Mercantilism-Induced Corruption And Global Poverty

Globalization can be thought of as a “widening, deepening and speeding up of worldwide interconnectedness in all aspects of contemporary life” including political, military, economic, cultural, migratory and environmental dimensions of world affairs.

However, it is in the economic and financial spheres and the restructuring of world business where globalization has been more notorious and dynamic. The opening of new markets, expansion of free trade, dispersed production at a global scale and subcontracting characterize this new economic order.

Globalization has been marked by an unprecedented subjection of the international economy to the discipline of a global integrated market under neoliberalism, leaving the traditional nation-state “borderless” and deeply immersed in a highly uncertain socio-political and economic environment.

For those critical of the process, “globalized capitalism” introduced new hierarchies in international politics and required governments in developed and developing nations to internally manage its unexpected social consequences.

Corruption can be understood as the abuse of public office for private gain. Joseph Samuel Nye, an American political scientist defined it as “behavior which deviates from the formal duties of a public role because of private-regarding (personal, close family, private clique) pecuniary or status gains; or violates rules against the exercise of certain types of private-regarding influence”.

The Brandt Line
The global economy is categorized into three, based on economic status of a country, and along the Brandt line of North and South divide. This categorization originated in the late 1960s when first group of Least Developed Countries (LDCs) were listed by United Nations resolution 2768 (XXVI) on 18th November, 1971. Besides LDCs are other categories as the Less Least Developed Countries (LLDCs), Medium Developed Countries (MDCs) and Developed Countries (DCs).

The North-South divide is a socio-economic and political division of Earth popularized in the late 20th century and early 21st century. Generally, definitions of the Global North include the G8 countries, the United States, Canada, all member states of the European Union, Israel, Japan, Singapore, South Korea, as well as Australia and New Zealand and four of the five permanent members of the United Nations Security Council, excluding China.

The Global South is made up of Africa, Latin America, and developing Asia, including the Middle East, and is home to the BRICs countries (excluding Russia): Brazil, India, and China, which, along with Indonesia, are the largest Southern states.

The North is mostly correlated with the Western world and the First World, plus much of the Second World, while the South largely corresponds with the Third World and Eastern world, although Latin America is often thought of as being neither Eastern nor Western.

The two groups are often defined in terms of their differing levels of wealth, economic development, income inequality, democracy, and political and economic freedom, as defined by freedom indices.

Nations in the North tend to be wealthier, less unequal and considered more democratic and to be developed countries who export technologically advanced manufactured products; Southern states are generally poorer developing countries with younger, more fragile democracies heavily dependent on primary sector exports and frequently share a history of past colonialism by Northern states.

Nevertheless, the divide between the North and the South is often challenged and said to be increasingly incompatible with reality since the likes of New Zealand, Australia, Hong-Kong, Taiwan and even china, are located in the south of the Brandt line.

In economic terms, as of the early 21st century, the North, with one quarter of the world population, actually controls four-fifths of the income earned anywhere in the world. 90% of the manufacturing industries are owned by and located in the North.

Inversely, the South, with three quarters of the world population, has access to one-fifth of the world income. As nations become economically developed, they may become part of definitions the “North”, regardless of geographical location; similarly, nations that do not qualify for “developed” status are in effect deemed to be part of the “South”.

Examples of ten global north countries are Canada, America, Britain, Germany, France, Holland, Switzerland, Japan, Australia and New Zealand with ten global south countries being Haiti, Congo DR, Republic of Congo, Burundi, Burkina-Faso, Mali, Malawi, Niger, Zambia, Gambia and Liberia.

These are less industrialized with lower per capital income levels. These can be split into two:

1. Moderately developed countries where per capital income is between $1000 and $2000 with average being $12,000 representing 4.9 billion people.

2. Less developed countries are of lowest income of less than $1000 with per capital of $500.

Child mortality rate is one of the most important measures of the primary healthcare system of a country. It essentially measures the temperature of a whole society. Because children are very fragile and there are so many things that could kill them: germs, starvation, violence, poor neonatal care and so on. As metric child mortality is the number of deaths below the age of 5 per 1000 births or how many children die before their fifth birthday out of every thousand live births. Malaysia has a child mortality rate of 14, meaning 986 children survive out of the 1,000.

