Globalization (or globalisation) is a term used to describe the changes in societies and the world economy that are the result of dramatically increased trade and cultural exchange. In specifically economic contexts, it refers almost exclusively to the effects of trade, particularly trade liberalization or "free trade".
Between 1910 and 1950, a series of political and economic upheavals dramatically reduced the volume and importance of international trade flows. In the post-World War II environment, fostered by international economic institutions and rebuilding programs, international trade dramatically expanded. With the 1970s, the effects of this trade became increasingly visible, both in terms of the benefits and the disruptive effects.
Meanings of Globalization
"Globalization" can mean:
- The formation of a global village — closer contact between different parts of the world, with increasing possibilities of personal exchange, mutual understanding and friendship between "world citizens", and creation of a global civilization,
- Economic globalization — "free trade" and increasing relations among members of an industry in different parts of the world (globalization of an industry), with a corresponding erosion of National Sovereignty in the economic sphere.
- The negative effects of for-profit multinational corporations — the use of substantial and sophisticated legal and financial means to circumvent the bounds of local laws and standards, in order to leverage the labor and services of unequally-developed regions against each other.
- The spread of capitalism from developed to developing nations.
It shares a number of characteristics with internationalization and is used interchangeably, although some prefer to use globalization to emphasize the erosion of the nation-state or national boundaries.
Globalism, if the concept is reduced to its economic aspects, can be said to contrast with economic nationalism and protectionism. It is related to laissez-faire capitalism and neoliberalism.
History of globalization
Since the word has both technical and political meanings, different groups will have differing histories of "globalization". In general use within the field of economics and political economy, is, however, a history of increasing trade between nations based on stable institutions that allow individuals and firms in different nations to exchange goods with minimal friction.
The term "liberalization" came to mean the combination of laissez-faire economic theory with the removal of barriers to the movement of goods. This led to the increasing specialization of nations in exports, and the pressure to end protective tariffs and other barriers to trade. The period of the gold standard and liberalization of the 19th century is often called "The First Era of Globalization". Based on the Pax Britannica and the exchange of goods in currencies pegged to specie, this era grew along with industrialization. The theoretical basis was Ricardo's work on Comparative advantage and Say's Law of General equilibrium. In essence, it was argued that nations would trade effectively, and that any temporary disruptions in supply or demand would correct themselves automatically. The institution of the gold standard came in steps in major industrialized nations between approximately 1850 and 1880, though exactly when various nations were truly on the gold standard is a matter of a great deal of contentious debate.
The "First Era of Globalization" is said to have broken down in stages beginning with the first World War, and then collapsing with the crisis of the gold standard in the late 1920's and early 1930's.
Globalization in the era since World War II has been driven by Trade Negotiation Rounds, originally under the auspices of GATT, which led to a series of agreements to remove restrictions on "free trade". The Uruguay round led to a treaty to create the World Trade Organization or WTO, to mediate trade disputes. Other bilateral trade agreements, including sections of Europe's Maastricht Treaty and the North American Free Trade Agreement have also been signed in pursuit of the goal of reducing tariffs and barriers to trade.
Signs of globalization
Globalization has become identified with a number of trends, most of which may have developed since World War II. These include greater international movement of commodities, money, information, and people; and the development of technology, organizations, legal systems, and infrastructures to allow this movement. The actual existence of some of these trends are debated.
- Increase in international trade at a faster rate than the growth in the world economy
- Increase in international flow of capital including foreign direct investment
- Greater transborder data flow, using such technologies such as the Internet, communication satellites and telephones
- Greater international cultural exchange, for example through the export of Hollywood and Bollywood movies.
- Some argue that even terrorism has undergone globalization. Terrorists now have attacked places all over the world.
- Spreading of multiculturalism and better individual access to cultural diversity, with on the other hand, some reduction in diversity through assimilation, hybridization, Westernization, Americanization or Sinosization of cultures.
