such as Germany and Japan. And from 1965 onwards, involvement in the Vietnam War raised American expenditure so much that there was a huge and growing deficit in its foreign trade account. As a result of this deficit, foreigners gained billions of dollars which gave rise to the Euro-dollar market centered in Europe. Around the year 1969 foreign shareholders and investors slowly started losing faith in the dollar and in America’s economic policy. The dollar rate was bound to the price of gold: 35 dollars for one ounce of gold. Shareholders (American ones included) started selling dollars for gold and other hard currency. Ultimately the U.S. government was forced to declare that they were no more obliged to give an ounce of gold in exchange for 35 dollars. Consequently the dollar was devalued and its exchange rate was allowed to rise and fall, according to demand and supply, like any other currency.
To this disturbance in the world of international trade and finance capital, a new development was added at the end of 1973. That year in the aftermath of the Arab Israeli War, the OPEC (Organisation of Petroleum Exporting Countries) raised the price of petroleum three-fold at one go. As a result of this all petroleum exporting countries like Saudi Arabia, Kuwait, Iraq, Iran, Abu Dhabi, Oman, Indonesia, Mexico, Venezuela, Nigeria, Brunei etc. acquired unprecedented wealth. Their socio-economic systems and existing infrastructures did not have the capacity to absorb such huge investments. Much of it had to be deposited in the coffers of big European and North American banks like the Citibank, Bank of America, Barclays, Midland Bank and Deutsch Bank. Through them these amounts were used for investment in industrial and other enterprises, in speculation and in giving huge loans to dictator – ruled third world countries. This is how the petro-dollar market was born. Multinational banks, flush with the petro-dollars grew eager to extend loans to the developing nations. Rulers of these nations (Like the Filipino President Marcos), were in a number of cases self-indulgent people or military men turned dictator-cum-politicians. They used these loans, which carried low rates of interest for procuring luxury items for themselves and for opening foreign accounts. It was virtually at this point that the debt problem of most of the Third World countries started (some countries had been enmeshed in the debt trap even earlier but at that time it had not taken on the dimensions of a universal burden).
The debt problem bore its poisonous fruit in the 1980s when the forces of globalisation and the policy of globalisation acquired new speed as a result of the invention of the microchip in 1971. In 1947, three American scientists, namely, Shockley, Bratten & Bardeen invented the transistor. With this, first of all the cost of the wireless receiver was reduced, and later that of television. This enabled ordinary people the world over to become proud owners of television sets. But a far bigger revolution started after 1971 when the Intel company of the U.S. on an order from a Japanese company was able to print entire contents of a computer on a single silicon chip. This was the beginning of the conquest of the world by electronic technology. Through the various media of the telephone, wireless, satellite, television and the press, with the help of these tiny chips, communication networks between individuals and organisations were established world wide. Violating prohibitory government policies, information and news reached all and sundry. The flip side was the far greater capacity of the press and the MNCs to indulge in false propaganda. It also became evident that whoever had greater wealth and capacity to control the electronic media would have greater clout in the world.
