Globalization: A Tool Used To Stunt Third World Growth

"From the suites of Davos to the streets of Seattle, there is a growing consensus that globalization must now be reshaped to reflect values broader than simply the freedom of capital." (Sweeny) Globalization is a force which is presently being used only in the sense of "the freedom of capital" (Sweeney); something which is not all that free. This is discussed in Stilglitz's Globalization and Its Discontents, and in Escobar's Encountering Development: The Making and the Unmaking of the Third World, whereas globalization should be viewed as an instrument to facilitate the use of an untouched global free-market system. In addition, global institutions should use upgrading and innovation globally to help with third world's development, as discussed in Humphrey and Schmitz's Governance and Upgrading: Linking industrial Clusters and Global Value Chain Research, and in Freeman's A Schumpeterian Renaissance? However, in using what are thought to be helpful market-recovery institutions, such as the IMF (International Monetary Fund) and the World Bank, the hidden agendas of the United States and developed countries are crippling the growth of the under-developed countries. Thus, the attempt by developed countries to help third world countries is misguided, when it should be encouraging an untouched global free-market system and a culture of innovation.

At the outset of Globalization and Its Discontents, Stilglitz discusses the IMF's failure as a facilitator of global stability in the global marketplace. Stilglitz goes on to say that the IMF of the past is very different from the IMF of today. In the past, the basic ideology behind the IMF was to fund the country in severe economic downturn, so that it would seem creditworthy. The country could then fund basic expenditures and tax cuts, which were needed to help stimulate the economy with expansionary policy intent. The IMF of the present, however, is run by market fundamentalists that believe that markets work well on their own and the country's government intervention would be a negative one, but the IMF (in the name of monetary policy) can intervene as it pleases with a contractionary policy intent. Stilglitz believes that the IMF intentionally worsened the problems they were trying to remedy through stabilizing exchange rates so that speculators could gain in a country's loss, by paying out a country's bankruptcies to creditors (usually developing countries banks) which diminishes any real risk or need for insurance. It might be unclear, but Stilglitz's intent is to show, that there was a good chance that a developing country, such as Colombia or Brazil would repay its debt to the IMF in a few years, after it regained its fiscal footing. Stilglitiz believes that shows that the IMF is a weapon used by creditors to insure they get repaid their investment. He then deduces that if creditors always get repaid then there is little to no risk and no need for any insurance. Stilglitz goes on to conspire that this is an actual agenda held by the financial institutions and those who run the IMF have a "quid pro quo" (Stilglitz, 207) deal with these institutions. In particular, Stilglitz explains how Korea and Thailand fell into this trap of taking an IMF loan, which sustained the exchange rate for American and European creditors so they could speculatively get their money out of the country at a decent exchange rate and get repaid part or all of the debt that was owed to them, even though the risk behind such loans should be punishing the creditors. Korea and Thailand's citizens repaid the IMF dearly in taxes for quite some time. Definitely, the creditor should be at as much fault as a the borrower when the loan is defaulting, as obviously the creditor did not do his homework in checking the borrower's credibility-- this is abuse is very frequent when your repayment is very much guaranteed by the IMF. Stilglitz postulates that the IMF is intentionally trading the troubled country's economic stability and best interest for the fulfillment of the IMF's agenda.

Similarly, in Escobar's Encountering Development: The Making and the Unmaking of the Third World, it is discussed how the World Bank is preying on the poor in under developed nations by putting their own interests ahead of those who need aid the most. Escobar postulates that the banks of rich countries loan dollars to the third world country banks. These loans then go to projects that involve international bidding, and all projects the World Bank coordinates are "mostly awarded to multinationals and experts from the First World..." (Escobar, 165) Escobar believes that the World Bank is creating new opportunities for Multi-National Companies, from developed countries, by way of investment in "transportation, electrification, and telecommunication projects..."(Escobar, 165) And that the bureaucrats of the World Bank, as Escobar discusses, are development tourists, not because they receive exorbitant salaries, first-class travel or that they stay in the best hotels-- it is because they visit the troubled countries capital cities on trips and view the problems it deals with in a "neoclassical economics" (Escobar, 165) sense. This means, as Escobar explains, that the World Bank never discusses the problems, but looks at ways to make money by creating reports that speak more to the Bank's "cost-benefit analysis" (Escobar, 165). An example how the interests of the World Bank are its own, is quite obvious when Escobar explores how the World Bank's number one priority was on electricity generation and water was not as big of a concern, thereby showing a "lack of concern for the welfare of poor people" (Escobar, 167). Escobar believes that the World Bank could be used as a development apparatus in many ways, but that it has fallen to the "cultural imperialism" of the developed world.

In Humphrey and Schmitz's Governance and Upgrading: Linking industrial Clusters and Global Value Chain Research, the authors describe something which could quite possibly help to grow the third world countries. Their contention is that upgrading helps to innovate and increase competition globally. The authors believe that firms in developing countries can improve their performance through upgrading to efficiently produce more sophisticated products. It is then hypothesised that upgrading and innovation are present in the developing countries, however, it is only to the benefit of the transnational companies who are orchestrating such production. The transnationals of the developed countries, Humphrey and Schmitz believe, are using the third world country companies to their benefit. They believe that the solution lies with the clustering of local companies for innovations in production