(THIS IS THE THIRD OF THREE FILES INTO WHICH "GLOBALIZATION: THE CONVERGENCE ISSUE" IS DIVIDED.)
(Updated 11/01/08)

~ TABLE OF CONTENTS ~

(1) ~ INTRODUCTION (In another file)
(1-A) ~ Physics of Globalization ~
(1-B) ~ Historical Background of "Free Trade," ~
(1-C) ~ Current Status of the Globalization Process, ~
(1-D) ~
Our Bipolar World - The Context of Globalization ~

(2) ~ DOES GLOBALIZATION PRODUCE CONVERGENCE? ~ (In another file)
(2-A) ~ Can Non-mobile Factors Prevent Convergence? ~

(2-B) ~ So is there a Faustian Bargain?

CHAPTER 3 ~ THE CONVERGENCE PROCESS ~ (In another file)
(3~A)~Economic and Social Effects of Trade Deficits
(3~B)~Effects of Trade Deficits on the US Economy ~
(3~C)~Policies for Dealing with Globalization ~

CHAPTER 4 ~ EFFECTS OF, AND RESPONSES TO, CONVERGENCE ~ (In another file)
(4~A)~The Subsistence-Level Labor Pool Constraint on Real Wages ~
(4~B)~Some Optimistic Studies ~
(4~C)~Some Case Histories of the Links between Globalization and Economic Growth
(4~D)~Some non-Optimistic Studies ~
(4~E)~The Out-Sourcing-In-Sourcing Debate ~
(4~F)~Blaming Globalization or Blaming its Context - And Does it Matter? ~

CHAPTER 5 ~ FINANCIAL CAPITAL CONSTRAINTS ON CONVERGENCE ~ (First Chapter in this file)
(5-A)~ The Role of Population Growth Rates
(5-B)~ Cost/ Time Frame for Reducing the Developing World's Financial Capital Problem
(5-C)~ The Role of Capital-Intensive Agriculture
(5-D)~ Capital-Intensive Agriculture: A Route to Developed World Status?
(5-E)~ The Role of Foreign Investments, Loans and Development Aid

CHAPTER 6 ~ NATURAL CAPITAL CONSTRAINTS ON CONVERGENCE ~
(6-A)~ Footprint Analyses ~
(6-B)~ Net Primary Production Analyses ~
(6-C)~ Neglected Issues ~

CHAPTER 7 ~ THE CONVERGENCE POINT ~
CHAPTER 8 ~
STRATEGIES FOR LIVING WITH CONVERGENCE ~
(8-A)~ The Threats Posed by Deflation ~
(8-B)~ Capital Utilization Efficiency - A Partial Cure for the Ills of Globalization ~
(8-C)~ Natural Capital Utilization Efficiency and Conservation - Another Partial Cure ~
(8-D)~ Reducing Population Growth - The Crucial Issue ~
(8-E)~ The Time-Frame Issue ~
(8-F)~ Demographic Bonus Investment Options ~ [8F1]~Sub-Saharan Africa, [8F2]~India and Southeast Asia, [8F3]~Irrigation, [8F4]~Non-Irrigated Croplands, ~
(8-G)~Other Strategies ~ [8G1]~Wild Fisheries, [8G2]~Immigration Policies, [8G3]~Raids on Developing Nations' Human Capital, ~
(8-H)~The Limited Potential of Available Options ~ [8H1]~Historical and Geographical Fundamentals, [8H2]~Religious Constraints,

CHAPTER 9 ~ POLITICS OF GLOBALZATION - déjà vu
(9-A)~ Old Rules and New Rules ~
(9-B)~ The New Environment ~
(9-C)~ Polls ~

List of Tables in this File (Chapters 5-9):
Table (8D-1) ~
Effects of Population Growth on the Probability of Civil Conflict ~

Go to Home Page of this Web Site ~

CHAPTER 5 ~ FINANCIAL CAPITAL CONSTRAINTS ON CONVERGENCE ~
Predicting the characteristics of a world resulting from convergence of the developed and developing worlds requires an understanding of the constraints limiting the point of convergence. Much of the task of understanding is complete (08S5). Two constraints appear to pose the most serious limits to the convergence point - the developing world's financial capital and its natural capital. Financial capital constraints are examined in this chapter. They result primarily from the huge, largely unmet infrastructure costs inherent in accommodating the developing world's high population growth rates.

However the notion that all the developing world needs to achieve developed-world living standards is better access to the abundant financial capital reserves of the developed world, and increased financial support for family planning-related services, requires closer examination. The man/ land ratio in the developing world tends to be considerably higher than in the developed world. Little or no good quality, undeveloped agricultural land that could be cropped sustainably remains. (See Chapter 1, Section (D) of Ref. (08S2).) Fisheries have the same basic problem. To make matters worse, tropical soils, typical of the developing world, tend to be far less fertile and more erosion-prone than the rich temperate soils of the developed world. Non-tropical portions of the developing world tend to be sites of old civilizations that took huge tolls on their natural capital in terms of cropland erosion, overgrazing, deforestation, salinization of irrigated lands, etc. This degradation has never been given the centuries of rest needed for recovery. To make matters worse, the developing world has never had the financial capital needed to protect its natural capital from degradation. Whatever financial capital it has been able to generate had to be allocated to the infrastructure growth that population growth called for.

To make matters worse, developing world agriculture and fisheries are undergoing transformations from being labor-intensive to being financial-capital-intensive. This reduces per-acre (per-fish) labor requirements by on the order of 95% - no small problem for a world of huge labor surpluses and dire shortages of financial capital. What is now the developed world underwent this same transformation in centuries and decades past. This transformation enabled the conversion from developing- to developed-world status. For reasons discussed below, this transformation is not occurring in today's developing world. Instead, the combination of capital-intensive agriculture, population growth, the lack of undeveloped natural capital reserves, and financial capital deprivation are producing mass migration to huge slums ringing developing world cities. These huge pools of subsistence-level labor are far too large for Type B globalization (defined in Section (1-D)) to work through. They also destabilize the social, economic, political and military climates of developing nations, making financial capital less safe. For these and other reasons, the developing world suffers from a tragic combination of natural capital constraints (Chapter 6) and financial capital constraints (this chapter) that feed upon each other. Further, the developed world's abundance of financial capital can do little to alleviate the problems. Past and current large-scale misallocations of financial capital flows to developing nations have probably done more harm than good since virtually all such financial capital was devoted to accommodating population growth instead of reducing that growth. All this leads to the conclusion (Chapter 7) that Type B globalization leads to a convergence point closer to developing world conditions than to developed world conditions.

SECTION (5-A) ~ THE ROLE OF POPULATION GROWTH RATES ~

The developed world operates in a financial capital accumulation mode and has plenty of financial capital. The developing world operates in a financial-capital-burning mode. It must constantly borrow huge amounts of financial capital and seek financial aid. Even then, the financial capital available just for expanding its basic infrastructure needed to accommodate its population growth (1.3%/ year) is inadequate. Economist Lester Thurow (95C1) estimated the financial capital need for basic infrastructure growth needed to accommodate population growth (educational-, industrial-, commercial-, and transportation- infrastructure, plus housing, land development, utilities, judicial systems and other government functions etc.) of 12.5% of GDP for each 1%/ year of population growth, i.e. roughly $1200 billion/ year (08S5). The on-going transformation to capital-intensive agriculture and the resultant urbanization are probably adding to this figure. External borrowing of about $160 billion/ year, plus $56 billion/ year in development- and humanitarian aid, are effectively consumed by the $270 billion/ year (1998 data, UNDP annual Human Development Report) the developing world owes on its external debt of $2450 billion (1999) that increases by $1000 billion every 10-15 years (02W2).

The developing world's inability to cover even its infrastructure growth needs reduces social, economic, political and military stability. This means it must spend about $273 billion/ year on military expenses for its numerous civil wars (1999 data, CIA World Fact Book, 2000). This does not cover losses of capital facilities as a result of war and terrorism. Given an economy with a 1997 GDP of $5800 billion (00W1), a population living largely at subsistence level (median income: less than $2/day), and a high-risk environment for financial capital given the numerous instabilities, and the seriousness of the situation becomes clear. All this neglects the huge unmet costs of stemming the degradation of its agricultural systems, fisheries and water supplies (08S2). But if capital formation rates remain negative, per-capita values of capital facilities must continually decline. Also external debt, and debt payments thereon, must become even larger and more unmanageable. The resultant growing desperateness of the competition between national, ethnic, religious, class and racial groups for basic necessities must add to the cost of military and terrorist activities, and the cost of replacing capital facilities lost in military and terrorist actions. Also, these social, political, economic and military instabilities diminish the safety of capital investments, and this can only magnify whatever financial capital scarcity problems exist.

One might conclude that the developing world is headed for bankruptcy, spiraling instability growth, and descent into the unthinkable. But this conclusion requires closer examination. South Korea, Taiwan, Singapore, Japan and Hong Kong undertook major family planning programs during 1960-1990, reducing fertilities from six to two (1.8 in east Asia). This produced a huge "demographic bonus" (the negative of the above-mentioned infrastructure capital needs) that was partly responsible for the impressive rise in East Asian savings and investment rates since the late 1960s. This is believed to have been a significant factor in these nations becoming the world's five fastest growing economies in the world during 1960-1990 (98B3). The net effect of the reduction in "dependency ratio" (dependents per worker) in northeast and southeast Asia was large enough to produce the entire decline in foreign capital dependence after 1970, by itself turning these regions from net debtors to net creditors on world capital markets (98B3). Between 1965 and 1990, the slowing of population growth accounted for as much as one third of the rapid growth in per-capita income in East Asian countries like South Korea and Taiwan (98B4). These "Asian Tiger" economies have moved to, or close to, developed-nation status. China has also been conducting aggressive family planning programs, at least in urban areas, for over a decade. The resultant demographic bonus could well be being spent on educating a large population of entrepreneurs, engineers and scientists that help make China attractive to foreign investments. Africa has the world's second-highest population growth rate, and as a result, poor infrastructure takes a heavy toll. In particular, poor road networks, unreliable energy supplies, and insufficient telecommunication facilities create high transaction costs that pose serious obstacles to operating a business in Africa (05A5).

Some contend that the progression from developing to developed nation is more precarious than suggested by the "Asian Tiger" example (02M3). They note that factors such as sound economic policies, the rule of law, enforcement of contracts, property rights, access to savings mechanisms and confidence in financial institutions are also essential. However these factors are not independent of the issue of wealth accumulation. Reduced fertility translates into things like money for improved education and less desperate existences, and these promote environments more conducive to these other essential factors. (See environmental determinism theory (08S5).) The "Asian miracle" was not driven by trade liberalization per se but by well-designed industrial policies, including directed credit, trade protection, export subsidization and tax intervention. The East Asia policy package worked because incentives were combined with discipline through government monitoring and the use of export performance as a productivity yardstick (05A5). Note that all this violates the basic principles espoused by advocates of globalization.

Arab Tunisia provides another example of the effects of an active family planning program on economic development - an example entirely unrelated to the "Asian Tiger" example described above. Tunisia had 4 million people in 1957 when it gained independence from France; with a strong family planning program, it now has 9 million people and is one of the fastest-developing countries in the world. Its neighbor Algeria also had about 4 million in 1957; today it has 30 million people and is ensnared in seemingly endless civil war and chaos. There are many such examples. Once countries are caught in the explosive levels of population growth of a Nigeria, Pakistan or Algeria, they can't develop beyond the stage of hopeless conflict (99G1). Tunisia's family planning program had the full support of the Muslim clergy (03N1). Its per-capita income is now $2070 - one of the highest in Africa. Tunisia's stability is attracting foreign investors that have helped it sustain a 5% annual growth rate of GDP over the past six years (vs. 2.6% in Morocco and 3.1% in Algeria). Another benefit: a very low incidence of HIV/AIDS. Much effort has also been expended on educating women and getting them into the workplace. There are now more women than men in local universities. Nearly 80% of Tunisia's population is considered middle class. The poverty rate was 33% in 1967, but 4.2% in 2004. Almost 90% of Tunisia's citizens own their own houses, and have access to education, health facilities, and clean drinking water. There is virtually no problem of religious extremism in Tunisia. Polygamy is prohibited. ("Tunisia a Model Muslim Country for Women's Emancipation," Jakarta Post (5/27/06).) Tunisia enjoys numerous other benefits as a result of its population policy. One example: Contract enforcement in Africa is extremely costly and lengthy, reflecting Africa's high population growth rates and hence inadequate investments in legal/ judicial systems, an important part of any nation's infrastructure (04W2). However Tunisia, with its low population growth rate, can afford better legal/ judicial infrastructure, so it now has one of the fastest procedures for contract enforcements in the world (05A5). This is part of why Tunisia is better able to attract external capital investments and invest more in human capital, which advances Tunisia's infrastructure and its human capital even further.

