World View Presentations:

GLOBALIZATION

Presented by Dr. Loren Fauchier

Queens University of Charlotte

August 29, 2003

GLOBALIZATION

Defining Globalization Components of Globalization Thinking About Globalization—Globalists

vs. Skeptics Major Questions and Dilemmas of

Globalization

Definitions of Globalization

1.Joseph Nye and John Donahue: “Globalism is a state of the world involving networks of interdependence at multicontinental distances.”

2. World Bank: Globalization is the growing integration of economies and societies around the world.

Thomas Friedman, “The Lexus and the Olive Tree” A globalist system has replaced the Cold War system The new system has unique rules, logic, pressures and

incentives driven by international capitalism Features integration: free flow of capital, goods, ideas

more broadly, faster, deeper than anytime in the past. The “Golden Straightjacket”: must abide by goals of free

market principles, efficiency. Rewarded if you do. New key players: The “Electronic Herd.” Globalization promotes cultural homogenization, the “Big

Mac.”

Friedman: Globalization’s new structure and balance of power Traditional balance between states (countries),

U.S. is the paramount player Balance between states and global markets:

states can’t ignore the market any longer without costs

Balance between individuals and states: people influence governments through the market at home and abroad (for good and evil). Globalization produces “super-empowered individuals

Important Conclusions from Friedman’s argument

1. Rewards. Those who participate in globalization are rewarded, though there are winners and losers.

2. Peace Dividend. Those engaged in globalization have too much to lose with war.

3. Democratic Dividend. Free movement of information with markets produces drive for freedom and liberty—seeds of democracy.

Components of Globalization?

Economic globalization Political globalization Cultural globalization

Q: Is there a global economy?If so, is this good? Globalizers (Integrationists) : Yes!

1. Increased integration has brought a higher volume of trade. This means more goods and services for most of the world.

2. Increased GDPs and overall standard of living for those that participate

Increasing World Trade (Billions ofUS$)

20 33 21 53 94 154574

1,972

3,824

7,465

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

1913 1933 1958 1973 1993

Year

Wo

rld

Exp

ort

s (U

S$

Bil

lio

ns)

Merchandise Exports as percentage of GDP in 1990 prices, world and major regions, 1870-1998______________________________________________

1870 1913 1950 1773 1998______________________________________________Western Europe 8.8 14.1 8.7 18.7 35.8Eastern Europe & former USSR 3.3 4.7 3.8 6.3 12.7Latin America 9.7 9.0 6.0 4.7 9.7Asia 1.7 3.4 4.2 9.6 12.6Africa 5.8 20.0 15.1 18.4 14.8World 4.6 7.9 5.5 10.5 17.2______________________________________________

“Development cycle” working well

Economies in post-industrial societies increasingly depend on the service sector

Developing countries are industrializing. By the late 1990s almost 50% of total world manufacturing jobs were located in developing economies while over 60% of developing country exports to the industrialized world were manufactured goods.

America?

Loss of manufacturing jobs natural. 2.6 million between 1979 and 1999, but overall job increases, especially in the 1990s.

Increasing role of the service sector: IT, banking, insurance, service industries—help raise GDP per capita and the overall standard of living

Cheaper goods and services with global market

Is economic globalization good?

“All boats rising” (for those who participate) but at different rates

Raised incomes, though not equal More individual choice and freedom in the

marketplace Costs of goods and services go down

World Bank Policy Research Report: Globalization, Growth and Poverty, 2002. Key Points:

1. Strong correlation between integrating into the world economy and economic growth. Poor countries with around 3 billion people have broken into the global market for manufactures and services.

2. Higher growth rates increase a country’s GDP and standard of living.

3. Globalization has reduced the number of people living in poverty by over 120 million.

4. Globalization has not increased income inequality (as many skeptics claim).

5. Globalization has reduced poverty, but not everywhere. About 2 billion people have been left out of the globalization process.

The success stories or “new globalizers” include:

China

India

Bangladesh

Uganda

Vietnam Why successful?

Good investment climateSocial policies that aid human capital

Related Study by David Dollar and Aart Kraay, “Spreading the Wealth,”Foreign Affairs, 2002. The current wave of globalization (starting

around 1980) has reduced poverty and promoted economic equality

Key examples: China and India

-account for 36% of the world’s population

-important examples of “how to do it.”

UN 2003 Report

China has lifted 150 million people out of poverty in the last 10 years—the biggest success story in international poverty alleviation.

Why?1. Rapid economic growth2. Political will (centralized government)3. Economic and policy reforms—more open

trade, investment, technology

Skeptics (Separatists): No.1. Not a “globalized” economy. Trade is

overwhelmingly dominated by the developed countries (U.S. and Europe). These countries amass 76% of the exports in goods and services.

2. World economy is dominated by the U.S. and major western powers.

3. Major U.S. trade partners: Canada, Mexico, Japan, China, Germany, U.K. South Korea, Taiwan, France, Italy.

LOCATIONS OF THE WORLD’S 500 LARGEST MULTINATIONAL ENTERPRISES

Country/blocNumber of MNEs in 1999

United States 179European Union 148Japan 107Canada 12South Korea 12Switzerland 11China 10Australia 7Brazil 3Other 11

Source: Held and McGrew, 2002, p. 43.

