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Globalization: Losing esteem or on the path of transformation and correction?

For a while it seems that the process of globalization is losing its credibility as well as steam. Apart from protests and opposition of the process of globalization in developing Afro-Asian countries, ironically the erstwhile major proponents of free trade and capital flow in the Western world are also today looking on globalization with a doubt. If the indication thrown up by the Brexit referendum and victory of Donald Trump in the US presidential election on the plank of “economic nationalism” and “protectionist agenda” are to be taken as a new trend, globalization is certainly on decline. But this is too early to write an obituary to the process of globalization. If Britain and the US are retreating on the agenda of globalization, Countries like China with a plethora of massive programmes including One Belt One Road (OBOR), Asian Infrastructure Investment Bank (AIIB) and the Eurasian Economic Union led by Russia, the New Development Bank led by BRICS, new efforts for regional economic integration like Regional Comprehensive Economic Partnership (RCEP) are initiatives that indicate that globalization has found new champions. Is it that axis of globalization has shifted, but globalization is not on decline? The axis of globalization has shifted partly because of lack of confidence in European countries including Britain and the US in their ability to compete with emerging economies. They are now throwing the onus of their economic decline on globalization, which once they preached others to worship.  Is it an indication of a new world order taking shape sooner than later with new order of economic hierarchy?

The world history has witnessed many revolutionary changes in the past. Globalization, nevertheless, stands out as one of the most influential ones. It was triumph of the idea of integration and cooperation at global level over narrow, restrictive and competitive statecraft of the Second World War period and Cold War era. Globalization led to reduction in tariff barriers and faster political, economic and socio-cultural interaction. This gave birth to what we call “global village”. The process got further fillip due to the advent of internet and fast modes of transport.  It seemed that the process would continue unhindered indefinitely. Globalization led to economic integration through trade creation and trade diversion apart from increased political, social and cultural flow. The NAFTA, EU, WTO, UNCLOS, FATF, SAFTA, EURASIAN FTA etc. took shape as evidences to the new trend of globalization. The countries over the globe liberalized the movements of goods and services and foreign investment. People to people contacts also increased leading to increased cooperation in research, innovation, creativity and exposure and experience of new ideas.

But over a period of time globalization bred many adverse effects in terms of inequality, uncertainty, risk and variety of asymmetries and threats which has given birth to suspicion in some circles against globalization. Some countries gained more in the process than others. The developing countries saw deindustrialization, loss of employment, adverse balance of trades, increased exposure to external capital and indebtedness. However, giving any judgment simply on the basis of current troubles, it is not appropriate to decry globalization as dangerous or harmful. Unabashed globalization may have its adverse effects, but the world today we have, we owe to a great extend to globalization.

What is globalization?

Globalization is a process of interaction and integration among the people, companies, and governments of different nations, a process driven by international trade and investment and aided by information technology. This process has effects on the environment, on culture, on political systems, on economic development and prosperity, and on human physical well-being in societies around the world. Many of the features of the current wave of globalization are similar to those prevailing before the outbreak of the First World War in 1914.

Benefits of globalization

The policy and technological developments of the past few decades have spurred increases in cross-border trade, investment, and migration so large that many observers believe the world has entered a qualitatively new phase in its economic development. Since 1950, for example, the volume of world trade has increased by 20 times, and from just 1997 to 1999 flows of foreign investment nearly doubled, from $468 billion to $827 billion. Distinguishing this current wave of globalization from earlier ones, author Thomas Friedman has said that today globalization is “farther, faster, cheaper, and deeper.”

This current wave of globalization has been driven by policies that have opened economies domestically and internationally. In the years since the Second World War, and especially during the past two decades, many governments have adopted free-market economic systems, vastly increasing their own productive potential and creating myriad new opportunities for international trade and investment. Governments also have negotiated dramatic reductions in barriers to commerce and have established international agreements to promote trade in goods, services, and investment. Taking advantage of new opportunities in foreign markets, corporations have built foreign factories and established production and marketing arrangements with foreign partners. A defining feature of globalization, therefore, is an international industrial and financial business structure.