Meanwhile, the governments which came to power in Britain and the U.S. under the leadership of Margaret Thatcher and Ronald Regan respectively became staunch supporters of the market. Taxes on rich people were reduced on the ground that this would help raise savings and investments. That, of course, did not happen; instead, the balance of payments and budget deficits of these countries kept growing. To deal with this the American government raised the rates of interest on government loans to high levels, and allowed all manner of finance companies and dealers in share markets to enter the business of giving loans and taking deposits. This right to unchecked movement between the share and debenture markets and the money market is called financial liberalisation or free trade in shares and credit capital. As the USA raised its rates of interest, the principal and interest amounts payable by the Third World countries, already buried under mountains of debt, also increased. To compound this, their exports also took a severe beating due to a depression in the world market. Consequently from 1982 onwards, first Mexico and other major Latin American countries such as Brazil, Chile and then in 1983-84 the Philippines and most countries in Sub-Saharan Africa reached a point where they simply could not repay their debts. Immediately, the IMF, the World Bank, the US and the countries of Western Europe rushed in to contain the damage or else quite a few of multinational banks in these countries would have become bankrupt. A simple and obvious solution would have been to reduce the interest rates from 15-16 percent to 2 to 4 percent and to write off a large part of the debt. The controllers of the world economic policies did not look in that direction at all. Instead they imposed such conditions on the indebted countries that their governments were forced to reduce all expenditure on social welfare and investments on the one hand and lift all controls and restrictions on sources of foreign earnings on the other. In many countries the restrictions on MNC operations and on capital transactions were removed altogether. It needs to be mentioned here that not a single one of these poor countries has progressed beyond paying the high interest and a fraction of the principal amount. Instead to fulfill the conditions imposed by the creditor banks and companies, most poor countries sank into deeper poverty. Nor were they able to enjoy the fruits of free trade and financial liberalisation. The only thing that did happen was that the MNCs and foreign capitalists gained unconditional access to these countries. In exact obverse, we see a toughening of conditions and greater controls over the immigration of nationals of poor countries to developing nations. This can only be called a one-sided globalisation.
There was however, one part of the Third World that was able to increase its national income and general prosperity during the 1980’s. This comprised the two city states of East Asia – Hongkong and Singapore, two small countries Taiwan and South Korea and the world’s most populated country, Communist China. Among these Hongkong and Singapore never had a landlord (Zamindar) class and a principal result of the communist revolution in China was the elimination of the landlord class and handing over of the land to the tiller. Owning to various historical factors, land ownership in Taiwan and South Korea came into the hands of the peasants and the landlord class disappeared. There was also a rapid rise in the literacy rates of the general population in these countries. Around 1995 adult illiteracy rates in China had fallen to 19 percent, in South Korea to 5 percent, in Hongkong to 8 percent and in Singapore to 9 percent. (Compare this to illiteracy rates in South Asia : Bangladesh 62 percent, India 48 percent and Pakistan 62 percent) Relying heavily on a strong sense of nationalism, these East Asian countries re-invested 30-44 percent of their National income, taking ample precautions to safeguard their internal economies from excessive influence of MNCs and increasing trade amongst themselves and with the countries of South East Asia such as Indonesia, Thailand, Malaysia, the Philippines and Japan. By doing this they have established an East Asian stronghold. Over time their trade transactions with other nations have also grown. Taiwan, South Korea and China have further strengthened their economic power by investment in other countries. In India MNCs that have made rapid strides in manufacture and marketing are South Korea’s Daewoo, Hyundai, Samsung – names proclaimed in innumerable advertisements.
Beginning in July 1997, the southeast Asian countries, especially Thailand and Indonesia were badly hit by a financial crisis of the kind that had caused havoc in Latin America in the 1980s and again in 1994-95. One of the four Asian tigers, South Korea was also badly hit. However, unlike Thailand and Indonesia, which were countries that still had landlord – military dominance in the economy, South Korea was primarily dominated by domestic big capital. By the end of 1998, South Korea was already coming out of the crisis, and by 2000 it had got on to a high growth path again, with perhaps a larger penetration of its domestic market by foreign capital. Interestingly enough, China, Taiwan and Hong Kong weathered the financial crisis well. Malaysia also recovered quickly because its government had imposed controls over capital mobility soon after the crisis broke. So determined domestic action orchestrated by a strong sense of real nationalism on the part of the ruling class can still stave off the worst effects of international financial crisis in today’s globalised economy.
