The McWorld raiding the Culture

Today’s global economy has a tendency to insulate consumers from the various negative impacts of their purchases by stretching the distance between different phases of a product’s lifecycle—from raw material extraction to processing, use, and disposal. Yet at the same time, social challenges accompanying economic globalization call for innovative forms of political mobilization across international borders. Shifting to more sustainable patterns of consumption and production worldwide will require pursuing new ground rules in order to forge a global economy based on protecting cultural values.

What we see is the onrush of the economic, technological, and ecological forces mesmerizing peoples everywhere with fast music, fast computers, and fast food—one McWorld tied together by communications, information, entertainment, commerce and especially the culture.

Today, the global spread of McWorld is rapidly bringing the consumer society of USA to the rest of the planet. The globalization of the consumer economy is closely linked with the general economic boom and growth in the movement of goods, services, and money across international borders, which accelerated during the 1990s.

McDonald’s operates 30,000 restaurants in 119 countries and serves 46 million customers each day. Its total revenue was $15.4 billion in 2002. On opening day in Kuwait City, the line for the McDonald’s drive-through was over 10 kilometers long. McDonald's has also spread expeditiously across Pakistan in almost 5 years with 18 restaurants in major cities. Strangely, there is no McDonald’s outlet in Peshawar and Quetta. McDonald’s costs the same in Pakistan as in the US, and given the per capita GDP disparity between the two countries, it is the cheapest food in one country, while being one of the most expensive in the other.

Pizza Hut also operates a chain of outlets in Pakistan and planning further to invest approximately 1 billion rupees in expansion. The money is being used to open 20 new outlets.

Coca-Cola sells more than 300 drink brands in over 200 countries. More than 70 percent of the corporation’s income originates outside of the United States, and its net revenues reached $19.6 billion in 2002.

Meanwhile, corporate strategies focused on boosting consumer demand in Pakistan have lead to increases in purchases of all manner of goods, from cars and televisions to paper and fast food. While it is ethically problematic to suggest that developing countries are not entitled to have the same options for material consumption that have long been taken for granted by western consumers, the global adoption of industrial country–style consumption patterns would place unbearable strains on local cultures.

The 1990s saw the emergence of many important international agreements and commitments embracing the need to transform unsustainable patterns of consumption and production. Agenda 21, the action plan that emerged from the 1992 Earth Summit in Rio de Janeiro, called on international institutions and national governments to promote greater energy and resource efficiency, minimize waste generation, encourage environmentally sound purchasing, and shift toward pricing systems that incorporate hidden environmental costs.

The UN Commission on Sustainable Development has provided a useful annual venue for governments and others to discuss consumption and production issues. The deliberations have produced little concrete action though. There is no voice raised for conservation of social values.

At the 2002 World Summit on Sustainable Development in Johannesburg, South Africa, governments agreed to develop a 10-year framework of programs to accelerate the shift toward sustainable consumption and production. These include offering a better range of products and services to consumers, providing more information about the health and safety of various products, and establishing programs of capacity building and technology transfer to help share these gains with developing countries. The World Summit also generated more than 230 partnership agreements among diverse stakeholders.

The Organization for Economic Co-operation and Development has sponsored a series of meetings and papers aimed at encouraging governments to implement innovative sustainable consumption and production policies.

In all these forums, apart from consumption and production, no emphasis is laid on the issue of social influence. Unfortunately, the limited gains made since 1992 in shifting toward more-sustainable patterns of consumption and production have been largely overwhelmed by the continued global growth of the consumer society. The controversial lifestyle issues continue to haunt.

The breakdown of WTO negotiations in Cancún in September 2003 provided reform-minded governments and activists with an opportunity to push for bringing future trade negotiations into better balance with sustainable development concerns. The way forward, nevertheless, is not yet clear.

Several new initiatives have emerged in the corporate and financial sectors, including the United Nations’ Global Compact, which calls on participating companies to integrate nine core values related to human rights, labor standards, and environmental protection into their operations, and the Equator Principles, which call on leading banks to manage environmental and social risks in their lending operations.

The international trade negotiations can provide opportunities to push for policy reforms needed to promote more-sustainable consumption and production. All the same, WTO rules and negotiations can also be used to protect cultures and social taboos of the host countries of MNCs.