Mexico, too, has had an active family planning program over the past few decades, and has been able to reduce its total fertility rate to around replacement level (typically 2.1). Today, the first signs of a middle class are appearing (06K2) - unusual in Latin America, and a necessary first step in an evolution to developed-nation status. In fact, it has been found that, in the past 100 years, no nation has evolved from developing nation status to developed nation status until it has been able to reduce its total fertility rate below 2.3 (97P1). All this would suggest that, even though there may be ingredients other than low population growth rates to advance to a high state of economic development, these additional ingredients are not particularly difficult to come by once an active family planning program makes it possible to accumulate financial capital at a reasonable rate.

SECTION (5-B) ~ COST AND TIME FRAME FOR REDUCING THE DEVELOPING WORLD'S FINANCIAL CAPITAL PROBLEMS ~

Experiences of the "Asian Tiger" economies (described above) give reason for believing that their route to financial capital abundance may be a model for the entire developing world. But there is a time-frame problem here. Reducing fertilities halfway down to replacement level does not quickly reduce population growth by half. This is because of "momentum" effects (caused by the population's young age structure - the results of previous high fertility). Bongaarts has disaggregated the sources of near-term population growth (about 78 million/ year) in developing countries into three categories:

Thus, universal access to family planning services could lower near-term population growth by only 33%, and by 82% over the long term (about 50 years) as momentum effects wear off. This translates to a savings in population-growth-related capital costs in developing nations of 33% of $1020 billion/ year ($340 billion/ year) in the near term, and 82% of $1020 billion/ year ($840 billion/ year) in the long term (before correcting for long-term population growth and GDP growth). However, reducing fertilities by providing universal access to family planning increases women's access to educational and other economic opportunities. This has been found to reduce desired family sizes, suggesting the possibility of eliminating that last 18% of population growth purely through universal access to family-planning-related services. So the question of how big an investment is needed to produce a full $1.0 trillion/ year demographic bonus boils down to the cost of providing universal access to family-planning-related services in the developing world. It has been estimated that an investment of about an extra $10 billion/ year for several decades would be required to achieve this (08S5).

This huge a benefit for such a tiny investment indicates that it is not a problem of not having transferred enough financial capital to the developing world. Instead it is a matter of having grossly misallocated the development- and humanitarian aid, loans, and private capital flows that have been made thus far. The potential return from an investment in universal access to family-planning related services is huge -to developed and the developing worlds alike. Some of the benefits that might be expected to accrue to the developed world alone are listed below.

The total benefit of these is estimated to be $380 billion/ year (08S5). The benefits to the developing world, including demographic bonuses, are estimated to be $870 billion/ year (short-term) and $1360 billion/ year (long-term) - not bad for a $10 billion/ year investment for a few decades. Not included are estimates of the benefits of reduced financial capital shortages in the developing world in terms of increased wages, and estimates of benefits to the developed world in terms of reduced pressure on developed world wages. These considerations could add trillions of dollars to the benefits from that extra $10 billion/ year investment in universal access to family-planning related services.

Development- and humanitarian aid and loans to developing nations are often seen as drains on developed-world taxpayers, with few clear benefits to either world. But had an attempt first been made to understand the underlying causes of the developing world's financial capital problems, the pointlessness of such aid and loans would have been seen. Far smaller investments in international family planning would largely eliminate the developing world's financial capital problems, while producing huge returns on investment to both worlds.

SECTION (5-C) ~ THE ROLE OF CAPITAL-INTENSIVE AGRICULTURE ~

The modern-day developing world situation is complicated by Type B globalization (defined in Section (1-D)) in the form of capital-intensive developed-world agricultural-, forestry- and fishery practices being applied to croplands, forests, grazing lands and fisheries of developing nations. These practices may increase global food/ fiber production. However they reduce labor requirements per unit area of land (or per fish caught) by on the order of 95% in a subsistence level world where agriculture, forestry and fisheries provide a large portion of both jobs and the GDP. Even worse, the developing world is already plagued by labor surpluses derived from financial capital shortages, high population growth rates, and minimal opportunities for expansion of agricultural, forestry and fishery resources. The resultant huge human migrations from farms, grasslands, forests, and fisheries to urban areas thus come from two sources: growth in capital-intensive agriculture and population growth in an environment of extreme scarcity of undeveloped arable land of sufficient quality that it can be managed sustainably. The result is mass rural-to-urban migrations to vast slums surrounding major urban centers throughout the developing world and usually from there into the "informal" economy (08S1). The UN estimates that at least 100 million people, worldwide, have no home. If those with especially insecure or temporary accommodations, such as squatters, are included, the number of homeless exceeds 1 billion. In many developing nations, squatter communities comprise 30-60% of the urban population (93O1) (98B5). Those in the "informal" economy are typically squatters (08S1).

Shortages of financial capital on this scale make the infrastructure development needed to accommodate these migrant hordes all but impossible. This contributes to the social, political, economic and military instabilities of the developing world. This further reduces both the availability and the safety of financial capital, and adds further to the glut of labor and the shortage of human capital. This keeps labor prices close to subsistence levels or worse - a situation that current levels of foreign direct investment (and even far higher levels) could not possibly correct without the developed world's trade deficits climbing to dangerous levels. The absence of undeveloped, good quality, agricultural land and fisheries (08S2) causes the path from subsistence agriculture to urban slums to have a several-decade stopover in non-sustainable agriculture on steep, rocky, eroding hillsides covered with thin, low-grade soils typical of tropical climates and regions that have suffered from many centuries of mismanagement (08S5).

Though capital-intensive cropland-, forest- and fishery management increase productivities of food and fiber, they raise costs, and often wind up converting cropland, forests, grassland and fisheries from local subsistence production to production for global markets where typical customers there are normally able to outbid subsistence-level folk of developing nations (08S5). Something on the order of three billion developing world people are in the process of migrating from subsistence agriculture, forestry and fishing to urban/ slum settings in developing nations. There they must somehow be absorbed into the industrial/ service economy (or more often, the "informal" economy) since there is almost no room for them anywhere in agriculture, forestry, fishing, grazing, etc.. If they cannot be so absorbed, they insure a perpetual supply of subsistence-level labor, insuring that labor prices in any fully converged (globalized) economy must be subsistence-level.

Lack of financial capital makes development of human capital (education etc.), and hence the transition from subsistence agriculture to industrial society, difficult or impossible. This is especially true when frequently obsolete, locally owned, capital-deprived industries must compete head-to-head with advanced, capital-intensive industries typical of multinational corporations. This causes earnings to go to the developed world's financial capital stocks, not to the financial-capital-starved developing world. This, in turn, increases developing world unemployment, keeps labor prices locked in more strongly to subsistence levels, making human-capital creation even harder. The resultant wretchedness makes for social, political, economic and military instabilities that consume capital, reduce the safety and supply of financial capital, and increase prices of financial capital. These positive-feedback loops magnify small differences, over time, into huge differences. One result is developing-world living standards that are a tenth of those of the developed world (Table (1A-1)) despite massive financial capital transfers in the form of loans, development- and humanitarian aid, and private investment flows from developed nations. Other results are in Table (1A-2). A study by Milanovic (05M2) has found that the reason why the world's poorest nations keep falling further behind the rest of the world is the greater frequency of armed conflict within these nations. However another study (See Table (8D-1).) finds a close correlation between levels of armed conflict and population growth rate.

SECTION (5-D) ~ CAPITAL-INTENSIVE AGRICULTURE: A ROUTE TO DEVELOPED WORLD STATUS? ~

The developing world is undergoing conversion of labor-intensive food/ natural fiber/ freshwater production to capital-intensive production, financed mainly by developed-world capital. Also, trade agreements are forcing developing world agriculture, and fisheries to compete head to head with heavily subsidized developed world farmers and fishermen. This produces more fish, grain, etc. per hour of labor, and even more fish and grain in total. This has got to produce benefits somehow - benefits apparently ignored above. In developed nations, labor-productivity growth has been on-going for a century or two. There, freeing people from subsistence-level economic activity has always created labor forces for expansion of manufacturing or service activities. That produced industrialized, well-educated, technologically advanced societies and consequent far larger GDPs and living standards, i.e. developed-nation status. Why can't the developing world simply follow in the developed world's footsteps? Since much of the developing world remains at a subsistence-level of economic activity, this transition from developing- to developed-nation status has not been occurring, or is occurring at a painfully slow rate - or is backsliding. There must be reasons for this. The analysis below contends that the reason is the inability to accumulate productive capital in an environment of rapid population growth and over-population.

When increases in capital-intensiveness and/or technological advances free someone in a developed nation from agriculture, that person obtains employment in manufacturing or in the services sector of the economy, and society advances because of that. That transformation requires capital to obtain the requisite new skills and to create new production and service facilities. In the early days of this transformation, the required productive capital creation was possible, in spite of the large population growth rates of the time, probably due to the vast untapped, high-quality natural resources for agriculture, forestry and fishing that created an environment conducive to capital investments, public education, unions, social stability, safety of financial capital etc.

In modern-day developing nation, people freed from agriculture cannot follow similar paths because those paths require financial capital for human capital creation and for locally owned production facilities. That financial capital is largely absent in modern-day developing nations for reasons noted above and below.

Conversions to capital-intensive agriculture are largely responsible for converting many subsistence-level economies of the past into what is now the developed world. The same outcome is not likely for the present-day developing world for reasons described above. Solving the developing world's severe financial capital shortages by addressing their source - population growth in an environment of severely limited reserves of undeveloped natural capital - could allow the developing world to benefit, rather than suffer, from conversions to capital-intensive agriculture.

SECTION (5-E) ~ THE ROLE OF FOREIGN INVESTMENTS, LOANS AND DEVELOPMENT AID ~

One might conclude that shipping even more of the developed world's abundance of financial capital off to the developing world in the form of foreign investments, loans and aid would break the positive feedback loops, promote creation of human capital, and finance the transition from subsistence to industrial societies. The $1 trillion increase in external debt of the developing world every 10-15 years suggest that this idea may be flawed. Since the sources of financial capital in the developing world are usually external, most earnings on financial capital leave the developing world. For example, in sub-Saharan Africa, 75% of foreign direct investment profits have been repatriated between 1991-97 (99I1). Only the earnings of labor remain in the developing world, but until the huge pools of subsistence-level labor in those ever-expanding rings of slums surrounding urban areas is used up to some significant degree, labor prices must remain at subsistence levels. This makes formation of human capital difficult or impossible. Loans are more than counterbalanced by interest payments on external debt, and development- and humanitarian aid are dwarfed by the magnitude of the unmet needs for financial capital for the non-income-producing infrastructure needed to accommodate population growth. Hence the shortage of financial capital for infrastructure expansion and human capital creation (beyond that needed by externally financed facilities) remains.

Tax Incentives for FDI
One might imagine that taxes paid by foreign direct investments (FDI) to developing nations would provide badly needed financial capital for infrastructure development, human capital creation etc. But there is less to that than meets the eye. Developing nations and developed nations alike are in a bidding war to attract FDI, favoring multinational firms at the expense of the state and the welfare of its citizens (03M1). Ammunition in this war includes tax holidays, import duty exemptions, investment allowances and accelerated depreciation - not to mention the costs of beefing up systems for transportation, communications, waste disposal and other infrastructural facilities in the vicinity of FDI facilities. (Mexican law forbids taxing FDI facilities in order to pay for the additional infrastructure required by these facilities - Mexicans themselves must pay for these, i.e. subsidize multinational corporations, a practice contrary to the basic precepts of globalization.) Countries that have become tax havens generally suppress all direct income taxes, and rely on indirect consumption and employment taxes that fall most directly on private citizens (03M1) - yet another subside of multinational corporations. As many as 67 countries offer tax holidays (95U1). FDI incentives cost Tunisia almost 20% of total private investment in 2001 (03M1). In the second half of the 1990s, the governments of Rio Grande do Sul and Bahia in Brazil gave General Motors and Ford financial packages worth US$3 billion to locate factories in their states (01H1). But developing nations, usually overwhelmed by staggering external debt, find it difficult to compete with developed nations for FDI. In 1996, Alabama paid Mercedes Benz US$200,000/ employee. Germany paid Dow Chemical US$3,400,000/ employee (98M3). Rupert Murdoch's News Corporation earned profits of US$2.3 billion in Britain since 1987 but has paid no corporate taxes there (00E1). Various forms of "tax competition" granted to multinational corporations are estimated to cost developing countries over US$50 billion/ year in foregone corporate taxes (00O2) (03L2). (The total of development- and humanitarian aid to developing nations in recent years has been about US$50 billion/ year.)