To some, globalisation is a matter of statistics, vast incomprehensible numbers like the shape, size and speed of the solar system or the universe. For instance, it may be said that according to the estimates of the United Nations, in 1994, there were 38,541 MNCs in the world and their branches or partners numbered 2,51,450 which implies that if there are 150 small and big nations in the world then each nation houses branches of 165 MNCs. A great number of these 38,541 MNCs (34,543 in fact) are based in the U.S.A., Japan, Britain and a few other wealthy nations. A tiny country like Switzerland alone has 3000 MNCs. In 1991 there were 125 MNC branches or partner companies in India. This number has definitely gone up in the last few years. The total sales figures of all these companies was 5200 billion dollars in 1992 which is 520,000 crore dollars. In comparison the national income of India in 1994 was approximately 29,352 crore dollars. Assuming that the sales of MNCs grew by 10 percent in 2 years then in 1994 that amount was twenty times the national income of 92 crore Indians.
Different kinds of foreign exchange transactions are taking place all over the world everyday, like the exchange of one currency for another, the sale of today’s dollar for dollars three or six months hence, which financiers and investors refer to as Hawala. Let us get an idea of such foreign exchange transactions of banks worldwide. In April 1995 daily forex transactions of the banks amounted to 1190 billion or 1,19,000 crore dollars, and this amount was 70 percent higher than that of 1992. The shortfall or excess in forex in any nation is handled by importing or exporting capital. An interesting fact is that even though the U.S. is the richest nation in the world its forex deficit from 1980 onward has grown more than that of any other country. In 1994 its external trade deficit was 15,120 crore dollars – India’s trade deficit during 1994-95 being 3,369 crore dollars. But the U.S. has not had to exert itself to reduce this deficit – because foreigners have purchased bonds and shares worth 4,260 crore dollars. Foreign banks have invested in the U.S. to the tune of 11,530 crore dollars. Foreign governments, central banks and non-governmental companies have purchased letters of credit worth 4,250 dollars from the U.S. government (and this is only an approximate tally).
It is considered one of the positive results of globalisation that foreigners invest in poor countries and help raise their productivity. This is normally called foreign direct investment. But this direct investment still mainly flows from one wealthy nation to another. In 1994 the amount of, foreign direct investment globally was 22,569 crore dollars, out of this 13,498 crore dollars was investment between wealthy nations. Direct foreign investment in poor countries in the same year was 8,444 crore dollars which is less than two-thirds of the flow between rich countries. And a lion’s share of this was invested in China and the countries of eastern and south eastern Asia. In China alone was invested 3,380 crore dollars, 790 in Singapore and 450 in Malaysia. In comparison foreign direct investment in India in that same year was approximately 95 crore dollars. To grasp the true dimension of direct investment in poor countries we have to go back a few years. Between 1983 and 1988 the total annual foreign investment the world over amounted to 9,155 crore dollars, out of which the share of the rich nations was 7178 crore dollars, and developing (largely poor) nations had 1976 crore dollars in their logbook – which was a little more than 1/4th of the amount invested in the rich nations. It needs to be added here that the lion’s share of the foreign direct investment in East and South-East Asia origins in those same regions – specially Japan, Taiwan, Singapore, Hongkong and communist China – countries that have reached self-reliance through social revolution, mass literacy and a strong sense of self-respect. It is these nations alone that have been able to witness this positive aspect of globalisation. Any hope that countries like Bangladesh, Pakistan and India may experience a similar fate has little basis in their current social and political structure.
India and globalisation
It has already been stated that India’s links with the rest of the world in the fields of education, technology and trade were ancient, and did not originate with British rule. In the second half of the 19th century the British rulers imposed the policy of unrestricted trade on India even though a majority of nations that engaged in trade with India did not have a free trade policy. Moreover the prices that Indian manufacturers received from trade with Britain were much lower compared to the prices available in other countries. This has been called `one-way free trade’ by R.P. Dutt (1949). It is sometimes claimed that there was a strong flow of foreign investment to India at this time. But that investment was a mere fraction of the profits that foreign (mainly British) traders made here. Over and above this, a large part of this investment went back to Britain in the form of taxes and the maintenance and expenditure of the British administration and army.