Brands like McDonald’s, Pizza Hut, Pepsi and Coca-Cola are not just cultural aggression but also an expression of power; once America lost its power these will go. It is nonetheless impossible to filter culture. In the past we hated the British raj but gradually adopted its symbols. Today we hate America and don’t want to adopt what we think is its culture. Pakistan must save its own culture to counter the onslaught. There is a need for reform in our culture, but this should not be obfuscated through this hatred or that. The only answer to the American cultural onslaught is the protection of Pakistan’s own culture. www.asifjmir.com

Cutting out a Pro-Poor Budget

In developing countries each time the budget has come, it means the elimination of benefits for the poor and elevated benefits for the rich. The hopes of the governments for making their countries as the most vibrant economies are laudable but the development policies have no relevance to the man in street.

The majority of the people in poor countries yearns for a pro-poor budget. Promoting pro-poor growth requires a strategy that is deliberately biased in favor of the poor so that the poor benefit proportionally more than the rich.

In general a pro-poor budget is one that takes into account the needs of the poor. It is one that seeks to make a difference in the lives of the poor. It is one that would impact positively on the poor so as to enable them to actively participate in and benefit from the process of development. A pro-poor budget would enable the poor to have increased opportunities In order to be healthy, educated, productive and responsible people. Such a budget would have to have a deliberate bias so that the poor would benefit proportionately more from government expenditure than the rich.

The first step in achieving a pro-poor budget is the identification of who the poor are. The understanding and measurement of poverty has evolved over time. Today it is generally accepted that poverty is not only a money related deprivation, but a combination of several deprivations that result in lack of well being. Consequently budget provisions must respond, to this complex situation of poverty. This is no easy task. In formulating a pro-poor budget there is need to have up to date information of the levels, intensity and types of deprivations that make up poverty.

There are many reasons, both practical and strategic, to establish a conceptual linkage between gender and poverty for promoting gender-sensitive budgets. It would be a mistake to simply equate the two categories. Gender imbalances and inequalities should run across every social, economic and political classification. The exclusion and deprivation experienced by the poor is not the same, and tends to be even more acute for women than for men. Gender allows us to stop envisioning the poor as a homogeneous category of people, whose needs can be addressed in a uniform way.

Pro-poor growth should direct resources disproportionately to the sectors in which the poor work (e.g. agriculture), areas in which they live (underdeveloped regions), factors of production which they posses (such as unskilled labor), outputs, which they consume (such as food), translated into strategy of pro-poor growth - employment generation combined with price stability of goods and services which are essential items. Policies need to be designed to reflect concerns of poverty.

In order to address poverty effectively the budget will need to have more direct rather than indirect means of taxation. This would help reduce prevailing high-income inequalities and help spread the benefits of economic growth.

Pro-poor growth means that the poor benefit disproportionately from economic growth. This is to say the proportional income growth (i.e. their income growth rate) of the poor must exceed the average income growth rate. The per-capita income growth rate of the poor must exceed growth rate.

Three obvious policy messages emerge. First, policies to promote growth should help the poor although they could do so more if they made growth pro-poor rather than neutral as it currently is. Second, reducing initial inequality, particularly asset inequality, should receive highest priority, due to its triple effect on poverty. Third, reducing gender inequality should equally be of highest concern to policy makers that want to achieve pro-poor growth.

It is clear that pro-poor growth that directly reduces poverty must be in sectors where the poor are and use the factors of production they possess. The vast majority of the poor is in rural areas, a majority depends directly or indirectly on agriculture for their livelihood, and the factor of production the poor possess and use most is labor, sometimes land, and even more rarely human capital. Thus pro-poor growth must be focused on rural areas, improve incomes and productivity in agriculture, and must make intensive use of labor. These things are nearly tautological, but often forgotten and are clearly not reflected in public policies or in the allocation of public funds by national governments or donors.

Heavy investment in the human capital of the poor will yield two benefits on poverty reduction. It will increase economic growth and it will make growth more pro-poor. The record of East Asia is a good illustration where high human capital accumulation promoted growth and poverty reduction.

Beyond a concern for increasing average incomes and reducing poverty, there is a greater appreciation for a need to enhance the security for the population if one is to ensure sustainable pro-poor growth. The security of the poor is threatened by physical threats. Thus, the poor are forced to avoid risks that may carry high rewards, can get trapped in cycles of poverty and insecurity, and are regularly pummeled by shocks that militate against sustainable reductions in poverty.

Our budget-makers need to remember that real enemy is poverty and deprivation, that their key weapon is their skill and professionalism and that their modus operandi is their humility. They are the custodians of a value system that defines our objective as demonstrating every single day that we are a caring democracy.