Go to the Table of Contents of this entire document (at the top of Chapter 1)
Go to top of Chapter 2 ~ Does Globalization Produce Convergence?
Go to top of Chapter 3 ~ The Convergence Process ~ (the top of the second file that this document is divided into)
Go to top of Chapter 4 ~ Effects of, and Responses to, Convergence ~
Go to top of Chapter 5 ~ Convergence - Financial Capital Constraints ~ (at the top of this third file)
Go to top of Chapter 6 ~ Convergence - Natural Capital Constraints ~
Go to top of Chapter 7 ~ The Convergence Point ~
Go to top of Chapter 8 ~ Strategies for Living with Convergence ~
Go to top of Chapter 9 ~ Politics of Globalization - déjà vu ~
Go to Chapter 10 ~ References ~
Go to Appendix B ~ Driving Forces for Globalization ~
Go to the Home Page of this Web Site ~

CHAPTER 6 ~ NATURAL CAPITAL CONSTRAINTS ON CONVERGENCE ~
(6-A)~ Footprint Analyses ~
(6-B)~ Net Primary Production Analyses ~
(6-C)~ Neglected Issues ~

If the convergence point of Type B globalization (defined in Section (1-D)) is to be a set of steady-state conditions similar to those of the developed world today, living standards of 4-5 billion people must be increased by a factor of ten or more (Table (1A-1)). Also the needs of the world's anticipated population growth (50% - about three billion people out to 2050) must be provided for. This is impossible if it is outside the sustainable capacity of the earth's natural capital - soils, waters, forests, grasslands, fisheries, surface water, ground water, etc. Other natural capital constraints exist, primarily minerals and energy. However biomass/ freshwater (in essence, food/ natural fiber/ freshwater) appear to be more limiting. So essentially infinite supplies of minerals and energy are assumed here. Recent price increases for energy resources and metals appear to be largely due to drawing only a very small fraction of the population of the developing world into the global economy, so our assumption of infinite supplies of energy and minerals should probably be seen as wildly optimistic.

Issues of sustainability, saturation characteristics, and counter-productivities associated with production-enhancement schemes complicate analyses of food/ natural fiber/ freshwater constraints (08S2). The world's major biomass production systems that need to be considered in any analysis of the sustainable capacity of the world's natural capital are (1) non-irrigated croplands, (2) forests, (3) grazing lands, (4) irrigated lands, (5) fisheries, (6) surface water and (7) ground waters. None of these systems are managed sustainably in the developing world (08S2). This fact is often overlooked by cornucopian writers of the past few decades (67K1) (81S1) (87W1) (01E1) (01L1) (03B2). A review of the global literature on the sustainability of the earth's food, fiber and water supply systems by this author is found in Ref. (08S2). Also, the potentials for expanding the physical sizes of these systems are very limited - in practical terms if not also in theoretical terms (08S2). The production-enhancement schemes responsible for the overwhelming bulk of growth in global food production during the past four decades are:

All three enhancements are near, at, or beyond the point of zero marginal productivity. Also, all three schemes involve counter-productivities that are frequently overlooked (08S2). Also, compelling arguments contend that no additional substantive food-production-enhancement scheme awaits discovery or development (03S7). An analysis of all these issues is given in Ref. (08S2) that is based on a large (900 page) review of the global literature on the degradation of the world's croplands (07S3), forest lands (07S6), grazing lands (07S5), irrigated lands (07S4) and fisheries (07S7). This analysis supports the conclusions that:

Two other distinctly different types of macro-assessments of global-scale human carrying capacity produce essentially the same constraint. These assessments are the "Footprint" analyses (Section (6-A)) and photosynthesis-based analyses, often called net primary production (NPP) analyses (Section (6-B) and Ref. (08S4)). Both types of analyses neglect:

These oversights are addressed in Section (6-C) below.

SECTION (6-A)~ FOOTPRINT ANALYSES ~

The ecological "footprint" - the average amount of productive land and shallow sea appropriated by each person for food, water, housing, energy, transportation, commerce and waste absorption - is about one hectare (2.47 acres) in developing nations, and 9.6 hectares (24 acres) in the US (02W1). For every person in the world to reach present US levels of consumption with existing technology would require five planet Earths (02W1). So if Type B globalization caused living standards to converge globally, and the Earth's "footprint" limit were obeyed, that living standard would be 20% of the current US standard of living, or 1.9 times the current average standard of living of the developing world. The peak human population, anticipated in mid-21st century (9 billion (99U1) (01U3)), would take the "1.9 times" figure down to 1.27 times. The lack of sustainability in the management of the world's key food/ natural fiber/ freshwater supply systems would cause the "1.27 times" figure to fall indefinitely. "Footprint" analyses tell us, therefore, that the most optimistic convergence point of Type B globalization must be something on the order of the current standard of living of the developing world. Neglected are the six items in the above bulleted list. These are evaluated elsewhere (08S5) (07S3) (07S4) (07S5) (07S6) (07S7) and summarized in Section (6-C) below.

SECTION (6-B)~ NET PRIMARY PRODUCTION ANALYSES ~

Net Primary Production (NPP) analyses start with known rates of photosynthesis (the bottom of the food chain that is the source of all food and natural fiber consumed by Man) and compute what fraction of terrestrial NPP is consumed directly or co-opted because of human activity. The word "Net" means that the respiration of primary producers -mostly plants - is subtracted from the total amount of energy (mostly solar) that is fixed biologically to NPP. The most comprehensive, global-scale NPP analysis was done by Vitousek et al (86V1). They compute that nearly 40% of the world's potential NPP is used directly, co-opted or foregone because of human activity, including 2% of aquatic primary production. Correcting for population growth since 1986 would give an updated global fraction of 48%. A later (1995) study by the International Center for Living Aquatic Resources Management estimated that humans co-opt 8% of aquatic primary productivity - 2% of open ocean primary productivity and 25-34% of other aquatic systems (98M1). NPP decreases over time as a result of such processes as permanent conversion of forests to pastures, desertification, and conversion of natural systems to areas of human habitation.

The implication of all this is that the world's human carrying capacity is limited to that that would result in the fraction of NPP co-opted becoming 100% (Vitousek et al's "intermediate" estimate) assuming infinite supplies of fossil fuels, freshwater, waste-disposal sites, etc. The implication of a 48% co-option of NPP is that human populations could roughly double. This seems inconsistent with the more comprehensive "footprint" analyses that imply that humans already consume somewhat more than 100% of the productivities of the world's photosynthesis-based systems. This inconsistency can be explained by some inconsistencies and an error in Vitousek et al's "intermediate" analysis of co-opted NPP. These inconsistencies and the error are corrected in Ref. (08S4) of this website. The revised global accessible NPP co-opted by humans is 89-96%. The revision also takes cognizance of the fact that some NPP is so diffuse that it is effectively inaccessible to human co-option. This largely eliminates the inconsistency between NPP and "footprint" analyses.

Both "footprint" and NPP analyses lead to the same basic conclusion - that, under present resource management practices, no significant options exist for sustainably increasing global food/ fiber outputs.

SECTION (6-C) ~ NEGLECTED ISSUES ~
Part [6C1]~ Misconceptions ~
In the global marketplace, per-capita food supplies increased 24%, and real food prices fell 40% since 1961, as the global population doubled to six billion in 2000. The factor of 2.48 increase of global food supplies since 1961 is due almost entirely to three changes:

Some analyses use the above supply/ price data to imply that global food/ natural fiber production potentials are well beyond current human needs if not limitless (67K1) (81S1) (87W1) (01E1) (01L1) (03B3). But these analyses neglect serious problems - the lack of sustainability of current productivity and major constraints on productivity growth, i.e.:

These issues are included in the brief analysis below and evaluated in detail in Ref. (08S2).

Part [6C2]~ Analyses of Neglected Issues ~
"Footprint" and NPP analyses both suggest that the developing world's natural capital constrains Type B globalization's convergence point to be no more than roughly 20% of the developed world's living standard (twice the developing world's living standard). But these analyses neglect some basic issues.

  1. Potential net system-size changes and degradation-related productivity changes in: (1A) non-irrigated croplands, (1B) irrigated lands, (1C) grazing lands, (1D) wild fisheries, (1E) aquaculture, (1F) forests and (1G) freshwater supplies that affect sustainable production and productivities;
  2. Potential net productivity changes from: (2A) increased consumption of inorganic fertilizers, (2B) increased pesticide consumption, (2C) genetic advances and (2D) As-yet-undeveloped processes.

Evaluating these potential net system-size and productivity changes can give estimates of the corrections to be applied to "Footprint" and NPP analyses. These corrections provide a better basis for estimating the upper bound of Type B globalization's convergence point as constrained by natural capital. Global population-growth projections (+33% by 2025; peaking at +50% in 2050) (01U3) (99U1) then give the time dependence of this convergence point. Some of these potential net system-size and productivity changes depend on how much financial capital is applied to them. This complication is examined in Section (6-D).

Issues 1-2 have been examined in Ref. (08S2) and in a number of literature reviews (07S3) (07S4) (07S5) (07S6) (07S7) that compile information on degradation of the world's croplands, forest lands, grazing lands, irrigated lands and fisheries. A major analysis of the sustainability of these outputs is given in Ref. (08S2). All known strategies for increasing productivities are found to be insignificant. The sustainability study finds that, overall, the sustainabilities of the world's outputs of food, wood and freshwater are disturbingly low. Addressing sustainability problems in developing nations all require massive amounts of financial capital - a resource that is in extremely short supply in developing nations. There are sound reasons for believing that this situation will continue as long as the high rates of population growth continue. (Chapter 5, above, goes into this issue in some detail.)

No detailed attempt has ever been made to estimate the total financial capital needed to achieve sustainability of the developing world's systems for producing food, natural fiber and freshwater, but a cursory examination (08S2) shows that the total would be huge, even by developed-world standards. Whatever this financial capital requirement is, it must be weighed against current and potential capital-formation rates of the developing world. The experiences of the "Asian Tigers" and several other nations offer developing nations hope of escaping from their negative rate of financial capital formation (98B3). However even under the best of circumstances, several decades would be required for significant reductions on population growth rates via fertility reductions. But during this time, "momentum effects" would add 1-3 billion people to the developing world's population. This increases the severity of all sustainability- and degradation-related problems and raises the financial capital requirements noted above. Also, all degradation processes affecting the world's food/ natural fiber/ freshwater supply systems are characterized by numerous positive feedback loops (07S3) (07S4) (07S5) (07S6) (07S7). These can cause, and are causing, these degradation processes to spiral out of control.

Clearly, even under the best of circumstances, the developing world has scant hope of winning the capital-formation race against the combined growing financial capital demands of infrastructure growth and natural capital restoration and expansion. It becomes difficult, then, to see how Type B globalization's convergence point could be much improved by even optimistic estimates of financial capital availability in the developing world. Therefore natural capital constraints on Type B globalization's convergence point, as given by "Footprint" analyses and NPP analyses, are largely unchanged. (See Section (1-D) for definition of Type B globalization.)

Go to the Table of Contents of this entire document (at the top of Chapter 1)
Go to top of Chapter 2 ~ Does Globalization Produce Convergence?
Go to top of Chapter 3 ~ The Convergence Process ~ (the top of the second file that this document is divided into)
Go to top of Chapter 4 ~ Effects of, and Responses to, Convergence ~
Go to top of Chapter 5 ~ Convergence - Financial Capital Constraints ~ (at the top of this third file)
Go to top of Chapter 6 ~ Convergence - Natural Capital Constraints ~
Go to top of Chapter 7 ~ The Convergence Point ~
Go to top of Chapter 8 ~ Strategies for Living with Convergence ~
Go to top of Chapter 9 ~ Politics of Globalization - déjà vu ~
Go to Chapter 10 ~ References ~
Go to Appendix B ~ Driving Forces for Globalization ~
Go to the Home Page of this Web Site ~

CHAPTER 7 ~ THE CONVERGENCE POINT ~

The analyses above, the "Footprint" analyses, and the NPP analyses, all lead to the same conclusion - that the developing world's natural capital constrains the upper limit of Type B globalization's convergence to the present global average standard of living, with future declines highly likely. Given the scale of the disaster implied by this conclusion, every hope for escape should be considered. This issue is taken up in Chapter 8.

