The Grey Chronicles

2009.July.2

Is Globalization Dead?



Globalization is often seen as replacing geopolitics (Blouet, 2001). Globalization is all about a world that knows no boundaries. Geopolitics was all about Great Powers and empires dividing up the world and imposing territorial control over it.

The Global Policy Forum describes globalization as:

“Human societies across the globe have established progressively closer contacts over many centuries, but recently the pace has dramatically increased. … Multinational corporations manufacture products in many countries and sell to consumers around the world. Money, technology and raw materials move ever more swiftly across national borders. Along with products and finances, ideas and cultures circulate more freely. As a result, laws, economies, and social movements are forming at the international level. Many politicians, academics, and journalists treat these trends as both inevitable and (on the whole) welcome. But for billions of the world’s people, business-driven globalization means uprooting old ways of life and threatening livelihoods and cultures. The global social justice movement, itself a product of globalization, proposes an alternative path, more responsive to public needs. Intense political disputes will continue over globalization’s meaning and its future direction.”

The World Is Flat: A Brief History of the Twenty-First CenturyIn his book The World Is Flat, Thomas Friedman (2005) sees globalization as a phenomenon that will eliminate inequality in our societies. He described the three great eras of globalization:

Globalization 1.0 lasted from 1492—when Columbus set sail, opening trade between the Old World and the New World—until around 1800 sh inking the world from a size large to a size medium. It was about countries and muscles. In this era, countries and governments (often inspired by religion or imperialism or a combination of both) led the way in breaking down walls and knitting the world together, driving global integration. Its key agent of change, the dynamic force driving the process of global integration, was how much brawn-how much muscle, how much horsepower, wind power, or, later, steam power-a country had and how creatively it could deploy it.
Globalization 2.0, lasted roughly from 1800 to 2000, interrupted by the Great Depression and World Wars I and II, shrank the world from a size medium to a size small. It key agent of change was multinational companies, which went global for markets and labor, spearheaded first by the expansion of the Dutch and English joint-stock companies and the Industrial Revolution. Global integration was powered by falling transportation and telecommunication costs, giving birth and maturation of a global economy, global market, with global arbitrage in products and labor.
Globalization 3.0 is shrinking the world from a size small to a size tiny and flattening the playing field at the same time. It dynamic force is the new-found power for individuals to collaborate and compete globally. … This new era of globalization will prove to be such a difference of degree that it will be seen, in time, as a difference in kind. … The world has gone from round to flat.”

Nancy Birdsall (2005), President of the Center for
Global Development in Washington, defines “Globalization is shorthand for global capitalism and the extension of global markets.” She argues, moreover, that Friedman’s focus on the flattening process (e.g., the US and China) overlooks literally and figuratively half the world’s population. Inequality is still the driving force in most countries. She offered three reasons why the global economy tends to sustain or worsen current money inequality—across countries and in particular within developing countries:

“Global markets reward more fully those countries and individuals with more of the most productive assets. (Call this, for simplicity, the market works.)
In the global economy, negative externalities raise new costs for the vulnerable and compound the risks faced by the already weak and disadvantaged. (Call this, for simplicity, the market fails.)
In the global economy, existing rules tend to benefit most those countries and individuals who already have economic power; it is natural that the richer and more powerful manage to influence the design and implementation of global rules—even those rules meant to constrain them—to their own advantage.”

Yet, many extolled the innumerable promises of globalization (e.g., Bhagwati, 2005; IMF, 2000). Some say globalization will bring everyone up to the same level. Thus, neoliberal economic theory achieved its greatest level of acceptance, leading to the globalization of finance, trade, and production.

Financial globalization, Mauro, et. al. (2007) defined, is the extent to which countries are linked through cross-border financial holdings, GDP. In their 2007 study, Mauro et. al. find:

“In principle, greater financial openness holds promise: gains may come from greater risk-sharing, a more efficient worldwide allocation of capital, and broader technology transfer. … Empirical evidence on the stability benefits of international financial integration is mixed: for countries with relatively strong institutions, well-developed domestic financial systems, and sound macroeconomic policy frameworks, greater integration has not been accompanied by significantly higher macroeconomic volatility, whereas for countries without those conditions in place, volatility has tended to increase with greater openness. Likewise, crisis frequency is found to be lower for countries that are relatively open to international trade, and with strong institutions, sound policies, and well-developed financial sectors.”

Many free trade adherents view that trade plays a key role in successful development and that the main benefits come from unilateral liberalization in developing countries themselves. Former Chief Economist at the United Nations Conference on Trade and Development (UNCTAD) Yilmaz Akyüz (2005) contends, however, that both theory and empirical evidence—using revealed openness, causality, or case studies—suggest no automatic linkage between trade liberalization and growth, and particularly, “Trade liberalisation in developing countries has generally resulted in a structural deterioration in the balance of payments.”

Furthermore, reacting to New York Times editorial, Baker and Weisbrot (2003) warn that “removing all the rich countries’ remaining barriers to merchandise trade—including manufacturing as well as agricultural products—and removing agricultural subsidies, will not level the playing field and therefore will not save developing countries from economic and social upheavals.”

In BRIE’s (1991) view, globalization reveals rival innovators operating in multiple geographic sources that are combined into several quite different approaches to production. The result is heightened competition, and critically, heightened uncertainty, by market volatility.

