3.3 Globalization

3.3 Globalization

            In literature, globalization is associated with an ongoing process by which regional economies, societies, and cultures have become integrated through a globe network of information & communication technologies and collaborative business initiatives (Ravier, 2009). Sometimes it refers to the integration of national economies into the international economy through trade, foreign direct investment, capital flows, migration, and the spread of technology (Bhagwati, 2004). The term has also been referred to the transnational circulation of ideas, languages, or popular culture through acculturation (Gunter & van der Hoeven, 2004). Yet, globalization is usually recognized as being driven by a combination of economic, technological, socio-cultural, political, and biological factors (Croucher, 2004).

            Academically, the early description of globalization is associated with the American entrepreneur-turned-minister Charles Taze Russell who coined the term 'corporate giants' in 1897 and a publication entitled ‘Towards New Education’ in 1930. However, it was not until the 1960s that the term began to be widely used by economists and other social scientists. The term globalization achieved widespread use in the mainstream press by the latter half of the 1980s. Since its inception, the concept of globalization has inspired numerous competing definitions and interpretations (Hopkins, 2004).

            The process of globalization is not a new phenomenon, yet there is little agreement amongst historians and economists as to its origin. The phenomena of globalization, according to many scholars, rooted back to ancient time when Sumer and the Indus Valley Civilization established their trade links in the third millennium B.C. (Frank, 1998). However, Leakley (1981, p. 212) states that “trade is older than agriculture or any other sort of regular production.” Herskovits (1948) points out that “in Europe there is evidence of trade over very great distances even in the Palaeolithic age, at least 30,000 years ago.”

            The ancient Silk Route has also been considered a significant factor in the process of globalization as it was the key trade route among the great civilizations of China, India, Ancient Egypt, Persia, Arabia, and Ancient Rome, and in several respects helped lay the foundations for the modern world. Later the Islamic Golden Age showed another stage of globalization, when Jewish and Muslim traders and explorers established trade routes, resulting in a globalization of agriculture, trade, knowledge and technology. Crops such as sugar and cotton became widely cultivated across the Muslim world in this period, while widespread knowledge of Arabic and the Hajj created a cosmopolitan culture (Hobson, 2004).

            Despite the fact that globalization finds its seeds in this gradual progress of exchange and commerce, there were certain periods in history in which the process expanded rapidly. Perhaps the first acceleration can be found in the 15th and 16th centuries, when several European powers expanded their navies and roamed the Earth, conquering, colonizing and developing commercial trade on an unprecedented scale. Richard Ebeling (2002) explains: ‘But it was only following the great explorations of the 15th and 16th centuries, with the opening of new trade routes from Europe to Africa and Asia and the discovery of a “New World,” that the modern era of international trade began its development. In the 17th century, globalization became developed greater when chartered companies like British East India Company (founded in 1600), often described as the first multinational corporation, as well as the Dutch East India Company (founded in 1602) were established’ (cited in Hayek, 1988). It has followed an accelerating trajectory since the 18th century, as both the technical means and the institutional order have permitted the potentials of global commerce to expand dramatically.

            Global integration continued with the European colonization of the Americas initiating the Columbian Exchange, the exchange of plants, animals, foods, human populations (including slaves), communicable diseases, and culture between the Eastern and Western hemispheres. Thus commerce gave way to sedentary civilizations in new places, which consequently enabled further specialization, a process that would finally culminate in demographical expansions. In this manner, Hayek (1988) explains that a chain reaction began: “the greater density of population, leading to the discovery of opportunities for specialisation, or division of labour, led to yet further increases of population and per capita income that made possible another increase in the population. And so on.” (p. 40)

            In the 19th century globalization approached its modern form. Industrialization allowed cheap production of household items using economies of scale, while rapid population growth created sustained demand. The Industrial Revolution was initiated in England during the 18th century, from where it expanded towards Continental Europe and a few other areas, transforming in the course of less than two generations the life of Western man, as well as the nature of his society and of his relations with the rest of the peoples of the world. In this manner, the Industrial Revolution initiated an accumulative process of self-propelled technological advance whose repercussions would be felt in all aspects of economic life (Landes, 1979, p. 15).

            The revolution in transport and communications, for example, afforded an unprecedented impact in the international markets of capital and goods, but also in the market of labour. For example, sixty million Europeans immigrated in the hundred years following 1820: three-fifths to the United States, many others within Europe and a significant percentage to Latin American countries, especially Argentina. The majority of European immigrants sought an escape from poverty, and wages on the American continent were relatively higher (Ravier, 2009: p.4) Globalization in this period was decisively shaped by nineteenth-century imperialism.