CHAPTER 8 ~ STRATEGIES FOR LIVING WITH GLOBALIZATION ~

(8-A)~ The Threats Posed by Deflation ~
(8-B)~ Capital Utilization Efficiency - A Partial Cure for the Ills of Globalization ~
(8-C)~ Natural Capital Utilization Efficiency and Conservation - Another Partial Cure ~
(8-D)~ Reducing Population Growth - The Crucial Issue ~
(8-E)~ The Time-Frame Issue ~
(8-F)~ Demographic Bonus Investment Options ~ [8F1]~Sub-Saharan Africa, [8F2]~India and Southeast Asia, [8F3]~Irrigation, [8F4]~Non-Irrigated Croplands, ~
(8-G)~Other Options -[8G1]~Wild Fisheries, [8G2]~Immigration Policies, [8G3]~Raids on Human Capital, ~
(8-H)~The Limited Potential of Available Options ~ [8H1]~Historical and Geographical Fundamentals, [8H2]~Religious Constraints, ~

INTRODUCTION ~
To summarize previous chapters; yes there will ultimately be convergence between wages and hence standards of living in the developed world and the developing world which currently differ by a factor of roughly ten. The various vague arguments suggesting that this convergence will not occur have been shown above to be false. Every factor that might possibly prevent this convergence from happening (e.g. "labor productivity" variations) is characterized by high- and rapidly increasing mobility, meaning it must ultimately provide no significant barrier to convergence. The convergence process began in earnest around 1980 and continues to progress, even though recently there is a tendency for trade negotiations to collapse (See facts and figures in Chapter 3, Section (3-A).).

The vague arguments suggesting that convergence will occur roughly at current developed world wages and living standards have also been shown to be false. The notion that Type B globalization's convergence point might somehow be raised close to developed world living standards must be given up (See Table (4-1) and Chapters 5 and 6). However the options described below could result in significant improvements to the ultimate point of convergence worldwide. These options also point out some pitfalls that will require close attention if they are to be avoided. The eventual natural point of convergence can be estimated (See above) to be at roughly double current developing world wages and standards of living, i.e. at a point roughly 80% lower than current developed world wages and standards of living. This conclusion was based on natural resource constraints analyzed in some detail earlier in this document and in references cited there. So-called "Footprint" analyses and Net Primary Productivity analyses both support this conclusion. This conclusion is also supported by current events. Just incorporating perhaps 20% of the Indian and Chinese economies into the global economy is causing major increases in the prices of all sorts of vital natural resources. That is also a major cause of the falling US dollar. Both changes are equivalent to US wages in units of some sort of global dollars to approach closer to the above-mentioned point of convergence.

A major study by this author (08S2) is finding high degrees of non-sustainability in every major segment of the developing world's systems that produces food, natural fiber and freshwater - and few if any options for sustainably increasing these productivities. All options for eliminating non-sustainabilities in this system require huge amounts of financial capital that developing nations do not have, and are not likely to have until their population growth rates can be reduced significantly (The food/ natural fiber-related fraction of the developing world's economy is roughly 60%.) The non-sustainability of the food/ natural fiber production system, coupled with population growth in the developing world, would suggest that the convergence point must trend continuously downward from the convergence points alluded to above. The global population is destined to increase by 50% between 2000 and 2050, although changing views in combination with an intense effort and recent technological advances in contraception and contraceptive marketing could reduce this increase significantly and cheaply. (See below.)

All possible options for damage control must be examined carefully. Some options are examined briefly in Sections (8-A) through (8-H) below. Because we have all been living in a state of denial about the convergence issue, few of these options have even been thought about in terms of their effects on convergence. Some of these options have surprisingly large potentials for producing rather large benefits. However the time frames required by virtually all options are rather long - disturbingly longer that the time frame over which globalization is occurring. This time problem suggests that "foot-dragging" in globalization-related trade negotiations may be beneficial. Problems with recent trade negotiations suggest that this foot-dragging is starting to occur; yet the mobilities of all components of economic activity keep increasing, so the net result is hard to predict.

SECTION (8-A) ~ THE THREATS POSED BY DEFLATION ~

Convergence in the US could come about as it is proceeding now - a gradual reduction in wages, benefits, and the value of the US dollar of the sort documented in Section (3-A) above. It could also come about precipitously and traumatically as a period of rapid deflation as noted in Section (3-B) above. The US trade deficit, plus the budget deficit, plus other external borrowing, now absorbs roughly 70% of the world's external savings (06R3). With the US current accounts deficit doubling about every 5 years (Table (1C-8)), it is easy to foresee serious trouble in a matter of years - rather than decades. The most serious problem that results from a rapid deflation is that the sizes of all personal-, business- and government debts would not fall along with everything else. This poses the risk of bankruptcies and other trauma on a large scale. The large-scale bankruptcies and related trauma as a result of the bursting of the US housing bubble could be just the early stages of this deflation. An economic meltdown of this magnitude precipitated the ascendancy of Adolph Hitler and consequently WWII, so obviously such meltdowns must be taken seriously. The generally agreed-upon fix to a serious bout of deflation is to print money. But in one way or another, gradually or precipitously, developed world living standards must continue to drop toward the convergence point noted above. The caste system that appears to be evolving in Japan, the EU and the US, plus the massive rate of growth of the "informal" economy in most developing nations (08S1) plus the rapid rate of price increases of natural resources worldwide could be interpreted as just three of the early elements of the overall globalization-driven convergence process.

All those changes have to produce serious declines in the stock markets. Bond markets would likely to be highly unsettled at best. US exports could be expected to grow closer to the size of imports, but the trauma in the US could be exported worldwide, so the scale of world trade (imports and exports) might fall significantly amidst all the other chaos and uncertainty. Regardless of what monetary policies are adopted, large drops in living standards are going to be seen as an economic meltdown in the minds of the average citizen regardless of whether their contribution to the GDP is in the form of labor, human capital, natural capital, financial capital or entrepreneurship. The primary focus should be on planning a process for dealing quickly with a deflationary period so that the bulk of the consequences similar to those experienced in the economic meltdown of the early 1930s can be avoided.

It is essential, also, to take steps now to minimize those other adverse consequences of globalization-driven convergence that are fairly easy to foresee. Some possible steps are outlined below. Most of them would be beneficial even if globalization-driven convergence did not exist. The fundamental strategy in all of them is to raise standards of living of both the developed world and the developing world within the natural resource constraints described above and elsewhere. This may appear to be fundamentally impossible. But this is not necessarily true, providing that we get a good head start on the task and apply lots of innovativeness early on. Trying to live in a state of denial on the convergence issue for as long as possible can only hurt everyone.

SECTION (8-B)~ CAPITAL UTILIZATION EFFICIENCY ~ A PARTIAL CURE FOR THE ILLS OF GLOBALIZATION ~

The bricks, mortar, steel, machinery, tools, land, etc. that are utilized to produce the GDP represent costs that some investors must provide financial capital for, and then receive payment (interest and dividends) for the financial risks they take, the obsolescence that occurs, the wear-and-tear that occurs, and the loss of liquidity that must be endured. The GDP must be divided among those who provide the labor, the above-mentioned use of the financial capital, the natural resources (land, oil, coal, minerals etc.) and the entrepreneurship that are uses in the production of the GDP. Imagine somehow making changes that permit producing the same amount of output from a production facility which involves a lesser amount of financial capital, interest, dividends, financial risks, obsolescence, loss of liquidity, land, energy, minerals, etc. than a prior system. As a result of such changes, those who provide labor to the GDP get a larger share of the GDP (which is unchanged as a result of the above-mentioned changes) simply as a result of some of the other contributors to the GDP (mainly those who provide use of financial capital plus some providers of natural resources) making less of a contribution to that GDP than before.

In a natural-resource-constrained economy (where the rate of consumption of natural resources is constrained to stay below a fixed limit) the above mentioned change provides a real benefit to those who provide labor because the rate of consumption of natural resources is reduced by the above-mentioned change, permitting the providers of labor the ability to increase their rate of consumption of natural resources in the form of consumables by an amount that causes the additional amount of natural resources involved in the consumables to equal to the reduction in natural resource consumption resulting from the above-mentioned changes in the mode of production.

The above thought-experiment points out the benefits of increasing the efficiency of capital utilization in a natural-resource-constrained economy. Increasing the efficiency of capital utilization need not occur in just a thought-experiment. In the US economy and in most other economies of the developed world, capital (financial, human, infrastructural and natural) is used extremely inefficiently, opening the possibility for making major increases in capital utilization efficiency with only small reductions in labor productivity (82S1). The reference (82S1) offers one way of mimicking the above-mentioned thought-experiment. Most of the huge investment in capital facilities used in producing goods and services in the developed world stand idle for a large fraction of the time. If this time fraction were increased, the various costs of capital and some of the natural resource costs embodied in each good and service produced would fall correspondingly (except for the component of depreciation due to "wear and tear").

The problem now becomes that of figuring out how to keep capital facilities used in the production of goods and services occupied for a larger fraction of the time. Increasing working hours significantly beyond the normal 40-hour workweek would serve mainly to increase stress levels among those who contribute labor to the GDP - stress levels that are already far too high. (See Section (3-A) [A10].) The problem can be solved in a much better way - with job sharing - so that each facility producing goods and services provides more than one job. In this author's earlier paper (82S1) a workweek of 3.5 days on the job and 3.5 days off the job with a 9-hour workday (basically a 31.5-hour workweek) was proposed. It would increase the utilization of each production facility by more than 50% - from 40 to 63 hours per week. It was found that the savings in time-dependent depreciation and interest/ dividend costs would more than pay for lost wages resulting from an 8.5-hour reduction in the workweek. In addition there would be numerous peripheral benefits, a few of which are listed below.

Once the logistic changes involved in increasing the role of job-sharing in the economy are resolved, other possibilities present themselves that permit even less down-time for capital facilities involved in producing goods and services. Various combinations of full time and part-time people working at each facility producing goods and services could probably double the capital utilization efficiency of such facilities.

Note, however, that several decades would be required for the above scheme for increasing capital utilization efficiency to come into being. Shorter time periods would entail lots of capital facilities standing idle for some number of years. But, as noted below, virtually any scheme for addressing problems related to globalization-related convergence would take at least as long to produce any significant effect.

The utilization efficiencies of capital facilities in the developing world would be expected to increase if they increased in the developed world. This is because production techniques are extremely mobile in this world of multi-national corporations. As a result, increases in capital utilization efficiency would not prevent convergence of living standards in the developed and developing worlds. It only raises the standard of living toward which the overall convergence process proceeds. Since, as noted elsewhere in this document, these standards of living are natural-resource-constrained, the benefits of increasing capital utilization efficiency probably fall purely into the following categories:

Note, too, that:

SECTION (8-C)~ NATURAL CAPITAL UTILIZATION EFFICIENCY AND CONSERVATION - ANOTHER PARTIAL CURE ~

In a fully converged, global economy that is bounded by natural capital constraints, the efficiency of the use, and the conservation of, natural resources would obviously play a crucial role in determining the standard of living in that economy. In many ways this focus on the efficiency of use, and the conservation of, natural capital is the direction in which the world is headed. The EU and the "Asian Tiger" economies of the Far East have both carried recycling to an advanced stage, even though the current high wages in these regions would suggest that recycling is not an economically viable concept, given the intrinsically high labor content in recycling technologies. (The EU and the Asian Tigers are possibly driven more by a lack of landfill space.) In the US, recycling is expanding but is taking a different form. Growing demands for natural resources by nations like China are raising prices of scrap metal, glass, cloth, paper, oil, coal and whatever else anyone cares to name. This is a trend that anyone who has thought much about globalization would have predicted. As a result, dealing in scrap materials has become quite profitable. However the US does very little labor-intensive reprocessing of such scrap. Instead it ships the materials to China on the same boats that bring Chinese-built consumer goods to US ports. Still, the amount of material going into US landfills is huge by anyone's standards. That tonnage could be greatly reduced, with a minimum of effort, by consumers dividing their waste materials into several categories (bins) before putting them out on the curb for collection by waste-gathering trucks having separate bins for each category of waste. This is done routinely in Japan, so there is no reason why US consumers cannot do the same. Public sentiments tend to be quite pro-recycling in the US, so all that is required is a little leadership.