- Erosion of national sovereignty and national borders through international agreements leading to organizations like the WTO and OPEC
- Greater international travel and tourism
- Greater immigration, including illegal immigration
- Development of global telecommunications infrastructure
- Development of a global financial systems
- Increase in the share of the world economy controlled by multinational corporations
- Increased role of international organizations such as WTO, WIPO, IMF that deal with international transactions
- Increase in the number of standards applied globally; e.g. copyright laws
Barriers to international trade have been considerably lowered since World War II through international agreements such as the General Agreement on Tariffs and Trade (GATT). Particular initiatives carried out as a result of GATT and the WTO, for which GATT is the foundation, have included:
- Promotion of free trade
- Of goods: reduction or elimination of tariffs; construction of free trade zones with small or no tariffs
- Of capital: reduction or elimination of capital controls
- Reduction, elimination, or harmonization of subsidies for local businesses
- Intellectual Property Restrictions
- Harmonization of intellectual property laws across nations (generally speaking, with more restrictions)
- Supranational recognition of intellectual property restrictions (e.g. patents granted by China would be recognized in the US)
Main article: "Anti-globalization".
Various aspects of globalization are seen as harmful by public-interest activists. This movement has no unified name. "Anti-globalization" is the media's preferred term. Activists themselves, for example Noam Chomsky, have said that this name is meaningless as the movement's aim is to globalize justice. Indeed, "the global justice movement" is a common name. Many activists also unite under the slogan "another world is possible", which has given rise to names such as altermondisme in French.
There is a wide variety of different kinds of "anti-globalization". In general, critics claim that the results of globalization have not been what was predicted when the attempt to increase free trade began, and that many institutions involved in the system of globalization have not taken the interests of poorer nations and the working class into account.
Economic arguments by fair trade theorists claim that unrestricted free trade benefits those with more financial leverage (i.e. the rich) at the expense of the poor.
Many "anti-globalization" activists see globalization as the promotion of a corporatist agenda, which is intent on constricting the freedoms of individuals in the name of profit. They also claim that increasing autonomy and strength of corporate entities increasingly shape the political policy of nation-states.
Some "anti-globalization" groups argue that globalization is necessarily imperialistic, is one of the driving reasons behind the Iraq war and that it has forced savings to flow into the United States rather than developing nations.
Some argue that globalization imposes credit-based economics, resulting in unsustainable growth of debt and debt crises.
The main opposition is to unfettered globalization (neoliberal; laissez-faire capitalism), guided by governments and quasi-governments (such as the International Monetary Fund and the World Bank) that are not held responsible to the populations that they govern and instead respond mostly to the interests of corporations. Many conferences between trade and finance ministers of the core globalizing nations have been met with large, and occasionally violent, protests from opponents of "corporate globalism".
The movement is very broad, including church groups, national liberation factions, left-wing parties, environmentalists, peasant unionists, anti-racism groups, libertarian socialists and others. Most are reformist (arguing for a more humane form of capitalism) and a strong minority is revolutionary (arguing for a more humane system than capitalism). Many have decried the lack of unity and direction in the movement, but some such as Noam Chomsky have claimed that this lack of centralization may in fact be a strength.
Protests by the global justice movement have now forced high-level international meetings away from the major cities where they used to be held, and off into remote locations where protest is impractical.
Supporters of democratic globalization can be labelled pro-globalists. They consider that the first phase of globalization, which was market-oriented, should be completed by a phase of building global political institutions representing the will of World citizens. The difference with other globalists is that they do not define in advance any ideology to orientate this will, which should be left to the free choice of those citizens via a democratic process.
Supporters of free trade point out that economic theories such as comparative advantage suggests that free trade leads to a more efficient allocation of resources, with all those involved in the trade benefitting. In general, they claim that this leads to lower prices, more employment and better allocation of resources.
Libertarians and other proponents of laissez-faire capitalism say higher degrees of political and economic freedom in the form of democracy and capitalism in the developed world produce higher levels of material wealth. They see globalization as the beneficial spread of democracy and capitalism.