In the first two and a half decades after Independence, India’s association with foreign countries changed quite a bit. Restrictions and regulations that were placed on export-import trade and on forex transactions during the second world war were continued and in some cases further tightened. The raising of money by issuing equities and debentures in the share market also continued to be controlled. A few new financial organisations were started in the public sector and through them subsidised industrial loans were offered. After the nationalisation of banks in 1969, some economic sectors such as agriculture and small-scale industries were given higher priority and provisions were for made for bank loans at low interest rates.
During a part of these decades, particularly during the eight years from 1956 to 1964 the country witnessed rapid industrialisation. Quite a few industries developed. In the last part of the 1960s the Green Revolution started. This was possible initially with the help of foreign technology and use of high-yielding varieties of seeds in the cultivation of wheat and rice. But a pre-requisite for The Green Revolution to occur is a sound irrigation system and extensive use of fertilisers. As a result of use of HYV seeds, higher doses of fertilisers and irrigation, and the hard work of farmers, many parts of the country experienced unprecedented growth in agriculture. But in a majority of the districts, land-ownership remained concentrated in the hands of landlords and the literacy rates remained poor and the spread of literacy moved at a snail’s pace. In the absence of an adequate social and political system that could put to optimum use the rapid advances in international trade and technology, the rate of economic development in India occurred at a much slower rate than in East Asia. The share of exports in India’s national income was 4 percent in 1965 and 5 percent in 1983. That it should be a small part of the national income is understandable, considering the vastness of the country. In comparison, the share of foreign earnings in Sri Lanka was 38 percent of the national income in 1965 and 26 percent in 1983. But in the case of India an additional reason for such a low percentage was our relative neglect of foreign trade.
But in favour of the Indian economic policy of the period, it has to be said that India had still not fallen into the foreign debt trap. In 1970, India’s foreign debt was 794 crore dollars. In 1983 it grew to 2128 crore dollars. In comparison, in 1983 the external debts of Brazil, Argentina and Mexico were 5806 crore dollars 2459 crore dollars and 6673 crore dollars respectively. It is generally understood that if the amount needed for repayment is only a small fraction of the export earnings then the burden of debt is low. It is taken as a danger signal if the fraction begins to approach 30 percent. For India, this ratio was 22.0 percent in 1970 and fell further to 10.3 percent in 1983. In the case of Brazil it was 12.5 percent in 1970 and 28.7 in 1983. In the case of Mexico it was 23.5 percent in 1970 and 35.9 percent in 1983.
In 1985 – the first full year of Rajiv Gandhi’s Prime-Ministership – major changes were brought about in India’s economic policy and this partially changed the nature of globalisation as far as India was concerned. During his stewardship tax rates on higher income groups were reduced and government expenditure kept rising. It was decided that raw material and other resources for large projects would be imported without restrictions. As a result of this and a few other similar changes the central budget deficit and the foreign trade deficit started growing. To meet this shortfall, huge loans were taken from foreign banks and other financial institutions. The greater the debt, the higher was the interest rate charged and the tougher became the conditions imposed by the creditors.
Though Rajiv Gandhi lost power in 1989, the new Janata regime made no changes in his economic policies. On the contrary, the government declared that soon the rupee would have to be drastically devalued and major changes would take place in the foreign trade policy. To benefit from the possible devaluation, financiers and capitalists started smuggling crores of rupees out of the country. This was a big drain on the foreign exchange reserves. To handle this situation and partly to fulfill expectations raised earlier, the Narasimha Rao government, on coming to power, sought a loan from the International Monetary Fund. As per the condition of the loan, the value of the rupee was brought down by 18 percent in July 1991. And by 1993 all controls and regulations were lifted from the current foreign exchange transactions of India. Among other major changes introduced by the Rao government, were the near total lifting of regulations on foreign investment, reduction in import duties and the replacement of quantitative restrictions by duties, removal of almost all government regulations from the share market, license to monopolies and large business houses for (unconditional) investment and the loosening of the Reserve Bank’s control over rates of interest charged by banks and other financial institutions.