The EU and the "Asian Tigers" also have strict land-use regulations and taxes on consumption of energy resources that prevent urban sprawl, increase automotive transportation costs, encourage mass transit via bus and rail, and save scarce land for use as productive croplands and well-managed forests. Their heavy taxes on gasoline encourages a preference for fuel-efficient automobiles. The US sees little sense in any of this and, in fact, goes so far as to give generous tax credits to Americans rich enough to buy the biggest, heaviest, least fuel-efficient SUVs. Clearly, in a fully converged, global economy, the US is going to be forced to make countless painful adjustments - adjustments that the EU and the Asian Tigers will have far less trouble with. There are few in the world who would suggest that the US does not deserve those pains, which in a globalized, converged economy are bound to spill over, to varying degrees, on the remainder of the Earth's inhabitants. It is not clear why the US cannot follow the lead of the EU and the Asian Tigers and trade in their wasteful uses of such crucial resources like land and energy for a better future and greater ease in adapting to the fully converged global economy that the nation's leadership is heading us whether we are ready for it or not.

In a fully converged, global economy with a standard of living perhaps 60-80% lower than that enjoyed by US citizens currently, activities like agriculture, forestry, grazing and fisheries are bound to be a far larger component of the developed world's GDP than it is today. (Today, such activities represent perhaps 50% of the global economy.) So it is in these areas that the efficient use, and conservation of, natural capital are going to have the most profound effects on the fully converged standard of living. In these areas also, the EU and the Asian Tigers are going to have far fewer, and less painful, adjustments to make than the US, although there will be plenty of pain to go around. For example, of all the fish involved in global trade, about 85% of it is bound for developed world consumption. That number will have to trend downward to on the order of 20%. The US has been a net importer of wood since around 1914, and essentially all of its foreign suppliers harvest timber at non-sustainable rates, and most developing nations will be demanding a greater share of this global wood production. The EU and the Asian Tigers have evolved in the direction of making very efficient use of wood; the US has gone in the opposite direction with its focus on building homes in the huge "McMansion" category, typically with dangerously high mortgages, low energy efficiency, and flimsy construction. Here again, no reason can be seen why the US cannot follow the lead of the EU and the Asian Tigers in terms of more wood-efficient and energy-efficient housing and transportation as a means of creating a smoother and less painful transition to the converged global economy that we are moving toward, regardless of how well prepared for it we all are.

Food, though, would be where the real crunch comes. In 2004, the US became a net importer of food for the first time in some decades. The EU and the Asian Tigers both have more sustainable food production than does the US. In many ways, the US seems to be bending over backwards to make its agriculture less sustainable. In the southwestern US, where water is scarce, the population is exploding. Rivers are being drained dry, aquifers are being depleted, dam backwaters are filling with silt (mainly due to overgrazing), and irrigation water is being reallocated to large urban areas in the region. Also, the federal government subsidizes, heavily, the sale of federal dam project water to all users, encouraging huge swimming pools in the desert and wasteful uses of water in irrigation projects. Water-conserving irrigation technologies like drip irrigation just aren't economically justifiable with all that cheap, subsidized water around, however non-sustainable that supply may be.

Australia, another major food exporter is having serious problems with salt buildups in its old, typically low-grade cropland soils. Also droughts are growing far more common - a trend generally attributed to the effects of the "Greenhouse" effect. Canada's vast grain fields have lost half of the soil organic matter, the source of much of the soil's productivity and erosion resistance. Canada is said to be capable of doubling its cropland area, but Canada's undeveloped croplands are on low-grade soils and significant slopes where productivities would be low and probably not sustainable. The risks that the US faces with more and more of the world's major food exporters in trouble are not to be taken lightly. It would seem that if people really want to live in semi-arid and arid lands, they should be willing to pay the full costs of so-doing. There is no justification for them being part of a huge welfare state full of frequently affluent people. Paying the full costs of water could make water-efficient irrigation systems economically sound, and reduce the rates of draw-down of the aquifers and rivers on which (semi-) arid-land economies are so totally dependent upon.

EU nations (and probably the Asian Tigers) increase the productivity of their croplands by adding more and more chemical fertilizers. They get away with this strategy by also adding lots of organic matter in the form of animal manure to replace the organic matter that large doses of chemical fertilizers deplete. (Soil organic matter provides fertility and erosion resistance among other things. If it is allowed to deplete, productive temperate soils turn into low-productivity soils more typical of tropical soils.) In the US, the option of adding manure to croplands no longer exists on most croplands. This is because most domestic animals are now raised in feedlots and "concentrated animal feedlot operations" (CAFOs) located too far from croplands to afford the costs of hauling the manure. But worse than that, the manure of CAFO animals is laced with all sorts of antibiotics and other contaminants that are required by systems that raise animals in extremely confined quarters. Even worse than that, the manure of grain-fed animals (as all CAFO animals are) contains E-coli(157) which is toxic to humans. (Pasture-raised [grass-fed] livestock from "mixed agriculture" (typically family farms) do not produce manure with this toxic substance.) CAFOs dump their animal manure into huge settling ponds that periodically break open and spill their contents into nearby rivers, wiping out downstream fisheries and urban water supply systems and depriving the nation's croplands of essential nutrients. It would seem that, if CAFOs are truly the most economically efficient means of raising livestock, then some fraction of that economic benefit of that efficiency could be channeled into compensating the nation for the staggering costs they impose on it. These costs are something that, over the long term, the US simply cannot afford to bear - convergence or no convergence, globalization or no globalization.

Some context on the issues raised above may be useful. In global terms, the massive growth of the global food supply since the middle of the 20th century has come primarily from expanded use of chemical fertilizers, the "Green Revolution," and the development of large-scale irrigation systems. All of these options have largely reached their limits (See the analyses in Ref. (03S7) and (08S2)) and no reason exists for believing that some new technology might be waiting in the wings. This wouldn't be so bad if the world's population were not scheduled to increase by 50% over the next half-century, and if the global systems for food and fiber production were all operating in a sustainable fashion. But such is not the case. Very few of the world's irrigation systems have invested in mechanisms to prevent salt buildup, and numerous other problems seriously challenge the sustainability of the food production (60% of the world's total) from irrigated lands (07S4). Croplands are being abandoned at a rate of about 100,000 km2/ year due to a combination of serious erosion problems, urbanization, and salinity buildup (03S7). The global supply of potential croplands (not currently in use) is negligible (03S7) (08S2). As croplands expand into semi-arid regions that really should be left as grazing lands, wind erosion and dust storms are taking a rapidly increasing toll (03S7). Nearly all of the world's grazing lands are overgrazed (07S5). The overwhelming bulk of the world's marine and freshwater fisheries are badly over-fished (07S7). The bulk of the world's land-based aquaculture ponds get so laced with antibiotics, pesticides and other contaminants that they must be abandoned after 7-10 years, and nothing can grow in the ponds' toxic sediments (07S7). The bulk of the forest plantations being developed worldwide are on tropical soils where the sustainability of wood production is in serious doubt due to typically low fertilities of tropical soils (07S6). The bulk of the world's grazing land expansion is on tropical soils that must be abandoned after 7-10 years of rapidly falling productivities (07S5).

SECTION (8-D)~ REDUCING POPULATION GROWTH ~ THE CRUCIAL ISSUE ~

No option for raising the standard of living characterizing the convergence point of globalization has any hope of success without first greatly reducing the developing world's dire shortage of financial capital, human capital and infrastructural capital. Reducing the developing world's shortage of capital can be done cheaply. In fact, it can be done profitably (08S5)) by reducing the developing world's population growth rate. This can be achieved by funding (in order of decreasing priority) (1) quinacrine sterilization, (2) social content serial dramas, (3) unmet needs for family planning, (4) unmet needs for basic maternal health care and (5) increased educational opportunities for women and girls and related strategies (07S1). The cost of averting a birth rises from several dollars to a factor of roughly 100 higher across these options (07S1). In recent decades virtually all governments in the world (except the Vatican and the US) have become aware of the link between population growth and economic decline. Even in the Muslim world, huge changes are underway in the area of fertility reduction (08S3). Reductions in population growth rate give the developing world a "demographic bonus" of some hundreds of billions of dollars per year, rising to somewhat over $1 trillion/ year as population momentum effects wear off over the next 3-5 decades. So any of the above five funding options offers a huge benefit: cost ratio. Also the political/ social battles needed to pursue any of these options continue to shrink, although these are still formidable for Option (1) (07S2).

To bring developing world population growth to a halt within on the order of a decade would require a total fertility rate of around 1.4. About 34 nations have total fertility rates between 1.6 and 1.1 with the average of these being just under 1.4 (02C1). But this goal seems difficult for developing nations as a whole, although Iran has shown that extremely rapid rates of decline of total fertility rates are possible (08S3). But there is evidence that we need not go this far. In the last hundred years, no nation on Earth has moved from the poor and less-developed status to the prosperous and developed status until it reduced its total fertility rate (TFR) to 2.3 (97P1). This at least suggests that a total fertility rate of 2.3 may do the trick in many cases. Furthermore, TFRs can now be reduced quickly and cheaply using a variety of mass-media approaches. The most cost-effective one is commonly referred to as "social content serial dramas" (or "soap operas" or "telenovelas") (07S1). Research at the University of Sao Paulo Brazil studying TV-Globo's "telenovelas" (inexpensive soap operas) and their impact, has concluded that telenovelas have been the principle force that drove Brazil's total fertility rate down from 3.4 in 1989 to 2.3 in 1996 (97P1). Another extremely inexpensive way to reduce total fertility rates is the use of quinacrine sterilization. It offers even the poorest of developing-world's women a non-surgical, affordable way to obtain female sterilizations (07S2). Female sterilization is the world's most popular form of contraception, even though about half the women in the world do not have access to surgical sterilization, and even if they had such access, they could not afford it. Their only remaining option for ending their child-bearing is frequently a series of abortions. All to frequently that involves illegal processes each of which carries a risk of mortality as high as one out of three.

This demographic bonus could reduce, or eliminate, the extreme scarcity of financial, human and infrastructural capital seen throughout the developing world (See Chapter 5), just as demographic bonuses have already done for the "Asian Tiger" economies (South Korea, Japan, Taiwan, Singapore and Hong Kong) (98B3), Tunisia (03N1), the Barbados and the Bahamas (04R1). Success with this option would open up possibilities for funding options for dealing with degradation- and sustainability problems associated with natural capital and for increasing food/ natural fiber/ freshwater productivities in developing nations (See Chapter 6). Annual political decisions of the US to greatly limit its financial support for international family planning started around 1980. This was, coincidentally, around the time that the first significant effects of Type B globalization (defined in Section (1-D)) appeared (Table (2A-5)), and around the time of the conversion of the "civilized capitalism" of 1950-1980 back toward the "wild capitalism" of the mid-19th century (02M1). In hindsight, the inability of the US and the Vatican to recognize the importance of international family planning seems certain to prove to be a monumental error that will cost the people of both the developed and the developing worlds dearly as they move into a fully converged global economy.

Inept and corrupt developing world governments (and citizens) could squander their demographic bonuses and plunge developing nations into ever increasing wretchedness. So it becomes important to develop clear understandings of options for investing those bonuses so as to optimize their benefits. The "Asian Tiger" economies benefited from an oriental culture that placed great value on education. This enabled them to develop technologically advanced production facilities that positioned them well for benefiting from the growth in technology that swept the world in the last half of the 20th century. Asian Tiger citizens also invested their savings heavily in their own technologically advanced industries, so the earnings growth of their financial and human capital stayed largely within their own countries. The cultures of Asian Tigers were also such that constraints imposed on women that kept them homebound were relaxed over time. This offered women more life-shaping options in terms of educations and jobs. The result was further rounds of desired-family-size reductions and demographic bonuses.

It is interesting to note that family planning programs have already played a huge role in at least temporarily protecting the US from the economic ills of globalization that would otherwise have already had staggering consequences. The huge (and growing) US trade deficit, plus its huge (and growing) federal budget deficit, plus some corporate- and personal borrowing, have had to be financed by large-scale external borrowing. A large fraction of the loans have come from the five "Tiger Economies" of the Far East plus China. But these economies all became major sources of financial capital as a result of aggressive family planning programs in recent decades. These programs lifted the otherwise staggering burden of the costs of infrastructure expansion required by population growth. Chinese households now save 25% of their income (versus 0% in the US). As a result, the Chinese are expected to have about $116 billion to invest abroad in 2005, much of which goes into US bonds (05I1), i.e. loans to the US.