Critics argue that the anti-globalization movement uses anecdotal evidence to support their view and that worldwide statistics instead strongly support globalization. One effect being that the percentage of people in developing countries living below $1 (adjusted for inflation) per day have halved in only twenty years . Life expectancy has almost doubled in the developing world since WWII and is starting to close the gap to the developed world where the improvement has been smaller. Child mortality has decreased in every developing region of the world . Income inequality for the world as a whole is diminishing .
Many pro-capitalists are also critical of the World Bank and the IMF, arguing that they are corrupt bureaucracies controlled and financed by states, not corporations. Many loans have been given to dictators who never did any reforms, instead leaving the common people to pay the debts later. They thus see too little capitalism, not too much. They also note that some of the resistance to globalization come from special interest groups with conflicting interests like Western world unions.
Globalization in question
There is much academic discussion about whether globalization is a real phenomenon or only a myth. Although the term is widespread, many authors argue that the characteristics of the phenomenon have already been seen at other moments in history. Also, many note that those features that make people believe we are in the process of globalization, including the increase in international trade and the greater role of multinational corporations, are not as deeply established as they may appear. Thus, many authors prefer the use of the term internationalization rather than globalization. To put it simply, the role of the state and the importance of nations are greater in internationalization, while globalization in its complete form eliminates nation states. So, these authors see that the frontiers of countries, in a broad sense, are far from being dissolved, and therefore this radical globalization process is not yet happening, and probably won't happen, considering that in world history, internationalization never turned into globalization — (the European Union and NAFTA are yet to prove their case.)
However, the world increasingly shares problems and challenges that do not obey nation state borders, most notably pollution of the natural environment, and as such the movement previously known as the anti-globalisation movement has transmogrified into a movement of movements for globalisation from below; seeking, through experimentation, forms of social organisation that transcend the nation state and representative democracy. So, whereas the original arguments of anti-global critique can be refuted with stories of internationalisation, as above, the emergence of a global movement is indisputable and therefore we can speak of a real process towards a global human society of societies.
Economy and trade
References and further reading
- Jagdish Bhagwati: In Defence of Globalization (2004), Oxford University Press, ISBN 0195170253
- David Held, Anthony McGrew, David Goldblatt, & Jonathan Perraton (1999). Global Transformations: Politics, Economics, and Culture. Stanford University Press, ISBN 0804736278 — The difinitive academic publication on globalization
- Hirst & Thompson: Globalization in Question (1996), Polity Press, ISBN 0-7456-2164-3
- Naomi Klein: No Logo (2001). A popular book which is very much against globalization. ISBN 0006530400
- Philippe Legrain: Open World: The Truth About Globalization (2002) ISBN 034911644X — A largely pro-globalization book which responds to many of the complaints of the anti-globalization movement, written by a former Special Adviser to the World Trade Organisation Director-General.
- Hans-Peter Martin: The Global Trap: Globalization and the Assault on Prosperity and Democracy (Die Globalisierungsfalle, 1996) ISBN 1856495302
- David Ransom: The Trojan Horse: A Radical Look at Foreign Aid (1975), pp. 93–116
- Arundhati Roy, Ordinary Person's Guide To Empire, Consortium Book Sales and Dist, September 15, 2004, hardcover, ISBN 089608728X; trade paperback, Consortium, September 15, 2004, ISBN 0896087271
- Manfred Steger: Globalization: A Very Short Introduction (2003), Oxford University Press, ISBN 019280359X - A good short introduction.
- Joseph Stiglitz: Globalization and its discontents (2002) — A book largely sympathetic to the theory of globalization from the 2001 Economics Nobel Prize winner. However, he is sharply critical of the global institutions, the International Monetary Fund, the WTO and the World Bank, regulating the process. ISBN 014101038X
- Thomas Friedman: The Lexus and the Olive Tree (2000), ISBN 0374185522. Deals with the conflicting processes of tradition and progress, which ultimately influence the progression of globalization throughout the Middle East and the world.