Even if there is no direct government surveillance in the share markets of countries like the U.S.A. and Germany, vigilance commissions of the stock exchanges themselves keep track of each and every transaction. In our country the share market is largely controlled by brokers, speculators and corrupt financiers. So with the lifting of government controls, the share prices immediately shot up and on the other side a nexus of corrupt businessmen and bank officials simply removed more than Rs.5080 crores from the scene in Bank scams. It is well known that Harshad Mehta’s skills had a hand in this but the lead roles in this drama were played by a handful of foreign banks like the Citibank, Grindlays Bank and the Bank of America. These bank scams are a glaring example of how damaging a careless globalisation policy can be to a nation’s economy. Thousands of middle and lower income group people have seen their hard earned savings vanish in this balloon-like inflation and deflation of the share market in a short span of two years.
Immediately after the introduction of the new economic policy India witnessed a major decline in industry. But the rate of growth of the national income packed up from 1992-93 to 1995-97. The explanation for this lay in successive good monsoons. Only during 1995-96 was there a fall in agricultural production. Industrial progress was good between 1992-93 and 1995-96 – a large share came from the manufacture of various models of cars for the upper and middle income groups, washing machines, refrigerator etc. But the beginning of 1997 has seen a slowing down in industrial growth. Manufacture and sale of many cars has gone down. The rapid rise over the last few years, in the export sector has ceased. Actually India’s deficit on trade account has grown from 405.6 crore dollars in 1993-94 to 1241.6 crore dollars in 1996-97. The most important role in filling this gap has been played by the earnings sent into the country by Indian migrant labour and by Indian doctors, construction workers and engineers employed abroad. In the year 1993-94 this amounted to 526.5 crore dollars and in 1996-97 it went upto 1158.3 crore dollars.
It is claimed that a positive result of India’s new economic policy is the rise in foreign investment in the country. In 1993-94 the total foreign investment amounted to US 423.5 crore dollars and to 535.8 crore dollars in 1996-97. And even out of this only a fraction is in the form of direct investment. The rest of it took the form of purchase of shares from Indian manufacturing companies, thereby granting greater controls to the foreign companies. In this way Coca-cola has purchased Parle’s Thums Up and other Indian cold drink brands, and Hindustan Lever has bought Tata Oils Mills Company. In many cases foreign companies have become the major manufacturers of goods consumed here. Besides, if foreign investment has gone up, it must be remembered that the shares of profits accruing to the foreign companies investing here, payable only in foreign exchange, has also gone up. In 1993-94 the amount payable was 327 crore dollars and in 1996-97 it stood at 390 crore dollars.
Like any other nation in the world, India too is a part of the system of global economy, of global communication and of global technology. In the remotest of villages, and the tiniest of Himalayan hamlets today we see television antennas. In the video parlours of cities, in towns and villages, even the most ordinary and the poorest of people can witness through the television live cricket matches being played in another part of the world, or experience the grief of the stricken masses in Britain at the death of Princess Diana. But man or woman does not benefit from the role of viewer or audience alone. One can hear complaints from every household about the negative influence of television on children’s education, addicted to this passive viewing. Many children all over the world are not even becoming literate nor learning any practical skills. Luxury items produced by highly advanced national or international technologies remain out of the reach of most Indians and these technologies are not even providing more employment or better work opportunities. The diktats of the World Trade Organisation have ensured that the results of research and technology will not be enjoyed by the citizens of this country. In many cases MNCs will claim that they have a patent on those technologies. Meanwhile a conspiracy is on to patent the ancient knowledge bases related to native products like turmeric and neem which will place even these beyond the reach of the common man. To eradicate these ill effects of globalisation, India will have to pay far more attention to the task of social reconstruction. It will also have to evolve ways in which we can access the body of world knowledge and culture without being totally dependent on foreigners. There is a lot we can learn in this context from countries like China, Japan and South Korea. Learning to deal with globalisation must become an integral part of our education system.
Select references :
Bagchi, A.K. 1992. Transnational banks, US power game, and global impoverishment, Economic and Political Weekly, 27(22), 30 May, 1133-36.
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