Attaining a pro-poor budget is a big challenge. It requires a bottom-up approach; that ensures that poverty eradication is a central issue and not a donor driven requirement. The principles of equity and accountability with particular attention to efficiency and effectiveness have to be continually respected at each stage of the budget process. www.asifjmir.com

Globalization & the Poor

The urbanization of poverty is being propelled by a tremendous increase in the transnational movement of people and capital. The rapid transfer of money and jobs to cities and countries where cheap labor can be found has fueled by a race to the bottom. For the urban poor who are impacted by this race, there are no winners, and the losers will most likely find themselves among the projected two billion people who will be living in slums by 2030.

Hardest hit by globalization are women and children - the most vulnerable of urban dwellers. Poor women are becoming increasingly marginalized as the feminization of poverty manifests itself in many parts of the world.

The positive aspects of globalization, including greater longevity, increased literacy, lower infant mortality and wider access to infrastructure and social services, mask the unfortunate truth that these benefits are not being shared equally. The effects of globalization on cities – both positive and negative – need to be better understood if public policy is to be effective in bettering the lives of those who live in them.

Under globalization, manufacturing activities in cities have been relocated offshore to the developing economies whose lower labor costs, lower taxes and less rigorous environmental protection enable higher profits. The socio-economic consequences of globalization weaken access to basic infrastructure and housing, fuel the creation and expansion of slums, and reinforce the negative environmental and health impacts affecting the urban poor in many cities.

Demographic shifts, including transnational migration and poor integration of ethnic and racial groups, add impetus to these changes. So, too, does the ability (or not) of households and individual people to cope with rapid economic change. Those on the losing end of these changes can easily find themselves confronted with the loss of jobs, and the consequent sale of assets in order to survive, converting them into the new poor, leaving them even more insecure and vulnerable in the face of economic change.

The last two decades have witnessed a transformation of the global economy, which has led to vast economic, social and political realignments in many countries and cities. The trend towards open markets has enriched some countries and cities tremendously, while others have suffered greatly. World trade in this period has grown from about US$580 billion in 1980 to US$6.3 trillion in 2004—11-fold increase. Flows of capital, labor, technology and information have also increased tremendously.

Among the losers in this race are female workers, whose wage levels and working conditions have declined as a result of the dropping of barriers to footloose industries. This same dynamic is evident inside individual cities as well, leaving many people unable to obtain stable jobs and incomes. This leads to changes in patterns of social inclusion and exclusion across cities, often along racial and ethnic lines.

The distribution of the fruits of globalization reflects private-sector judgments about the expected financial returns to these investments, their security, and the economic and political environments in which they occur. Corporations have tended to concentrate direct investment in ten countries, including China, Brazil, Mexico, Indonesia and Thailand. In stark comparison, the poorest countries have seen no such investment.

The vacuum created by footloose industries is rarely filled by job opportunities for the poor. Rather, any new jobs tend to be in knowledge-intensive industries, many requiring university-level education.

The race also occurs within individual cities, resulting in job losses where large segments of the labor force have to shift from one sector to another. The urban poor are losing jobs and benefits and must now find other income-generating opportunities in the informal sector, which offer no security or benefits.

The loss of secure jobs with secure community roots fosters an informalization of the urban economy, with more people eking out a living in unregulated sectors. Several economic processes converge to informalize employment and other aspects of urban life. The closing of formal-sector enterprises often coincides with the downsizing of ancillary industries and services. As one industry declines – as with light engineering in Karachi - incomes in the city as a whole reduce. Former employees are no longer able to purchase services on the street; hence, street vendors also suffer. Simultaneously, if utility tariffs increase, other enterprises suffer and are forced to reduce their operations or close altogether.

Globalization has set cities against each other in a desperate competition for a share of highly mobile capital and trade. The needs and desires of global capital must be balanced with policies based on the needs of the region’s own inhabitants. Otherwise, any effort to alleviate urban poverty will expire, as meaningless gestures that provide little more than temporary relief – and the gap between rich and poor will continue to grow larger.

Jobs, consumption patterns and opportunities for social mobility are all easily influenced by external factors. This instability can be manifested in both national and local contexts through at least four important channels: patterns of investment, labor markets, prices and public expenditures. Moreover, they occur in different locations within the city, creating patchworks of decay, renewal, and economic revitalization. The challenge for national and local authorities is to identify which kinds of changes are occurring, or better still, which types of changes can be anticipated, in order to consider whether there are measures that can cushion or mitigate these impacts. To do that, changes must be anticipated and capital set aside to deal with them.

While government may feel its budget is severely constrained, it needs to apply discipline to save some of their resources for these future needs. This does not mean borrowing and thereby passing on debts to future generations. It means saving for the future. In reality, this saving is an insurance policy against future unknowns. Having such resources at hand allows decision-makers to face the future more confidently and to smooth out the impacts of volatile changes in the global economy at large. (www.asifjmir.com)