            In modern age, the term globalization began to appear in 1960s in the literature published by economists and other social scientists.  The term reached the mainstream press in 1980s. Since its inception, the concept of globalization has inspired competing definitions and interpretations (Hopkins, 2004; IMF, 2000; Kinnvall & Jonsson, 2002; Steger, 2009).  For example, The United Nations Economic and Social Commission for Western Asia defines globalization as:  "a widely-used term that can be defined in a number of different ways. When used in an economic context, it refers to the reduction and removal of barriers between national borders in order to facilitate the flow of goods, capital, services and labour... although considerable barriers remain to the flow of labour... Globalization is not a new phenomenon. It began towards the end of the nineteenth century, but it slowed down during the period from the start of the first World War until the third quarter of the twentieth century. This slowdown can be attributed to the inward-looking policies pursued by a number of countries in order to protect their respective industries... however, the pace of globalization picked up rapidly during the fourth quarter of the twentieth century..."( Wikipedia, 2012).  

            Tom G. Palmer of the Cato Institute defines globalization as "the diminution or elimination of state-enforced restrictions on exchanges across borders and the increasingly integrated and complex global system of production and exchange that has emerged as a result." Adrián Ravier (2009) of the Hayek Foundation summarize the globalization as such the process that arises spontaneously in the market and acts by developing a progressive international division of labor, eliminating restrictions on individual liberties, reducing transportation and communication costs, and increasingly integrating the individuals that compose the “great society.”

            The recent trend of globalization, on the one hand, brought unprecedented opportunities to the global community. On the other hand, it has also created many social, cultural, and economic implications.  Alberto Benegas Lynch Jr. and Carlota Jackisch (2002, p. 126) explain that ‘the acceleration of globalization, understood as a technological phenomenon especially in the fields of telecommunications, led to significant transformations in the capital markets of the world, particularly during the last decade of the 20th century. Therefore new investment alternatives arose, such as the so-called “emerging markets,” and the flexibility and speed of access and exit of the diverse financial markets increased [...] Foreign trade, on the other hand, has not managed to globalize to the same extent. Despite the moderation of the exacerbated protectionism experienced between World War I and II, the world is still far from the free trade standards that dominated most of the 19th century. Conspiring against commercial globalization, we have first of all a firmly rooted anti-liberal mentality which has plagued international trade with military terms. Thus “exportation” becomes “conquer of markets”; “importation” is viewed as “an invasion of products”; duty increases are seen as “in retaliation” to similar increases previously sought by the other country, etc.’

            Ravier (2009) argues that in this way social engineering is the goal of entirely reconstructing society, without considering that these experiments necessarily have both unwanted and unforeseeable consequences, which lead to the exercise of yet more pressure upon the events in order to “straighten” society towards the desired direction. Benegas Lynch and Carlota Jackisch (2003, p. 18) comment, “it is not rare that those who assume such a task do not hesitate to ‘sacrifice a generation’—as was commonly heard in the Soviet Union—if the distant ideal demanded it.” ( Cited in Ravier, 2009)

            Social engineering, deliberately created, was conceptualized by Gabriel Zanotti (2002) (cited in Ravier, 2009) as the “globalization of interventionism” which according to his analysis presents the following facets:

  • Interference by taxation (Human Action, pp. 737–42): “any tax on rent or capital is criticized as something that simply decreases the existing capital rate and consequently diminishes real wages, harming lower-income sectors.”
  • Restriction of production (Human Action, pp. 743–57): “any state intervention regulating tariff is rejected as something that far from increasing prices and employment, will significantly reduce them, in addition to creating an economic system based on privilege.”
  • Interference with the structure of prices (Human Action, pp. 758–99). Apart from aggravating inflationary problems, it is peculiar that Mises warns against the dramatic consequence of fixing the salary (one of those prices) above its productivity, producing unemployment. That is when he begins his criticism against union activity of the fascist type.
  • Currency and credit manipulation (Human Action, pp. 780–99): “state monopoly over currency and control of the monetary supply necessarily imply inflation. Credit expansion implies an artificial period of expansion followed by its inevitable effect: recession.”
  • Foreign exchange control and bilateral exchange agreements (Human Action, pp. 800–803), as well as a clarification of the negative consequences that follow the implementation of politics that today we would frame under the title “living on our own.”
  • Confiscation and redistribution (Human Action, pp. 804–11), predicting its obvious effect: “de-capitalization, added poverty and underdevelopment.
  • Syndicalism and corporativism (Human Action, pp. 812–32), “that fascist bond between the labour unions and the state that leads to ample and devastating unemployment, followed by a critique regarding bellical mentality as an excuse for state intervention.”

            The historical perspective of globalization has been presented; it is time to see the social and cultural implications that arises in parallel with the last acceleration of the process of globalization. Talking about the social and cultural implications Canadian professor Herbert Marshall McLuhan, in his book The Gutenberg Galaxy: ‘The Making of Typographic Man (1962), describes how electronic mass media collapse space and time barriers in human communication, enabling people to interact and live on a globe scale. He coined the expression “global village” as a way of illustrating how electronics convert vast spaces into reduced regions (“virtual reality”). The revolution in communications has notably contributed to tighten relationships between people of diverse places. It has also created an impact on the life and work of people, their families, and their societies. Concern is often raised about the impact of globalization on employment, working conditions, income and social protection. Beyond the world of work, the social dimension includes security, culture and identity, inclusion or exclusion from society and the cohesiveness of families and communities (Gunter & van der Hoeven, 2004).