Income per capital is a frequently used metric to compare the economic well-being of countries and often used as means of evaluating the living conditions and quality of life. It is derived by dividing a country’s total income (its GDP) by its population. Hence, as a country progresses economically, the country can now spend more on its people, its healthcare, its infrastructure, its energy systems, its education.

The net result: better quality of life and hence an increase in life expectancy. As an overall trend, per capital income has risen up and so has the life expectancy. Countries like India and China who were far apart in the 1960s have caught up with their “developed” counterparts and that distinction is slowly fading away.

Example of this category of countries is India which has grown and matured into a society where in income levels have improved, life expectancy has gone up significantly, both child mortality rate and female fertility rate have declined, literacy rate has been on the rise and access to affordable primary health care is undergoing a major transformation.

The Least Developed Countries (LDCs) is a list of developing countries that, according to the United Nations, exhibit the lowest indicators of socioeconomic development, with the lowest Human Development Index ratings of all countries in the world.

These are a group of countries that have been classified by the UN as “least developed” in terms of their low gross national income (GNI), their weak human assets and their high degree of economic vulnerability.

A developing country is also known as a Low and Middle Income Country (LMIC). It is less developed than countries classified as “developed countries” but these nations are ranked higher than “less economically developed countries.” These countries are characterized by being less developed industrially and a lower Human Development Index when compared to other countries.

However, developing countries do have the potential for high growth and security when evaluating factors including the standard of living, gross domestic product and per capita income. The term refers to the current state of a nation and is not used to determine changing dynamics or future progress.

This category is based on the countries’:
(i) Poverty or Gross National Index over a 3-year period and if fall within the bracket of less than $1,025 as at 2018.

(ii) Human resource indicators pointing to weaknesses in health delivery, nutrition, education and adult literacy.

(iii) Economic vulnerability arising from instability in agricultural production, poor exports of goods and services, and susceptibility to a section of the population being displaced during natural disasters.

The critique
A political corruption is a ubiquitous phenomenon that appears enmeshed in institutional networks at different levels of national political systems interconnected with globalized markets. It is articulated by individuals within political institutions, especially political parties, interacting with society and the global market in the context of diverse sociocultural values and practices.

From a political economy perspective, globalization acts on the supply side of corruption, giving incentives to international business seeking to accede new markets or to displace competitors. It is an external stimulus that made corruption proliferates in the absence of international standards of ethics and regulations sanctioning corruption.

Role of IMF/World Bank
Following WWII, there was a meeting of 44 US-led allied countries at Mount Washington Hotel in Brenton-Woods, New Hampshire USA, in July 1944 where the following three private institutions were created:

1. International Monetary Fund (IMF)
2. International Bank for Reconstruction and Development (IBRD) which later became World Bank (WB)

3. General Agreement on Trade and Tariffs (GATT) which later became World Trade Organization (WTO).

At the said conference, it was agreed that the world trade be conducted with the US dollar and gold price pegged at $35 an ounce. These decisions, from the word go, put the US-led globalized north at unfair competitive advantage, in that, they determined prices of raw commodities produced by the global south, but in turn, priced their finished products at relatively high prices.

The role and track-record of World Bank/IMF in creating socioeconomic parity along the Brandt Line are well-chronicled: these institutions have often prescribed one-solution-fits-all strategies for countries with different economic distress; with extremely stringent conditions which have often proven to be woefully counter-productive.

Corruption started to be considered a malaise harming international competition and foreign investment as well as growth and development in recently democratizing countries. Several studies demonstrated that foreign investment, growth and fiscal revenues were negatively correlated with corruption. As a tax over foreign investment, corruption diminished the profits of business or simply transferred costs to consumers.

It also diminished state revenues since moneys from bribes usually went into the pockets of corrupt elites and not to finance development projects. And when it did, investment went to finance big infrastructure projects and not health or educational programs thought to be the least prone to corruption.

Public works attracts private investment because it is an opportunity for construction firms and/or corrupt governmental officials to grab big sums of money in one quick operation. Besides, for any incumbent government weighing the probability of winning the votes of the unemployed makes public works politically very attractive.

Counter measures
Moreover, it can provide fresh unaccountable resources for electoral campaigns and steady party financing as the cases of Japan and Italy demonstrate. However, it has been demonstrated that increasing openness to trade and integration and adherence to international norms tend to reduce corruption.

