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Globalisation
Wednesday, 10 September 2008 20:26

If the truth be known, we have been living globalization for an awefully long time.

Humankind started its long march out of Africa and across the globe around 50,000 years ago.  Trade routes like the Silk Road were carved around the global.  And beliefs and ideas like Buddhism, Christianity and Islam spread to all four corners of the planet.

Some scholars identify earlier phases of globalization like the Age of Discovery when Portugese, Spanish and Dutch boats sailed the high seas in search of slaves, spices, new lands and much more.  Another earlier phase was the 19th century when trade and capital flows rivalled those of recent decades, and when migration greatly exceeded today's much more limited international movement of people.

This heady period of proto-globalization came to a screaming halt with almost half a century of world wars, economic depression and protectionism.  This first half of the 20th century was in fact a period of de-globalization, as flows of trade, capital and people collapsed.  Ironically, it was in 1930, in the midst of this chaos, that the word globalization came into being.

Exhausted by conflict, after World War 2, the Western world saw political and economic cooperation as a path towards peace and prosperity.  Barriers to trade and capital movements were progressively dismantled through the GATT (WTO predecessor) and the European Economic Community (which became the European Union).  This together with assistance through Marshall Plan for Europe and US assistance to Japan saw the rapid rebuilding of "Western" countries.

The period from 1946 through to the 1980s could be regarded as a period of mini-globalisation between North America, Western Europe, Japan, Australia and New Zealand.  Communist countries were cut off from the global economy.  Developing countries were exporting mainly primary commodities, a continuation of colonial trading patterns.  But most of them also cut themselves off from the global economy through inward-looking, import substitution policies.

But then gradually, step-by-step, the pieces were put together for what is now a global economy -- "economic globalization".

The Asian tigers -- Hong Kong, Korea, Singapore and Taiwan -- took off thanks to export-driven growth.  South East Asian countries like Indonesia, Malaysia and Thailand followed suit, and so did China.

The period around 1990 was a big turning point.  Fall of the Berlin Wall.  Breakup of the Soviet Union.  The Tiannaman Square massacre had slowly faded into the past, and China re-energized its open door policy.  Release from jail of Nelson Mandela foreshadowing the end of apartheid.  Stabilization, liberalization and democratization came to Latin America.

Finally we were almost one one world, one planet, one globe.  But unfortunately, Africa was not really part of the globalization story.

Countries all over the world opened their borders to trade and capital, but much less so migration.  Sometimes they opened of their own accord (unilaterally), sometimes through regional agreements like NAFTA.  Trade negotiations under the GATT and WTO contributed too. 

But there was more to it than that.  Rapid technological change reduced the cost of transportation of goods and people.  The rise of the Internet gave birth to what Tom Friedman calls a flat world.  Previously non-tradable services could be outsourced.  Manufacturing production could be fragmented with different tasks being outsourced to different countries, and closely coordinated thanks to information technology.  Financial transactions can zip across the world with the click of a button.

So this is economic globalization, a global economy.  Trade, capital flows and migration have accelerated.  In reality, we do not have one fully integrated global economy, but we are integrating rapidly.  And today developing and emerging economies have become the main drivers of globalisation and economic growth.

This global economy has been a massive source of prosperity and poverty reduction.  Just compare the cases of North and South Korea, East and West Germany, and Burma and Thailand.  Middle classes are expanding in the developing world, and democratisation is spreading.

But financial crises, income disparities, environmental degradation and international economic crime have gone hand-in-hand.  While globalization-driven economic growth does not always buy happiness, it does provide the means to solve many problems.

There is more to globalization than the economy.  While economic globalization is changing our societies and cultures, there are signs of a global society and a global culture possibly emerging.  Globalization is challenging the capacity of our governments -- in part because many solutions can only be found in global governance through international organizations like the United Nations, International Monetary Fund, World Bank, World Trade Organization and the Organisation for Economic Cooperation and Development.

There are many discussions and debates about whether globalization good or bad.  It has become a buzzword and a lightning rod for people's frustrations.  And this is where we see so many paradoxes.

. Globalization has delivered historically unprecedented levels of prosperity to advanced Western countries.  But their citizens and governments seem unwilling to use some of that prosperity to tackle problems like climate change, even though they are principally responsible for the historic buildup of carbon emissions.

. Apparently not satisfied with their prosperity, very many Western countries have gone on a borrowing binge, and today find themselves massively indebted, especially to emerging countries like China.

. While many problems can only be solved by international cooperation, international relations are strained, and international organizations are too often undermined and weakened by their own member governments.

. Public opinion in advanced Western countries has turned against globalization, despite its objective benefits.  In reality, many people talk about globalization without knowing what it really is.  It is also used as a scapegoat all sorts of unconnected things like unemployment and other social ills.  We must remember that globalization is not the only thing happening in the world today.  Technology is advancing, populations are ageing and national geography also shapes economic performance.

. Emerging economies which were converted to globalization by the West are now greater supporters of globalization than the West.

. The main opponent of globalization has been the civil society movement which, ironically, is highly globalized itself.

As with everything in life, globalization is not perfect.  The key thing is managing it.  Most regrettably, this is something we are not doing very well.

Some references

- The World Is Flat: A Brief History of the Twenty-first Century, by Thomas L. Friedman.
http://www.amazon.com/World-Flat-3-0-History-Twenty-first/dp/0312425074
http://www.thomaslfriedman.com/bookshelf/the-world-is-flat
- In Defense of Globalization, by Jagdish Bhagwati
http://www.amazon.com/Defense-Globalization-Jagdish-Bhagwati/dp/0195170253
http://www.columbia.edu/~jb38/
- Making Globalisation Work, by Jo Stiglitz
http://www.amazon.com/Making-Globalization-Work-Joseph-Stiglitz/dp/0393061221
http://www.josephstiglitz.com/
- Why Globalisation Works, by Martin Wolf
http://www.amazon.co.uk/Why-Globalization-Works-Martin-Wolf/dp/0300102526
http://www.ft.com/comment/columnists/martinwolf
- Trade and Structural Adjustment: Embracing Globalisation, by OECD
http://www.oecdbookshop.org/oecd/display.asp?lang=en&sf1=DI&st1=5LGW5K47MNS5
- Global Economic Prospects 2007: Managing the Next Wave of Globalization, by the World Bank
http://www.worldbank.org - The End of Poverty: Economic Possibilities for Our Time, by Jeffrey Sachs
http://www.amazon.com/End-Poverty-Economic-Possibilities-Time/dp/1594200459
- La France et la mondialisation, by Hubert Védrine
http://www.elysee.fr- Globalization and Its Enemies by Daniel Cohen
http://www.amazon.com/Globalization-Its-Enemies-Daniel-Cohen/dp/026203350X
http://elias.ens.fr/~dcohen/homepage.htm


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