4. Developed countries have overwhelming advantage with investment and trade. Do little to help poor countries. Center for Global Development and Foreign Policy Magazine recently ranked overall contributions by developed countries to developing countries. The U.S. (despite having the largest economy) ranked second to last out of 21 countries. U.S. spends 0.1 percent of its GDP on development.

5. Globalization does not alleviate inequality and poverty, it increases it. Gap between rich and poor countries has increased.

Per Capita GNP, North and South

0

5000

10000

15000

20000

25000

30000

1970 1980 1990 2000

SouthNorth

6. Gap between the rich and the poor within countries has increased. Good example? China! Top 10 percent to bottom 10 percent income ratio: 1:35.

Countries with the highest inequality in income and consumption? Sub-Saharan Africa.

7. Intentions and statistics of the World Bank and the International Monetary Fund suspect.

Joseph Stiglitz, Chief Economist for the World Bank. Book: Globalization and Its Discontents, 2002.

These organizations put the interests of Wall Street and the financial community ahead of the poorer nations.

8. Globalization hurts workers in developing countries—forced to work for cheap wages and in poor working conditions e.g. China, India. Rights of workers ignored.

9. Cheap foreign competition and off-shore production of manufacturing hurts American workers e.g. Pillowtex.

10. Globalization is undermining the white-collar class as well with the export of jobs, for instance, to India.

11. Labor is anything but “global.”

12. Developed countries are still protectionist. This hurts developing countries, limits globalization, and only helps the already developed.

Important Points

1. China and India are important cases but they don’t represent “the world.”

2. Need to ask what life would be like in China, India and other globalizers without reforms.

3. Rich countries HAVE grown richer, and most of the VERY POOR countries HAVE stayed poor. Question is WHY.

4. Some governments clearly fail to provide a sufficient environment for economic growth and development. Others fail to create fair tax systems e.g. Guatemala. Role of ethnic conflict?

5. Some governments are politically unready to even try to provide the a proper environment e.g. “failed states.”

6. Key differences between the Globalists and Skeptics revolve around:

a. Efficiency: “let ‘em eat cake”

b. Fairness: “social safety-netters”

c. Quality of life under globalization

Need policies that address all of them:

“Sustainable development”

Q: Is there a Global Culture? Globalists: Yes and No.

1. Decline of nationalism.

2. Growing universal language: English

3. Universal Market of popular culture: entertainment, the Internet, food, etc.

4. Globalization does not destroy local cultures, though it may influence them.

5. Likely growth of a democratic culture. Over 120 democracies today, including over ½ of the world’s population. Most of these encompass capitalist economies.

Skeptics: No.

1. Nationalism and ethnic nationalism are alive and well in many parts of the world.

2. Globalization = Americanization, a “McWorld” led by the U.S. Vast majority of products originate from the U.S.

3. Globalization undermines and destroys local cultures e.g. Guatemala and Mayan culture.

4. Globalization engenders a backlash and resistance.

Q: Has globalization reconfigured Political Power and National Interests? Globalists: Yes1. The power of governments has

declined in the face of the market.2. Downside: states are more

vulnerable—economic pressures and non-state actors e.g. terrorists.

3. Societies are freer of government control; people are better able to “link up” for common purposes.

4. War is less likely because of the costs5. The U.S. is the dominant power but it

acts as a positive force in the globalization process providing “rules” of the market and “creative destruction.”

6. States are losing their sovereignty to the market and other multilateral organizations

Skeptics: No.

1. States are still powerful, some clearly more than others—US unilateralism.

2. National interest? Each state still defines its own if it can.

3. States ignore the goals and regulations of multilateral organizations when it benefits them.

Dilemmas and Strategies1. Each side can muster evidence for its

cause—what is the broad, sustainable picture?

2. Globalization can be “trainwrecked”

- Economic collapse

-War

-Terrorism

3. Globalization’s impact on the environment and our future? Global warming, resource use, rainforest destruction, etc.

4. Can everyone “globalize” at once?

5. How can governments provide a stable economic environment in the face of AIDS and ethnic conflict?

6. Gender discrimination and empowerment

America? Comprehensive Policy

1. Support globalization but negotiate a more level playing field for American workers.

2. Improve worker training and “retooling at home.”

3. Support governments that both liberalize their economies and attempt to improve human capital. Offer “sweet deals.”

4. Bring cases of worker exploitation to the spotlight.

5. Encourage and negotiate improvements in human rights in other countries but protect the market of opportunity.

6. Encourage the economic empowerment of women.

7. Better entrust and finance UN agencies to achieve sustainable development.

-micro-level investment strategies

-cheap health programs

-address AIDS in a comprehensive way

-transparency for all economic actors

-sensible taxation policies

-”progressive” deprotectionism

-open markets in developed countries for goods from developing countries

Develop and maintain middle classes--Aristotle

Suggestions for Readings

Thomas Friedman, The Lexus and the Olive Tree, 1999 David Held and Anthony McGrew, Globalization/Anti-Globalization,

2002 Manfred B. Steger, Globalism. The New Market Ideology, 2002 Jackie Smith & Hank Johnston (eds), Globalization and Resistance,

2002 Joseph Stiglitz, Globalization and Its Discontents, 2002 Frank Lechner & John Boli (eds), The Globalization Reader, 2000 Robert M. Jackson (ed), Global Issues 03/04, Annual Editions, 2003