Events of recent years have had several significant (if not exciting) effects on the pursuit of population growth reduction. One of the more exciting new technologies is the development of what are commonly referred to as "Social Content Serial Dramas" (SCSDs) ("soap operas" or, in Latin America, "telenovelas"). The developing world has changed in recent decades in terms of major increases in the availability of radios and TV sets, even in backward and remote regions. Radios have gotten cheap, and TV sets are often shared among large numbers of people, often in some semblance of a community gathering-place with a power generator. What is so exciting is the much lower cost of selling the ideas that international family planning organizations are trying to promote. In one study the cost of selling family planning was found to be 80 US cents per new adapter. That probably translates into the cost of averting a birth of on the order of $10. (Other strategies cost on the order of $60 to $600 per birth averted as noted above.) The cost of getting people to change behavior to avoid HIV/ AIDS was found to be 8 US cents per person making the necessary behavior change. That probably translated into a few dollars to avert a case of HIV/AIDS and thus a death from HIV/AIDS. SCSDs also focus on selling adult- and female education, the rights of women to control their sex lives, and other issues that also have a strong influence on desired family sizes and hence population growth rates (04R1).

Another exciting recent development in contraception technology is the International Service Assistance Fund's (ISAF's) Phase III clinical trial of a non-surgical method of female sterilization known as QS (quinacrine sterilization) (06I2) (07S2). Quinacrine sterilizations have been performed in 50 countries on more than 175,000 women. It reduces the cost of a female sterilization by 90%. Successful completion of the Phase III trial is expected to reduce maternal mortality and morbidity by 40%, reduce the number of abortions worldwide by 40%, and reduce the number of unwanted births by more than 50%. This reduction in unwanted births would amount, worldwide, to over 25 million fewer births per year out of the 78 million or so annual surplus of births in excess of deaths, and out of the 136 million total births per year -a major change in global population growth trends. About 25 million fewer births per year (virtually all in the developing world) would represent a savings in infrastructure costs to developing nations of $325 billion/ year (07S2). As noted above, these savings would come largely in the form of reductions in unmet needs for new infrastructure, plus reduced wretchedness, hope deprivation, warfare, terrorism, religious fundamentalism, environmental degradation, and greater safety of financial capital and what it is invested in.

Note however that these are only first order effects. Higher-order effects of QS would likely snowball, holding out the promise of major, future-altering enhancements in the human condition globally. A major component of the reduction of unmet needs for new infrastructure would come in the form of reductions in unmet needs for "human capital" (education - one component of "infrastructure") - something that is essential for the transition to developed world status, and something that increases awareness of, availability of, and affordability of, contraceptives. These effects further decrease the global number of births per year, and hence further reduce unmet needs for new infrastructure (including human capital).

Quinacrine sterilization in the US could also produce significant enhancements of the human condition. About 76% of pregnancies to poor US women are unintended (95G1). Title X program (the federal program that provides family planning to poor women in the US) has seen its funding drop (in inflation-corrected terms) by 55% during the period 1980-2000 (01D2). This was in spite of the fact that every public (Title X) dollar spent for family planning services saves $4.40 - over $3 in medical costs alone -that otherwise would be spent over the next two years to provide medical care, welfare benefits and other social services to pregnant women (99A2). Further benefits would result from reducing the poverty caused by families having more children than they can afford, reduced crime rates and similar benefits. A 90% reduction in the cost of female sterilization would make already badly stretched Title X funding go farther. Also, the $325 billion/ year benefit to the developing world translates to a higher probability that the external debts of developing nations ($2.45 trillion in 1999, and increasing by $1 trillion every 10-15 years) will ever be repaid. An aggressive family program in Mexico during recent decades has reduced total fertility rates significantly, resulting in the beginnings of a Mexican middle class and hints of the trend spreading beyond Mexico (06K2). A 90% reduction in the cost of a female sterilization could make such procedures far more accessible to the average Mexican. This would promote further growth in Mexico's middle class, thereby reducing the rate illegal immigration of Mexicans into the US. For the US this would mean a reduction in the high social, economic and political costs associated with such immigration. For Mexico this would also mean a reduction in the economic costs of Mexico's "brain-drain" of human capital.

Counteracting the anticipated benefits of QS and SCSDs are the effects of the HIV/AIDS pandemic on funding for family planning in the developing world. In 1995, family planning received 55% of total worldwide population-assistance expenditures; while basic research and reproductive health received 18% each, and HIV and other sexually transmitted infections (STIs) received 9%. In 2003, HIV/ STIs received 47% of total worldwide population-assistance expenditures, while reproductive health received 25%, basic research 15%, and family planning only 13% (05U1) (05L3). Some recent research (05H2) suggests that, if done right, treating HIV/ STIs in developing nations could be done at extremely low costs - low enough to foresee the possibility of wiping out the pandemic - instead of the treatment of HIV/ STIs being a bottomless pit for money, even to cure just a tiny fraction of HIV/ AIDS cases. The recent study (05H2) examined the costs of treating HIV/ AIDS by a wide range of options that can be divided into two categories: prevention and cure. ("Cure" refers to highly active antiretroviral therapy using several categories of drugs.)

It was found that the lowest cost of achieving a given benefit via a cure (antiretroviral therapy) option was on the order of 180 times greater than the lowest cost of achieving that same benefit (averting a case of HIV/ AIDS) via a prevention option. Clearly antiretroviral-drug-based approaches are not economically viable, and all available HIV/AIDS funding should be spent on prevention options. The cost of saving a life via a very carefully designed prevention measure ("social content serial dramas" (SCSDs) (soap operas)) beamed to radios and TV sets of the developing world is on the order of a few dollars - far less expensive than the least expensive media-prevention approach examined in Ref. (05H2).

The Link between Population Growth and Conflict: The costs of developing world population growth to the developing world itself, and ultimately to the standard of living characterizing the convergence point of globalization, is actually far worse than just a massive shortage of financial- and human capital in the developing world caused by the infrastructure costs associated with population growth. Population growth also causes conflict which itself represents a huge drain on financial capital and human capital creation. A combination of two studies, one by Population Action International (04P2) and another by Milanovic (05M2) show compellingly what a huge effect this is. The study by Population Action International (04P2) made the relationship between population growth rate and the probability of civil conflict fairly quantitative. The results of their study are summarized below.

Table (8D-1) ~ Effect of population growth rate on probability of civil conflict (04P2)

Births per 1000 per year

45+

35-45

25-35

15-25

15-

Probability of Conflict *

40-52%

30-34%

23-33%

11-16%

4%

* Likelihood of an outbreak of a civil conflict in a given decade

Civil conflict is another huge drain on the creation of financial capital and human capital, making matters far worse in nations with high population growth rates. Some research by Milanovic (05P2) shows this quite clearly. Milanovic examined the various theories as to why the poorest countries are failing to catch up, economically, with the rest of the world - which is what some current theories of the effects of globalization say should be happening. In fact, the poorest countries have been falling further behind the middle-income and rich countries. The median per-capita growth of the poorest countries during the past 20 years has been zero. Milanovic (05M2) examined the following popular possible explanations of this:

The first three of these explanations were shown to offer no statistically significant explanation as to why the poorest countries have been failing to catch up with the rest of the world during 1980-2002. The main reason for this failure, Milanovic found, was the fourth explanation - involvement in wars and civil conflicts (05M2).

What Milanovic failed to do was to consider population growth as a fifth possible explanation for the failure of the poorest countries to catch up with the rest of the world economically. Nor did he examine what possible effect population growth may have played in the greater likelihood of poor countries being involved in wars and civil conflicts. Had he done this, he would have noted that the region of the world with the highest population growth rate (the Muslim world) was the scene of the overwhelming bulk of the world's wars and internal conflicts. He would also have noted that the region of the world with the second highest population growth rate (Africa) was the scene of the bulk of the remaining wars and internal conflicts. His conclusion would then have almost certainly have been that wars and civil conflicts are the main reason why the poorest countries are falling further and further behind the rest of the world (as he did conclude) but also that population growth was the primary cause of these wars and civil conflicts (which he did not do because he failed to consider that possibility). Milanovic's simplistic conclusion about wars and internal conflicts is virtually useless in terms of devising strategies for addressing the problem. On the other hand, a conclusion as to the effects of population growth could have led to numerous inexpensive and effective strategies for solving the economic problems of the world's poorest countries. The paragraphs above discuss some of these cheap and effective strategies for reducing population growth, and hence for reducing the extreme scarcity of financial capital, and hence for reducing the frequency of civil conflict (which cause even more extremes on financial capital formation). All this makes abundantly clear why reducing population growth is so crucial in any attempt to significantly raise the convergence point that globalization is leading us all to.

SECTION (8-E)~ THE TIME-FRAME ISSUE ~

The time frame for the transition of the "Asian Tigers" to, or nearly to, developed-world status was a matter of several decades. Few, if any, of the options described here could be expected to accomplish much in any less time. But the US current accounts deficit, relative to GDP, is already close to what many see as an upper limit (Section (3-B)); it doubles in roughly every five years, and it currently requires about 70% of the world's external savings. So there are clear risks that the US economy could suffer some sort of meltdown phenomenon that could quickly and significantly reduce US living standards. So any option for raising the standard of living characterizing the convergence point could easily be too late to prevent people of the developing world from enduring a significant period of a level of suffering that is so well known to people of the developing world. Obviously buying time is essential. Perhaps heel-dragging in negotiations over trade agreements, increasing taxes to cover the federal budget deficit, or some policy like "semi-protectionism" (Section (3-C)) might work. These strategies probably could not be expected to work on a permanent basis, given the huge array of high and growing mobilities of virtually every element of economic activity. However such strategies could reduce trade deficits, current account deficits and federal budget deficits for a few decades, and delay meltdowns long enough to permit more of the strategies noted here to achieve meaningful results.

SECTION (8-F)~ DEMOGRAPHIC BONUS INVESTMENT OPTIONS ~

Countless possibilities exist for improving the sustainabilities of the food/ natural fiber/ freshwater production systems of the developing world, if not also the developed world. Such systems represent something on the order of 50% of the global economy. Successfully carrying out these possibilities could enhance the standard of living of the developing world and the convergence point, and relax the natural resource constraints on the standard of living characterizing the convergence point. The problem is that all these possibilities require large amounts of financial- and human capital. (See Section (6-D)), and the developing world is desperately short of financial- and human capital. Whatever capital the developing world is able to generate goes into the additional infrastructure required by population growth. People earning a median income of $2/ day/ person simply cannot afford the $1 trillion required for this added infrastructure, so there are huge unmet needs. Hence possibilities for improving on the sustainabilities of the developing world's food/ natural fiber/ freshwater production systems must be viewed as wishful thinking for the time being. However if the population growth reduction strategies described in Section (8-D) could be successfully pursued, the financial capital scarcity picture would improve dramatically. The financial costs of pursuing these strategies are extremely small - a small fraction of what the developed world now (mis)spends on humanitarian and development aid and loans. For this reason, it is important to contemplate the sorts of ways that the "demographic bonus," produced by cutting back on population growth, could be invested in improving the productivities and sustainabilities of the developing world's food/ natural fiber/ freshwater production systems - and in anything else that might relax the natural resource-based constraints on the standard of living characterizing globalization's convergence point. A few examples of these contemplations are described below.

Part [8F1]~ Sub-Saharan Africa ~

This region has more potential for improvement than anywhere else in the world. But this is probably due to its high population growth rate (2.5%/ year - second highest in the world) putting the region far behind most of the rest of the world in almost every way. (About 80% of Sub-Saharan Africans survive on less than $2/ day, vs. 50% on a global basis (03D1).) In 1970, Africa accounted for 10% of the world's poor. In 2000 nearly 50% of the world's poor were Africans (04A1). The region cannot be ignored, economically, because the US Congress passed the African Growth and Opportunity Act in June of 2000. This act gives 23 sub-Saharan countries the opportunity to ship a range of textile products to the US, duty-free. Broader agreements may follow. These would link Sub-Saharan Africa and its vast pool of unskilled labor closer to the global economy.

Sub-Saharan Africa is the least-irrigated region of the world. This means a shortage of dams more than a shortage of rivers. Thus, dams offer a good way to invest demographic bonuses, especially considering the fact that irrigated croplands provide about 59% (by value) of the world's cropland-based foods. Reducing population growth rates increases social-, economic- and political stability by virtue of the resultant demographic bonus. The result would be safer environments for financial capital. Sub-Saharan Africa, with its numerous civil wars, and its war casualties in the millions per decade, is an unsafe environment for financial capital. Reducing population growth could eliminate this problem. (See Table (8D-1).)