Technology has been the other principal driver of globalization. Advances in information technology, in particular, have dramatically transformed economic life. Information technologies have given all sorts of individual economic actors—consumers, investors, businesses—valuable new tools for identifying and pursuing economic opportunities, including faster and more informed analyses of economic trends around the world, easy transfers of assets, and collaboration with far-flung partners.

A critique of globalization

Asymmetric benefits of globalization

In the initial phases of globalization many studies showed gains in income output and employment. But later on the economists pointed out the trends of asymmetric benefits arising from globalization between the developed and developing countries leading to inequality. Also in the national economies, globalization brought prosperity to selected sectors and selected regions. It is alleged that if globalization made billionaires, it led millions to poverty and destitution. It was also alleged that the supporters and leaders of globalization deliberately ignored the plight of people down the pyramid of wealth created by this new phenomenon. The cost of living and unemployment increased while wages stagnated for the lower and medium level workers but it rose at the top of ladder human resources. Slowly vast millions developed hate and contempt for the phenomenon called globalization. Seeing no signs of solace the sided with the populist far right political ideologies. The first shock to globalization was Brexit in 2016. Next was the victory of Donald Trump in the American presidential election in 2017. A new wave of protectionist and nationalist thinking is now brewing in many European countries. Countries like India are although not favouring protectionism but politics has drifted to populism and right wing nationalism without any doubt. Right wing politics mostly flourishes on perceived fears and enemies to national security and national economies. It also tries to validate status quo guaranteeing the traditional power structure to sustain or support many conservative notions regarding human rights, liberty and restrictions.

Controversies around globalization

Globalization is deeply controversial. The criticism of globalization is based on cost and benefits associated with them.  The critics point out that globalization has created much global and internal unrest in many countries. One of the important criticisms of globalization is that it requires nations to give up their political, economic, and cultural sovereignty to adapt to Western ways. Further some critics say that globalization believes “one size fits all” irrespective of different levels of development of the countries and their specific strengths and weaknesses. While the dynamics of capitalism is changing and each country is unique in its political makeup, globalization is a set-in-stone “program” that is difficult to implement without political unrest. Globalization can be partly responsible for the current global economic crisis. Case studies of Thailand and the Arab nations’ view of globalization show that globalization is a threat to culture and religion, and it harms indigenous people groups while multinational corporations profit from it. Although globalization has promised an improved standard of living and economic development, it has been heavily criticized for its production of negative effects. Globalization is not simply an economic project, but it also heavily influences the country environmentally, politically, and socially as well.

Globalization and inequality

Globalization may or may not achieve its positive outcomes or it may even bring negatives. One of the most observed of all outcomes of globalization is inequality. Some analysts say that globalization is one of the most important causes of increase in inequality in many countries in the Organization of Economic Cooperation and Development. The Governor of the Bank of England, Mark Carney held the view that inequality in modern societies is one of the byproducts of globalization. Analysts point out that the OECD countries, the United States, Canada, and Argentina, the early adopters of globalization have faced an increase in inequality by between one-half to one-third between the 1970s and the late 1990s.

An uneven process

Globalization has been described as an “uneven process” in Africa due to the global integration of some groups happening alongside the marginalization or exclusion of others. Therefore, the worldwide trade will have the restrictions on the growth of economy. John Gray described globalization as a post-Cold War American triumphalism, and stated “global laissez faire is an American project.” Globalization is a project in which American ideals and values are executed and implemented into other countries. However, despite its proclaimed benefits and theoretical elegance globalization, there are high levels of economic and social inequalities in the USA as the gap between the rich and poor is big and increasing.