This uncertainty and volatility is clarified by OECD’s Global Industrial Restructuring (2002):

“Firm and industry restructuring includes investment in new plant and equipment, mergers and acquisitions, cessation or downsizing of operations and the forging or termination of commercial alliances with other firms. … The global restructuring has generally tended to boost firm efficiency and has helped to spur innovation by facilitating the diffusion of technology and production, and managerial and marketing expertise.”

Michael W. Lewis (2004) debunks the notion that production itself creates economic value, whereby governments protect business regardless of their performance, thus they fail to understand the link between production and consumption. His advice:

“Undoubtedly, dismantling barriers to economic growth is difficult. Some firms must be allowed to go out of business,thus forcing workers to find new jobs. Industries must be open to foreign competition, and the enforcement of tax codes and other regulations must be strengthened. And governments must stand up to special interests.”

Here Lies GlobalizationEvery other economist predicted that globalization is doomed [e.g., Bello (2006)]. During the series of economic crises occurring all over the world, the efforts of the World Bank and IMF even came under a range of criticisms, including by at least two Nobel economists (Krugman 1999; Stiglitz 2002). With the present global economic crises, many are again debating that this might be the signal that globalization has really failed its promise.

Friedman claimed in his book that the dot-com bubble was only one aspect of globalization, and when it imploded, rather than imploding globalization, it actually turbocharged it. Quirk (2008), discussing the changing nature of states and the state system during globalization, considers evidence of three potential trends: “the breakdown of international institutions, the rise of state control and diplomatic use of energy resources, and the abandonment of the principles of globalization by the United States.”

If the current global economic crises, brought by globalization itself, is only one aspect of globalization, then should we expect that it could actually boost Globalization 3.0? Or is it the headstone for Globalization?


Notes:

Akyüz, YILMAZ (2005). Trade, Growth and Industrialisation: Issues, Experiences and Policy Challenges. Penang, Malaysia: Third World Network, 2005. p. 17-18, 22. back to text

Baker, Dean & Mark Weisbrot (2003). False Promises on Trade, Global Envision. Washington, D.C.: <a href="http://www.cepr.net/&quot; title="Center for Economic and Policy Research" target="_blank"Center for Economic and Policy Research, 20 August 2003. back to text

Bello, Walden (2006). Globalization in Retreat. Silver City, NM and Washington, DC: Foreign Policy In Focus, 27 December 2006. p. X. back to text

Berkeley Roundtable on the International Economy [BRIE] (1991). Globalization and Production. Berkeley: University of California, 15 April 1991. p. 3-4, 6 back to text

Birdsall, Nancy (2005). The World is not Flat: Inequality and Injustice in our Global Economy, Delivered at the Wider Annual Lecture Series 9 at Marina Congress Center, Helsinki, Finland: United Nations University World Institute for Development Economics Research [UNU-WIDER], 26 October 2005. back to text

Bhagwati, Jagdish (2005). In Defense of Globalization: It Has a Human Face, Speech given in The 2005 Angelo Costa Lecture , Rome. back to text

Blouet, B.W. (2001). Geopolitics and Globalization in the Twentieth Century.. London: Reaktion Books, 01 May 2001. 256pp. back to text

Friedman, Thomas L. (2005). The World Is Flat: A Brief History of the Twenty-First Century. USA: Farrar, Straus and Giroux, April 2005. pp. 10-11, 46-47, 112, 386-7 back to text

Krugman, Paul (1999). The Return of Depression Economics. New York: W.W. Norton, May 1999. 176pp. back to text

Lewis, William W. (2004). The Power of Productivity: Wealth, Poverty, and the Threat to Global Stability. Chicago: University of Chicago Press, 16 April 2004. 370pp. back to text

Mauro, Paolo & the IMF Research Department (2007). Reaping the Benefits of Financial Globalization. Washington, D.C.: International Monetary Fund, June 2007. pp. 3, 35- back to text

Organisation for Economic Co-operation and Development [OECD] (2002). Global Industrial Restructuring. Paris: OECD Publications, 2002. p. 7, 9. back to text

International Monetary Fund [IMF] (2000). Globalization: Threat or Opportunity?. Washington, D.C.: International Monetary Fund, 12 April 2000. p. X. back to text

Quirk, James M.(2009). Globalization at Risk: The Changing Preferences of States and Societies, Managing Global Transitions . 6:4. Winter 2008. pp. 341-371. back to text

Stiglitz, Joseph (2002). Globalization and Its Discontents. New York: W.W. Norton, June 2002. 282pp. back to text

Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 LicenseDisclaimer: The posts on this site do not necessarily represent any organization’s positions, strategies or opinions; and unless otherwise expressly stated, are licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License.

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7 Comments »

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    – Marc Shaw

    Comment by Marc Shaw — 2009.October.15 @ 15:26 | Reply

  2. Nice!

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    Comment by seo expert london — 2009.July.4 @ 21:21 | Reply

  4. great article. thanks!

    Comment by hanny — 2009.July.4 @ 13:04 | Reply

  5. That was a nice read.

    Comment by sunee — 2009.July.4 @ 06:21 | Reply

  6. Nicely written article

    Comment by soori — 2009.July.4 @ 05:56 | Reply

  7. That was a nice read.

    Comment by vepa — 2009.July.3 @ 15:30 | Reply


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