Sub-Saharan Africa also has notoriously poor soils - typical of the soils of tropical climates. This makes many investments in agriculture marginal at best. A major shortcoming is low organic matter contents. But Africans, unable to afford fuel oil etc. and suffering from large-scale deforestation, tend to burn crop residues and animal dung instead of returning it back into the soil. This makes soils even poorer and increases erosion rates, fertilizer runoff rates, and cropland abandonment rates. It also reduces drought resistance and water-use efficiency. These, in turn, make the economics of inorganic fertilizers and irrigation poorer, making people poorer, making them even less able to afford fuel oils etc. So another excellent way to invest demographic bonuses is fossil fuels, since it may help to break these positive feedback loops and provide a good financial return.

Sub-Saharan Africa also uses far less inorganic fertilizer per unit area of cropland than anywhere else (e.g. in the 1990s, China was using 240 kg/ ha/ year and India about 110, but Sub-Saharan Africa was using about 8 (02F1).) Much of the problem stems from the fact that inorganic (chemical) fertilizer prices in Sub-Saharan Africa are 6 times greater than in Asia, Europe and North America (60 times greater if measured in units of hours of labor needed to buy a ton of chemical fertilizer). Poor transportation infrastructure causes much of this problem. Much of Africa has less than 10% of the road density of India or China (02F1). Infrastructure problems result from shortages of financial capital due to high population growth rates. Demographic bonuses would aid in solving this infrastructure problem, thereby solving the fertilizer price problem, thereby increasing fertilizer consumption and food productivity, while decreasing the rate of growth of food requirements. Inorganic fertilizers, irrigation, and genetically improved crops each improve the economics of the other two processes. The result could be positive feedback loops of expanding benefits. Such loops help to explain the huge variations in cropland productivity and living standards around the world. Clearly, investing demographic bonuses in transportation infrastructure and inorganic fertilizers would produce major benefits in terms of reducing food imports and increasing food/ natural fiber/ freshwater productivity - crucial to raising the convergence point.

According to Norman E. Borlaug, Africa's grain productivity could be doubled or tripled in three years (02K1). Africa's present food deficit, plus its expected population-doubling over the next 3-4 decades, demands at least a tripling. (One third of the 590 million people living in Sub-Saharan Africa are chronically undernourished. Food donations from the outside world cover only a fifth of the region's food deficit.) Ref. (02K1) examines the numerous, intertwined, largely cash-flow-based, problems besetting African agriculture. Demographic bonuses could solve such problems. Until that happens, Borlaug's statement is little more than idle speculation. Unfortunately that speculation is used to support the conclusion that Africa's problems are mainly a result of bad leadership. That conclusion, in turn, leads to arguments that foreign aid to Africa - even family planning aid - should be cut, resulting in a self-fulfilling prophesy and a lower standard of living for the converged state of the global economy.

Part [8F2]~ India and Southeast Asia ~

India suffers some of the same problems as Sub-Saharan Africa, though perhaps not to the same degree. (India's population growth rate is still quite high - a good bit higher than China's.) Tropical soils are usually poor, and Indians burn crop residues and animal dung for the same reasons Africans do. So Indians suffer the same consequences. Also, India uses only half as much inorganic fertilizer per unit area of cropland as China (02F1). So this suggests room for improvement and increased crop yields. India's cropland area (1993) was 1.70 million km2 vs. China's 0.96 (96W1). Yet India's food grain production is 208 million tons/ year, vs. China's 410 million (www.indiawatch.com). This suggests that India has a significant potential for increasing grain productivity. Part of this potential may be in increased inorganic fertilizer consumption. Another part may be in increasing the level of attention to soil organic matter to the level of attention that China pays to this issue. Bear in mind that India produces surplus grain. So India's current problems with large-scale hunger and related deaths are more related to poverty than to food supply. (See below.)

India's population growth rate is much larger than China's, meaning that China has more financial capital to invest in agricultural improvements than does India - e.g. dams and irrigation systems that China is investing heavily in. India gets much of its irrigation water by depleting its ground water tables and its rivers. So it may need to invest heavily in drip irrigation, especially since its rivers often don't make it to the oceans. This too would suggest that the demographic bonus from reducing India's population growth rate could produce major benefits in terms of more sustainable food/ natural fiber/ freshwater productivity. Much of Southeast Asia has the same problems as India - poor tropical soils, high population growth rates and hence extreme shortages of financial capital and human capital for investing in agricultural improvements (soil improvements, inorganic fertilizers, dams, irrigation). Given significant demographic bonuses and the political will to invest them properly, food/ natural fiber/ freshwater productivities and per-capita consumption could be increased while reducing rates of demand-growth for these items.

Presently half of India's children are malnourished, 350 million Indians go to bed hungry, and pockets of starvation deaths surface regularly (02W3). However India runs a wheat surplus of 53 million tonnes per year, which could significantly reduce these hunger problems. However India's farm lobby has been persuading the government to subsidize wheat production by buying wheat at ever-increasing prices. Meanwhile, the World Bank, the IMF and the WTO have been forcing the Indian government to reduce wheat-consumption subsidies for India's poor (02W3). (See the final two paragraphs of this document.) The result: increasing production, decreasing consumption, falling water tables, depleting soils, rotting wheat, hunger, and wheat storage costs that exceed the amount the Indian government spends on agriculture, rural development, irrigation and flood control - combined (02W3). The inability of India's poor to purchase grain probably stems largely from the glut of unskilled labor. This, in turn, comes from India's high population growth rate and the huge capital/ infrastructure costs of financing this growth. So clearly, dealing with food productivity issues without first addressing financial capital scarcity issues would be pointless.

Part [8F3]~ Irrigation ~

Irrigation expansion can greatly increase cropland productivity. For example, while irrigated crops supply 59% of global cropland productivity (by value), global irrigated area is only 20% of global cropland area. The problem is that irrigation systems, including the required dams, require increasingly huge financial capital investments. Even greater investments are required if salinization problems are to be addressed (typically by systems of underground tiles) and dam backwater siltation problems are to be overcome in order to make productivities sustainable. Even greater financial capital investments are needed if water supplies are scarce, so that heavy investments in drip-irrigation are needed. Reducing population growth rates produces demographic bonuses that could provide the developing world much of the financial capital needed for building and improving the irrigation systems while simultaneously reducing rates of demand-growth for food, natural fiber and freshwater. The severe limitations on irrigation system expansion have been noted elsewhere (08S2).

Part [8F4]~ Non-Irrigated Croplands ~

Soil erosion rates on non-irrigated croplands in the developed world are under control (07S3) (08S2). This represents a major improvement over decades past. The most important changes that bought this about were increased use of "no-till" or "low-till" methods and the retiring of low-grade cropland. The developing world cannot afford either of these options and continues to suffer from high rates of topsoil loss -particularly where human pressures on the land are high, such as in the crescent of land from Korea to the Middle East. As a result, dam backwaters fill quickly with erosion sediments, raising financial capital costs for irrigation even further. Also, erosion tends to carry off inorganic fertilizers, and selectively carries away organic matter that is essential for many crucial soil properties (08S2). The developing world, lacking financial capital, uses the two erosion-reduction strategies of the developed world (mentioned above) to a far lesser degree, and suffers the consequences. The demographic bonus from reducing population growth rates provides hope for raising the capital intensiveness of developing world agriculture, and hence of increasing food/ natural fiber/ freshwater productivities while decreasing demand-growth.

SECTION (8-G)~ OTHER STRATEGIES ~
Part [8G1]~ Wild Fisheries ~

The world's marine and freshwater fisheries have suffered a reduction of sustainable productivity of on the order of 20 million tons per year - about 20% - due to over-fishing and other forms of mismanagement (08S2). This productivity loss could be recovered, given the political will to do so. Even in the US, where human pressures on fishery resources are supposedly lighter than elsewhere, recent legislation is now being aimed at revising laws passed in the mid-1980s that were aimed at enhancing the sustainability of marine fisheries. The revised laws focus on near-term expediency - and sacrificing sustainability on that altar. Developing nations that suffer from huge external debts, are selling fishing rights to their share of the oceans to heavily subsidized developed nation fishing companies (07S7). These contracts usually entail increasing fish harvests in fisheries that are already badly over-fished - and developed-world purchases of developing-world fish for pennies on the dollar. Eventually it must be realized that these sorts of policies and practices harm everyone - especially in a converged global economy. International treaties are needed that plot a course for recovery of all of the world's degraded fisheries, and maintenance of sustainability thereafter.

Sustainability Politics: The underlying problem is that the fishing industry itself, like the timber industry, like major irrigators, like the grazing industry, like farmers, have traditionally held the concept of "sustainability" in contempt -even on lands and waters that they themselves own (08S2). Outside of Western Europe, the furthest the concept of sustainability ever got, legislatively, was in Canada (sustainable logging) and Iowa (no net soil loss). Neither law was ever enforced (08S2).

Part [8G2]~ Immigration Policies ~

Immigration policies can affect options for raising Type B globalization's (defined in Section (1-D)) convergence point in several ways. A nation faced with problems associated with excessive population growth has two options. Option (1) is to offer and promote universal access to family planning services. Option (2) is to do nothing: let degrading economic conditions inspire citizens to migrate to lower-population-growth-rate neighbors. Option (2) is bad, since its net long-term effects on the entire region are negative. But if there are influential anti-contraception clergy to be dealt with, Option (2) could be the least troublesome politically. Nations with high net in-migrations need to take a more globally oriented view of the issue and work to reduce immigration from nations that seem more inclined to export their problems than to solve them internally. Ultimately the goal, globally, should be to drop all barriers to immigration and emigration, but along the path to this goal, the context needs to be examined constantly. (Something on the order of 50% of Mexicans want to emigrate to the US, and one billion people worldwide want to do the same. As mobilities increase, an ever-increasing fraction of these two numbers are likely to make that move.) Mexico's active family-planning program of recent decades is resulting in the beginnings of a middle class. This strategy for dealing with immigration problems is probably the least expensive and the most far-sighted.

Part [8G3]~ Raids on Developing Nations' Human Capital ~

The primary problem of the developing world is financial capital starvation, and this problem cannot help but reduce the standard of living characterizing globalization's convergence point. Options noted above make it clear that this problem has negative consequences globally. Besides needing financial capital for the above-mentioned purposes, the developing world also needs human capital, supplies of which are limited by shortages of financial capital - the nurses, doctors, accountants, engineers, optometrists etc. that are needed to create strong "internal" economies, not economies whose main strength is in exports. Yet the developed world seems bent on solving its shortages of nurses, engineer etc. by raiding the limited human capital of developing nations. This shortsighted policy is self-defeating, since it sends a message to would-be developed-world nurses, engineers, etc. to invest in other skills. Also it increases the levels of financial-capital starvation in developing nations. The most productive, way for the developed world to deal with its human capital shortages is through the more traditional, free-market mechanisms of wage- and benefit adjustments for its own citizens.

There are reportedly more Bangladeshi nurses in the Middle East than in Bangladesh. There are major outflows of physicians from India, South Africa, and Cuba, and of nurses from the Philippines and Jamaica. The economic costs of training professionals that subsequently emigrate are estimated to be tens of millions of dollars for South Africa alone (03W1) (00B2). Developing countries are estimated to lose over US$500 million each year in training costs alone of doctors and nurses who migrate to wealthier nations (03L2) (02F3). South African-trained physicians in Canada alone numbered 1738 in 2002, and that number grows 10%/ year (02M4) (03L2). About 75% of all international medical graduates in Britain come from poorer countries (05A3). The rate was 40% in Australia, 60% in the US and 43% in Canada according to a study in the New England Journal of Medicine (05A3). Entire public health systems are at risk of collapse because of the growing shortage of nurses in developing nations (05A3). The percent of African health-care workers intending to migrate: Cameroon - 49.3%; Ghana - 61.6%; Senegal - 37.9%; South Africa - 58.3%; Uganda - 26.1%; Zimbabwe - 68.0% (Source: WHO Migration Report, 2005) (07U1). In 2000, 20% of the stock of "high-skill workers" in the world's 50 Least-Developed Countries, defined as those workers with tertiary education (13 years of schooling or more), was working in an OECD (rich) country (06P4). The average number of years of schooling of the adult population in the world's 50 Least Developed Countries was three years in 2000 (06P4). For perspective, the world's 50 Least Developed Countries contain somewhat over 10% of the world's population (06P4). The developed world has no shortage of financial capital. In fact it has a troublesome surplus. (See Section (3-A) Part [A19]) There is no reason why that world cannot solve its human capital problems by increasing the wages in professions in which human capital is in short supply.