Increased uncertainty and risk

Another aspect of globalization is increase in uncertainty, risk and stress. Some analysts claim that America has the highest rates of incarceration, and anxiety due to economic uncertainty is great. Also the implementation of the American system into other countries may reproduce these negative effects. The Global Economic Crisis, the worst financial crisis since the Great Depression, can be accredited partially to neoliberal globalization. Although globalization promised an improved standard of living, it has actually worsened the financial situation of many homes and has made the financial crisis global through the influences of international financial institutions such as the World Bank. Globalization limits development and civilization to a path that only leads to a Western and capitalistic system. Because of the political and structural differences in countries, the implementation of globalization has been detrimental for many countries. Globalization has fueled the rise of transnational corporations, and their power has vaulted to the point where they can now rival many nation states. Of the world’s one hundred largest economies, forty-two of them are corporations. Many of these transnational corporations now hold sway over many nation states, as their fates are intertwined with the nations that they are located in.

Increased power of transnational corporations

Also, transnational corporations could offer massive influence regarding the Third World, and bring about more pressure to help increase worker salaries and working conditions in sweatshops. On account of doing the business globally, transnational corporations have the huge influence in many nation states.

In the process of implementing globalization in developing countries, the creation of winners and losers are often predetermined. Multinational corporations often benefit from globalization while poor, indigenous locals are negatively affected. Globalization can be seen as a new form of colonization, as economic inequality and the rise in unemployment have followed with its implementation. Globalization has been criticized for benefitting those who are already large and in power at the risk and growing vulnerability of the countries’ indigenous population. Furthermore, globalization is non-democratic, as it is enforced through top-down methods.

Sovereignty issue

Globalization requires a country to give up its sovereignty for the sake of executing Western ideals in its country. As a result, sovereignty only belongs to a select few: those whose views and ideals are being implemented. In the name of free markets and with the promise of an improved standard of living, countries give up their political and social powers to international organizations. Thus, it causes the greater empowerment of these international organizations and the diminishing influence of local state institutions.

International trade in petroleum products has expanded significantly over the past decades through globalization so that the environmental problems in Nigeria have been deteriorated. As the international trade in petroleum products keeps increasing, there is also corresponding increase in activities in the petroleum industry to meet the requirement of the ever increasing demand for petroleum products. As a result, it gives rise to the environmental pollution. The petroleum is toxic to almost all forms of life and its extraction fuels climate change including air pollution, water pollution, noise pollution, land degradation and erosion. Infection is the invasion of an organism’s body tissues by disease-causing agents, their multiplication, and the reaction of host tissues to these organisms and the toxins they produce. Infectious disease, also known as transmissible disease or communicable disease, killing more people worldwide than any other single cause. It caused by germs, such as bacteria, viruses, parasites or fungi; Germs are tiny living things that are found everywhere in air, soil and water. You can get infected by touching, eating, drinking or breathing something that contains a germ. Infectious diseases, such as SARS and Ebola, have traveled across the world due to increased world trade and tourism. As International commerce develops new trade routes, markets and products Globalization facilitates the spread of invasive species. The modern technology offer the opportunity that human and commodities can move around the world. On account of the development of new source, larger and faster ships and increased air transport, the commercial trade propels rising annual and cumulative rates of invasion.

Globalization and Its Discontents

Nobel laureate (2001) Joseph E. Stiglitz in his book Globalization and Its Discontents  way back in 2002 expressed his  disillusionment with the IMF and other international institutions, saying that they acted against the interests of impoverished developing countries. Stiglitz argues that the policies pursued by the IMF are based on neoliberal assumptions that are fundamentally unsound. He argues that IMF policies contributed to bringing about the East Asian financial crisis, as well as the Argentine economic crisis. He further noted the failure of Russia’s conversion to a market economy and low levels of development in Sub-Saharan Africa. Specific policies criticized by him included fiscal austerity, high interest rates, trade liberalization, and the liberalization of capital markets and insistence on the privatization of state assets. He criticized the most relentless pursuit of the Washington Consensus policies citing evidences to show that when there is imperfect information and incomplete markets, (that which always happens to be the case especially in developing countries), then the invisible hand works most imperfectly. He argues that in such cases government interventions are desirable which, at least in principle, can improve upon the efficiency of the market.  Initially he was seen as an ‘out of line’ economist and having an anti liberalization and globalization agenda. Stieglitz argued that globalization if the national governments have control on their economies (such as East Asian countries including South Korea and Taiwan) were able to close technological, capital and knowledge gaps through exports on which they depended. By managing national pace of change and speed of liberalization on their own, those countries were able to achieve economic growth. The countries who received the benefits from the globalization shared their profits equally.