            Some of the other concerning aspects highlighted in literature are listed below:

  • Poorer countries suffering disadvantages: While it is true that globalization encourages free trade among countries, there are also negative consequences because some countries try to save their national markets. The main export of poorer countries is usually agricultural goods. Larger countries often subsidize their farmers (like the EU Common Agricultural Policy), which lowers the market price for the poor farmer's crops compared to what it would be under free trade (Chossudovsky, 2003; Oxfam, 2002a; 2002b ). Incomes declined in emerging economies: down by 40 percent in China and India, 17 percent in Indonesia, 41 percent in the Philippines, 32 percent in South Africa and 24 percent in Argentina. For Indonesia, the decline was far worse than the Asian crisis, and for China and India, the decline was worse than the one experienced by Germany during the Great Depression. Yet hardly anyone noticed (Milanovic,  2008).
  • Exploitation of foreign impoverished workers: The deterioration of protections for weaker nations by stronger industrialized powers has resulted in the exploitation of the people in those nations to become cheap labor. Due to the lack of protections, companies from powerful industrialized nations are able to offer workers enough salary to entice them to endure extremely long hours and unsafe working conditions, though economists question if consenting workers in a competitive employers' market can be decried as "exploited". It is true that the workers are free to leave their jobs, but in many poorer countries, this would mean starvation for the worker, and possible even his/her family if their previous jobs were unavailable (Mcmahon &  Tschetter, 1986).
  • The shift to outsourcing: The low cost of offshore workers have enticed corporations to buy goods and services from foreign countries. The laid off manufacturing sector workers are forced into the service sector where wages and benefits are low, including child labour (Pavcnik, 2005), but turnover is high . This has contributed to the deterioration of the middle class which is a major factor in the increasing economic inequality in the United States . Families that were once part of the middle class are forced into lower positions by massive layoffs and outsourcing to another country. This also means that people in the lower class have a much harder time climbing out of poverty because of the absence of the middle class as a stepping stone (Pavcnik, 2005;  Milanovic,  2008).
  • Weak labor unions: The surplus in cheap labor coupled with an ever growing number of companies in transition has caused a weakening of labor unions in the United States. Unions lose their effectiveness when their membership begins to decline. As a result unions hold less power over corporations that are able to easily replace workers, often for lower wages, and have the option to not offer unionized jobs anymore (Nepgen, 2008).
  • Increase exploitation of child labor: Country that experiencing increases in labor demand because of globalization and an increase the demand for goods experience greater a demand for child labor. This can be "hazardous" or “exploitive”, e.g., quarrying, salvage, cash cropping but also includes the trafficking of children, children in bondage or forced labor, prostitution, pornography and other illicit activities (Pavcnik, 2005; Milanovic,  2008).
  • Income inequality: As regards the impact of globalization on income inequality, there is now a large literature which conclude that globalization has increased income inequality within as well as between countries. Stiglitz (2003), for example, argues that, as actually practiced, globalization tends to make poor societies more rather than less unequal. However, some contributors to the literature question these findings or argue that, though higher growth has been accompanied by increased inequality, poverty has still decreased (Singh & Dhumale, 2000; Burtless, 2002).
  • Globalization & gender: There has certainly been some progress in women’s social status, based on the increased female participation rate, especially in manufacturing and export processing zones. However, some of the more recent studies, especially Chambers (2000), have argued that despite the increase in female participation rates, women remain economically disempowered. Black and Brainerd (2002) conclude that “increased competition through trade did contribute to the relative improvement in female wages in concentrated relative to competitive industries, suggesting that, at least in this sense, trade may benefit women by reducing firms’ ability to discriminate” (p. i). On the other hand, Balakrishnan (2002) concludes that the international fragmentation of production has led to the flexibilization of work and that women often accept unstable and vulnerable work in order to combine their family responsibilities with paid work. Similarly, Moghadam (2001) casts a gender perspective on globalization to illustrate its contradictory effects both on women workers and on women’s activism. She concludes that globalization has had dire economic effects on women; however, the process has created a new constituency of working and organized women, which may herald a potent anti-systemic movement.

           In this section we have discussed the process of globalization and  some concerning aspects of globalization which have been mentioned in literature. Just to conclude we can say that a considerable part of the literature analyzing the impact of globalization is highly controversial. At the aggregate level, examining the overall impact of globalization, most analyses fall between two polar views. For some, globalization has been an instrument for progress; it has created wealth, expanded opportunities and provided a nurturing environment for entrepreneurship and enterprise. For others, globalization has created unemployment, poverty and marginalization, and is thus perceived as a force institutionalizing social crises. However, a consensus does seem to be emerging that, overall, globalization has brought more benefits than costs; that it has exacerbated inequalities both within and between countries because of the sharply diverging experience at individual and country levels; and that it has increased economic and political insecurity even for those who have benefited in monetary terms from globalization. Yet it is still a challenge to make the process of globalization more beneficial for the global community (Gunter & van der Hoeven, 2004).


Footnotes


refers to a historical trade routes across the Afro-Eurasian landmass that connected East, South, and Western Asia with the Mediterranean and European world, as well as parts of North and East Africa