SECTION (8-H)~ THE LIMITED POTENTIAL OF AVAILABLE OPTIONS ~
Part [8H1]~ Historical and Geographical Fundamentals ~

Options described above offer room for raising the standard of living characterizing globalization's convergence point well above current living standards typical of those in the developing world - provided a conscious and concerted global effort is undertaken to make these options happen. However whatever optimism exists over raising the convergence point must be tempered with some harsh realities.

As growing land-man ratios degrade environments, human life grows cheaper; competition for basic resources becomes more desperate and bloodier - particularly among political, class, religious, tribal, ethnic, and racial groupings. Governments, particularly law enforcement, get harder to administer; basic freedoms produce instabilities and so become too expensive; wars, genocides and democides grow more common. So the safety and supply of financial capital diminishes, setting off any number of positive-feedback situations. Ultimately there must be some recognition that not only are population growth rates too high, but also populations themselves are sometimes too high also. So long as the political will exists, all sorts of new and developing technologies are available for lowering both population growth rates and populations.

Part [8H2]~ Religious Constraints ~

Despite all this grief, many fundamentalist clergy apparently still see population growth as a means of competing with other religions, and as means by which they might expand their personal wealth and power. The electronic media have given them the means by which they might increase their political influence, and hence their ability to force people of the developing world to have more children than they want or can afford, and their ability to keep the developing world's five billion people capital-starved and working for subsistence wages. All this has done much to produce a bipolar world and wretchedness on a massive scale. A heavy price must ultimately be paid for this. Fundamentalist clergy need to recognize that the benefits of contraception, even in moral terms, outweigh risks like that of "making women more promiscuous" by making contraceptives more readily available.

The extremely high population growth rates in the Muslim world (the highest population growth rates in the world) are the results of a number of factors. The shortage of financial capital and the degraded state of Middle East lands causes people to use children as a social security system - the only social security system they think they can afford, despite the obvious counter-productivity. The low status of women in Muslim society prevents them from obtaining educations and good jobs, narrowing their life-shaping options and increasing their desired family sizes. Also many Muslim Mullahs, particularly the more fundamentalist ones, take a dim view of such family-planning options as tubal ligation (female sterilization) and vasectomy (male sterilization) if not other forms of contraception. So the question arises as to whether it is politically possible to reduce population growth rates in the Muslim world. The growth of Islamic fundamentalism would suggest that it is not possible. But evidence to the contrary is becoming increasingly easy to find (08S3). Muslims themselves are increasingly recognizing the benefits of smaller families and an ever increasing number of even the more fundamentalist Mullahs are being convinced that family planning is not anti-Islamic.

Go to the Table of Contents of this entire document (at the top of Chapter 1) ~
Go to top of Chapter 2 ~ Does Globalization Produce Convergence? ~
Go to top of Chapter 3 ~ The Convergence Process ~ (the top of the second file that this document is divided into) ~
Go to top of Chapter 4 ~ Effects of, and Responses to, Convergence ~
Go to top of Chapter 5 ~ Convergence - Financial Capital Constraints ~ (at the top of this third file)
Go to top of Chapter 6 ~ Convergence - Natural Capital Constraints ~
Go to top of Chapter 7 ~ The Convergence Point ~
Go to top of Chapter 8 ~ Strategies for Living with Convergence ~
Go to top of Chapter 9 ~ Politics of Globalization - déjà vu ~
Go to Chapter 10 ~ References ~
Go to Appendix B ~ Driving Forces for Globalization ~
Go to the Home Page of this Web Site ~

CHAPTER 9 ~ POLITICS OF GLOBALIZATION - déjà vu ~

(9-A)~ Old Rules and New Rules ~
(9-B)~ The New Environment ~
(9-C)~ Polls ~

Chapter 8 describes some options for making the best of the convergence process that is Type B globalization (defined in Section (1-D)). Carrying out these options requires actions by nations and groups of nations as a whole. Political insights and considerations are therefore crucial to accomplishing what is needed. Merging the capital-rich developed world's economy with economies that suffer from dire scarcities of financial capital and large surpluses of subsistence-level labor must produce, at least initially, favorable results for developed world owners of capital, and unfavorable results for developed world labor. Hence the options suggested in Chapter 8 might prove to be politically contentious and therefore difficult to pursue.

SECTION (9-A)~ OLD RULES AND NEW RULES ~

Further insights into globalization politics can be gained by noting some uncanny similarities between the globalization process of 1980 onward and that of the mid-19th century up to World War I. This is disturbing; because mid-19th century globalization and its rules seemed more motivated by plunder than by overall human betterment.

The 19th century globalization process was driven by politically powerful groups within "beneficiary" nations that stood to benefit significantly, based on the unique situation they were in. Many nations were "globalized" at gunpoint. Others were "globalized" by being colonized. Millions of people were "globalized" by being taken into slavery. Rules of mid-19th century globalization were stacked heavily in favor of those politically powerful groups within "beneficiary" nations, and against colonies, slaves et al. Colonies often found globalization's rules to be little more than proxies for their economies being plundered by 19th century versions of 20th century multi-national corporations (Section (1-B)). World Bank economist Milanovic (02M1) termed the capitalism of both periods of globalization "wild".

As in the 19th century, the rules of mid-20th century globalization found in numerous trade agreements, are being stacked heavily in favor of (1) bestowing far more power on multi-national corporations there is any conceivable need for; (2) depriving other interests of what should be considered basic rights, and (3) ignoring what Adam Smith would consider to be sound economics. Below are some examples.

Clearly, no interests, other than those of multi-national corporations, have more than an insignificant degree of standing. Judges in international courts ("tribunals") of globalization answer to no voters. Citizens in Mexico have been shot for striking - opposing national laws created to conform to trade agreements (93F1). Most developing world people who work in globalization-oriented industries earn barely enough to purchase the food needed to provide the energy needed to perform their assigned tasks. Many live in "dormitories."

SECTION (9-B)~ THE NEW ENVIRONMENT ~

Milanovic (02M1) builds a case for his contention that capitalism made a transition from "civilized" to "wild" around 1980, the start of noticeable globalization. Data in Section (3-A) provide supporting evidence. Below is some additional evidence for this transition.

The increasingly heavy-handedness of developed nations in imposing their versions of the trade rules defining modern-day globalization has recently been documented in a book by Jawara and Kwa (03J1). These authors compiled interviews with 33 WTO diplomats and 10 organization employees. They claim that industrialized nations (Canada, Japan, Australia, New Zealand, South Africa, and countries in Western Europe) used bribery and dissemination of fear to convince developing countries to make agreements on international trade. The authors say that developing country ministers have been physically barred from participating in negotiations related to their countries, and that rich countries have threatened to stop offering aid to those nations if they did not sign the agreements. The book says that six WTO ambassadors from developing countries were removed from their posts in Geneva after disagreeing with diplomats from developed countries on the Doha Round of WTO talks, which were held in 2001. The book presents an official document written by US trade representative Robert Zoellick, demanding that developing countries change their positions regarding some negotiations or face inclusion on a US list of "enemy countries." African diplomats were pressured and intimidated by the US to sign an agreement - passed 8/30/03 - giving approval for poor countries to import generic copies of patented medications (03J1).

A more recent book by John Perkins (04P1) describes US dealings with developing nations in a similar vein. Perkins, a former chief economist at Boston strategic-consulting firm Chas. T. Main, worked for 10 years helping US intelligence agencies and multi-nationals cajole and blackmail foreign leaders into serving US foreign policy. His economic projections cooked the books to convince foreign governments to accept billions of dollars of loans from the World Bank and other institutions to build dams, airports, electric grids, and other infrastructure he knew they couldn't afford. The deals were smoothed over with bribes for foreign officials, but it was the taxpayers in the foreign countries who had to repay the loans. When their governments couldn't do so, as was often the case, the US or the World Bank or the International Monetary Fund would step in and essentially place the country in trusteeship, dictating everything from its spending budget to security agreements and even its UN votes.

A similar analysis was written by George Monbiot (05M1). He noted that a past president of the World Bank, Robert McNamara, concentrated almost all the World Bank's lending on vast prestige projects - dams, highways, ports - while freezing out less glamorous causes such as health and education and sanitation. Most of the major projects he backed have, in economic or social terms or both, failed catastrophically (96C1). McNamara argued that the World Bank should not fund land reform because it "would affect the power base of the traditional elite groups" (96C1). Instead, it should "open new land by cutting down forests, draining wetlands, and building roads to previously isolated areas" (96C1). He bankrolled Mobutu and Suharto (both corrupt, despotic rulers), deforested Nepal, trashed the Amazon and promoted genocide in Indonesia. The countries in which he worked were left with unpayable debts, wrecked environments, grinding poverty and unshakeable pro-US dictators (05M1). Also see Catherine Caufield, Masters of Illusion: the World Bank and the Poverty of Nations, Henry Holt, New York (1996).

SECTION (9-C) ~ Polls ~

New York Times and CBS News poll in the spring of 2007: Some 68% of Americans favor putting restrictions on free trade to protect domestic industries. This is the highest share since they began asking the question in the 1980s, and 12 percentage points more than in 2000 (08P1).

Pew Global Attitudes Project in 2007: Only 14% of Americans surveyed said increasing trade was "very good" for the US. That is less than 50% of the share in Canada, Germany or Sweden. Even among the French, 22% said more trade was very good (08P1). There are some reasons for this difference in poll results. European governments provide a stronger safety net to catch workers undercut by foreign competition. Also they redistribute the gains from trade more equitably than in the US (08P1). Also, in the US, public spending on social programs, from unemployment insurance to health care amount to about 17% of the overall economy. This is about half the level in Germany and less than almost every other rich nation (08P1).

Wall Street Journal/ NBC News poll of October, 1992 those with an opinion on NAFTA opposed it by 2-1 (Almost 40% had no opinion.) (Wall Street Journal (12/23/92)).

Wall Street Journal/ NBC News Poll of 12/02/99: In general, do you think that free trade agreements between the US and foreign countries have helped the US, hurt the US, or haven't made much difference (NMD)?

Income Level

Hurt

NMD

Helped

Under $20,000

54%

26%

17%

All adults

32

24

35

Over $50,000

25

24

41

In a poll of likely Republican voters, 32% said that foreign trade is good for the US economy, while 59% said that foreign trade is bad for the US Economy - reflecting a substantial shift from 8 years ago and a steady erosion in Republican support for free trade. In a December 1999 WSJ/ NBC poll, 37% of Republicans said trade deals have helped the US and 31% said they had hurt, while 26% said they made no difference (07H3).

In a March 2007 WSJ/ NBC poll before the recent scandal involving tainted imports, 54% of Democratic voters said free trade agreements have hurt the U.S., while 21% said they have helped (07H3).

A telephone survey of 800 voters during June, 1996, accompanied by 6 focus groups, revealed that Americans of all ages, all incomes, all races, and both political parties are angry with the way large corporations have been treating their workers in recent years. Specifically, voters are angry over:

Survey and focus groups conducted by EDK Associates and Peter D. Hart Research working under contract to the Preamble Center for Public Policy in Washington DC.

Wall Street Journal Poll, 7/31/97 61% of US citizens opposed giving President Clinton "fast-track" authority to negotiate free-trade agreements (vs.32% in favor).

Pew Research Center poll, 9/97 77% of Americans believe that protecting American jobs should be the nation's top foreign policy priority (Pittsburgh Post-Gazette (10/10/97)).

Wall Street Journal / NBC Poll, 12/10/98

Go to the Table of Contents of this entire document (at the top of Chapter 1)
Go to top of Chapter 2 ~ Does Globalization Produce Convergence? ~
Go to top of Chapter 3 ~ The Convergence Process ~ (the top of the second file that this document is divided into)
Go to top of Chapter 4 ~ Effects of, and Responses to, Convergence ~
Go to top of Chapter 5 ~ Convergence - Financial Capital Constraints ~ (at the top of this third file)
Go to top of Chapter 6 ~ Convergence - Natural Capital Constraints ~
Go to top of Chapter 7 ~ The Convergence Point ~
Go to top of Chapter 8 ~ Strategies for Living with Convergence ~
Go to top of Chapter 9 ~ Politics of Globalization - déjà vu ~
Go to Chapter 10 ~ References ~
Go to Appendix B ~ Driving Forces for Globalization ~
Go to the Home Page of this Web Site ~