But   if the national economy is regulated by international institutions, it enhances possibility of an adverse effect. It is because the international institutions such as IMF, WTO, and World Bank lack transparency and accountability. Without government oversight, they reach decisions without public debate and resolve trade disputes involving “uncompetitive” or “onerous” environmental, labor, and capital laws in secret tribunals—without appeal to a nation’s courts. In case of East Asia’s financial crisis, Russia’s failed conversion to a market economy, failed development in sub-Saharan Africa, and financial meltdown in Argentina, Stiglitz argues that IMF policies contributed to a disaster as It failed to promote productive investment opportunities and demand for credit of quality. He asserted that only well-planned loans, based on high quality economic and sector work lead to improved design, effective implementation, and lower cost. It is better to spend more time getting the program right than to lend prematurely. However, none of these was done. As a result, loans came with extensive conditions that subverted the growth of democracy, hampered local economic growth, and enriched multinational corporations.

 He further said that predictably, great resentment resulted from the IMF’s agenda. Stabilization is on the agenda; job creation is not. Taxation, and its adverse effects, are on the agenda; land reform is off. There is money to bail out banks but not to pay for improved education and health services, let alone to bail out workers who are thrown out of their jobs as a result of the IMF’s macroeconomic mismanagement. Ordinary people as well as many government officials and business people continue to refer to the economic and social storm that hit their nations simply as ‘the IMF’ — the way one would say ‘the plague’ or ‘the Great Depression.’

But the leaders failed to pay heed to all such criticisms against them. The situation gradually deteriorated further.

Conclusion

No idea is absolutely flawless. Had the leaders and governments pursuing globalization paid heed to the criticisms, the situation would not have worsened.   A Time magazine columnist William Greider observed that  the multinationals were colonizing the world while systematically draining America of manufacturing and the core jobs of its broadly shared prosperity. While globalization created wealth, the globalizing companies brutishly exploited the low-wage peasant workers in their new factories in Asia. Many developing countries were pushed into massive fiscal deficits and trade deficits. Inequality surged ahead. Gains of globalization were asymmetric between the countries and classes within an economy. Environment also got scant attention by the proponents of globalization and every development led to uncompensated penury and destitution.  Although many leaders from within the liberal democratic set up raised valid questions, they were blatantly ignored. Anti-trade anger was the decisive issue that gave Bernie Sanders his victory in the Michigan primary. The logic of global capitalism was also criticized by other observers. The socialist and left leaning political organizations, Civil society and NGOs raised their voices, but no heed was paid. The present crisis is a reminder that one-upmanship and infirmities are not correct strategies. Growth and progress are premised basically on learning and growing and flexibilities should not be taken as weakness. When in the past, some of the things were “overdone”, now people long for a change to “undo” the wrongs, even if it amounts to bring headstrong and irrational leaders to power. They are no more bothered about correctness of their political side. The process becomes further complex due to post truth politics in which some leaders are fishing in the troubled waters by shuttle mixing of untruth with facts and justifying their obsessions and prejudices. The social media has helped the process of reverse change. However, moving in reverse gear may be needed for a while only for correction of the system; it cannot be the path of progress in future. Liberal democracy is the only answer. This requires liberal democracy to be more sensible and sensitive enough to understand and rectify its aberrations. And in the age of social media, reaching out to people is very important; otherwise their minds would be filled up by incessant propaganda. This is what happened in the US, Britain and India and now waiting to happen in Europe. Social media has made the battle of information very intense and propaganda has made it ever murkier. Will the liberal democrats and socialist forces learn a lesson?  Globalization will never die. It is a passing phase. There is no natural course better for humanity than this but the proponents need to listen to valid criticisms.

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