As a country’s business people and officials become increasingly connected to the international economy, they become immersed in the transnational business culture and advocate stricter prohibitions against corrupt practices, producing a convergence toward transnational anti-corruption norms.

Several international organizations and governments proposed measures to control corruption. The United States must be credited, through the enactment of the Foreign Corrupt Practices Act (FCPA) in 1977, to be the first government to criminalize the bribery of foreign government officials. It also urged OECD countries to adopt similar legislation by the end of the 1980s.

Whether the United States pursued just a moral goal with the FCPA, caused by the scandals of some American corporations, or tried to improve their competitive edge, promoting business transparency in an expanding world market, is not clear. Apparently, both goals were articulated in the legislation drafted in the post-Watergate era.

However, the modifications introduced in 1988 allowed US corporations certain questionable payments for services and bona fide expenses in host countries. Helping US business compete with European corporations in “Big Emerging Markets” as it did occur under the first Clinton administration, seems to have always been a goal behind the moral anti-corruption US drive.

In fact, Transparency International’s Bribery Index shows that the United States government is perceived around the world as exercising undue influence upon other governments to advance the interests of US business. Nevertheless, Western business and multinationals have great responsibility in the development of bribery and corruption.

Guided by profit maximization and with the apparent goal to report returns to shareholders in their home countries, they have introduced moral relativism in their practices abroad, blaming corruption on locally established cultural and political customs. But what Western businesses have done indeed is to create a myth about their ethics, concealing the reality of corrupt practices at home. Compared to the crude East and Third World practices, corruption in the West seems much more sophisticated.

Breath of fresh air
(c) With these notwithstanding, the advent of emerging powers provides a great deal of fresh impetus to socioeconomic progress of countries of the global south, for these following reasons:

(i) The mode of operation of Breton-woods Institutions where strict and often one-jacket-fits-all counterproductive conditionality are attached to assistance programs, are gradually being out-staged by soft loans and grants from the world’s second largest economic powerhouse, China.

Example is the Silk and Belt policy of China where funds capital-intensive projects in beneficiary countries are provide by Chinese Government, often on Build-Owned-Operate-and-Transfer basis.

(ii) The advent of the West always preferring lending to the countries of the global south at exorbitant interests for capital intensive projects is being eroded by China’s batter policy where countries can secure same funds through exchanging natural resources. Example is Ghana’s bauxite agreement with Sino-Hydro of China.

(iii) capital investments by china are often never tied to domestic dynamics of recipient countries which is in sharp contrast to that of the Western nations’ which sometimes can go as far as meddling in democratic systems to influence process to elect political leadership, based on ideological differences or non-adherence to issues of globally-accepted human-rights practices.

However, the possibility of taking good advantage of rays of hope from the Chinese initiatives and others from the Western World will largely depend on the following home-grown factors:

1. Integrity of leadership
2. Making corruption unattractive
3. People-centered policies
As postulated by the theory of American political scientist and Realist academic Kenneth Waltz(1924-2013), the character of a leader, particularly ideological inclination, heavily influences his/her foreign policy formulation albeit liberalism or Realism.

And since realism focuses on a State’s economic and military might, countries of the global south are largely of liberalist-leaning since that focuses on trade, cooperation and dialogue, due to lack of military might and economic independence. This leader must also have integrity by way of fighting corruption and holding people, including his/her appointees, to account.

We currently have a situation on our hands, as a nation, where a British Serious Fraud Office has uncovered elaborate corruption scheme by a multinational company, Airbus, and top political figures but the conversation has, as expected, been thrown into the arena of NPP-NDC cacophony, instead of removing the veil off these alleged culprits and holding them to account.

With over 70% of population of the global south falling within the youthful bracket, policies geared towards developing and tapping into their full potentials must be the topmost priority.

Failure to train and put this mass of the population structure to productive use, will open them up to overtures from other non-state actors with counter-productive agendas, like Islamic State In West Africa Province (ISWAP), al-Qaeda-linked Boko-haram and al-Shahab terrorist groups on rampage in the Sahel, north-east Nigeria and east Africa regions, respectively.

Justice Abeeku Newton-Offei
International Relations Expert

Source: ayanewz/moderngh.

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