The word globalization does not have a specific definition. This is because it is not related with any specialized field. It is studied in different aspects, amongst which some of them are politics, economics, cross-culturing, international relations and political theory (Evans and Mooney ix).
Globalization can be defined as “the development of an increasingly integrated global economy marked especially by free trade, free flow of capital, and the tapping of cheaper foreign labour market”. (Longman Dictionary, 2005)
Globalization generally means growth to a global scale. Therefore, from the economic perspective, globalization can be termed as a global transformation of a regional economy. The institutions, that promote globalization, are International Monetary Fund (IMF) and World Bank. The institution, which imposes free trade, is World Trade Organization (WTO)
It is first important to understand the necessity of globalization. Only after this, we would be able to understand the importance today it plays in international politics.
Is it necessary to be a part of globalization?
For developing countries, it is necessary for them to break the shackles and become global competitor. Without this, they cannot pursue to even think of becoming a entering the ranks of the developed world.
Developing countries do not have a productive economy. The livelihood of the people in those countries is pathetic. For them to survive as a sovereign nation, they need to bring about developments especially in their economies. And if they fail to do so, how will it be able to sustain the population growth? This is what Richard Robbins have argued about when he points out that population growth can be sustained by a developing economy (p. 134)
If any country does not develop its economy, it would have a heavy debt and this can lead to its bankruptcy. Then, its currency would devalue and it may suffer from inflation. Due to this trend, poverty will increase in that country after which it can be termed as a failed state. Hence, in order to survive, every country needs to carry out sustained development and growth.
Let’s analyze the basic principles which the developing countries mostly follow in the world today, which keeps them aloof from the process of globalization.
Many countries today have government’s intervention in their economy. This is something which is necessary as Richard Robbins says that “The state has probably always been involved in its subjects’ economic life in one way or another.” (p.106)
Governments of developing nations give subsidies to the local farmers and industrialists. Trade barriers are also imposed in those countries. Because of such policies, the imported products would not threaten the local market player. This is because the product of the local manufacturer would be cheaper as compared to the imported one by virtue of the subsidies and trade barriers being offered to them.
The perceived disadvantage of a protectionist economy is that there is no exchange of technology from the developed world. The quality of the products remains unchanged. The local industrialists may also form a cartel, which prevents competition in the market. To increase the prices, they can create artificial dearth in that country to benefit themselves. Hence, the consumers may not be mainly benefitting from this trend and may suffer because of the monopoly.
To solve this problem and to invite any country to open its economy, that country is offered with the free trade policy. Let’s analyze the basic principles of free trade so that we can scrutinize the reality behind such policies, which are offered as a means of revival.
What is free Trade?
Free trade is a trade relation between different states, free from any type restriction being imposed by the government. It ensures that no burden is present like tariffs, subsidies and other trade barriers. It implies free market economy, where goods and products of a particular state entered to another country free from all government taxes. The motivation tool for implementing free trade is that countries would be able to yield the maximum production in their specialized fields. After production increases, then as a result, supply would also increase. In addition, as the principle of supply and demand goes: the greater the supply, the lower the prices.
Hence, the prices would decrease consequently. Therefore, it is only after the absence of government’s intervention that this policy can entail. Furthermore, this policy brings capital in the country as Richard Robbins highlights the fact that increase in free trade allows capital to move freely in the world (p. 98)
Now the question arises, which is the option that one should opt for? A protectionist economy or open its market for global competitors? These answers can be explained by analyzing what globalization has really offered to the world till today.
Globalization – What has it offered the world today?
The multi-national corporations today carry out an analysis on the emerging markets in the world. Wherever they find any opportunity, they opt for it to expand their business as an opportunity to maximize their profits.
The September edition of The Economist reads “the sheer size of the consumer markets now opening up in emerging economies, especially in India and China”. (The Economist, 1-2)
This trend has led the world believe today, that globalization is a key to its development. India and China are not only the new consumer markets, they the future’s centre of business activities. (The Economist, 1-2)
One of the strongly held viewpoints is that growth in the economy is the key to development and when seen would be able to solve other problems like poverty reduction, efficient allocation of resources, and development in the economic and technological field. So let’s analyze tackle the above questions from some of the facts given by economists.
Globalization – Has it reduced poverty in developing countries?
Yanuar Nugroho (2003) writes that
“We are constantly told of the one recipe to reduce poverty: economic growth. Yet the UN Human Poverty Index 1998 for industrial countries showed that Sweden, with one of the lowest rates of economic growth per person, had the best human welfare. Whereas the U.S., with the highest rate of economic growth (and a higher per capita GDP than Sweden), had more people who were “functionally illiterate” (20.7 percent) than that in any other country” (p.1-2)
This clearly shows that the term of economic growth is often misinterpreted by many people. Growth is actually a measure for the increment in the manufactured quantity of the goods. It shows how much profit has been incremented by the companies, not how efficiently the resources have been allocated to the masses.
How does the local population benefit from globalization?
As stated earlier, if any economy is governed by an industry protectionist policy, it will not be able to bring prosperity to the people because of the absence of competition. But if any country decides to accept the free trade policy, then what happens.
Richard Robbins presents a scenario in which a country is offering feasible policies to the investor. This policy must be strong enough to motivate the investor to move in that
country and should be based on the principle of free trade. When different countries compete to bring the capital in their lands, the capital controller is able to ask for more benefits which favour it to maximise its profits. Hence, till the cheap labour remains in the country, then only investor remains in the country. Even when some laws related to environment are imposed, the investor considers this as a threat and changes his place for operation. (p. 98)
Therefore, we can say that free trade and globalization makes difference for the firms who have invested. It brings no change for the people as they were only utilized to fulfil their desires. The policy which enslaves people can be reflected from World Bank’s development report 2009 that foreign aid is less than 0.5 percent of the gross national income of giving countries, and not even a large fraction of the GDP of countries home to the bottom billion who have 12 percent of the world’s population, but less than 1 percent of its GDP (p.5)
So who benefits from globalization?
It is only the elite masses who benefit from policies such as free trade. The governments run on these organizations and promise to benefit them after winning the elections. One should note that the profits of different firms like Shell and Lockheed Martin reached their peak during Bush era. Amazing to note that Shell’s profits in first quarter of 2008 was almost equivalent to its annual profit of 2007.
Ellen Hodgson Brown (2008) has rightly summarized that “corporations are feudalistic organizations designed in the structure of a pyramid, with an elite group at the top manipulating masses of workers below”. (p.102)
Who follows the industry-protectionist policy?
Although the world’s most industrialised countries are gathering nowadays to resolve the ongoing global economic recession. The Daily Guardian newspaper on the recent meeting of G7 in February highlighted that the statement warned of the risks inherent in protectionism, and that further drastic measures were needed from governments around the world to bail out their banking systems
Today, the whole world is governed by the elites who have amassed wealth to direct governments to fulfil their desires. These governments raise the slogan of free trade when it is meant to fulfil their desires. But when it comes in ensuring their security, they forget their ideology and their principles. It is Gordon Brown himself who has admitted that capitalism has no values.
How can we assume that it is natural for many top companies to be mergers? Take, for example, the case of LG. It is a multinational company formed from the merger of Luminar and Goldstar. Now Panasonic Co., an electronics giant of was a merger of Panasonic and National co. It is also amazing to note that 90% of the world’s media companies are a merger. Stark reality to note that these giant media companies own all types of electronic media under one umbrella.
When any movie is released by Disney Entertainment Co. for example, a sound track would be released, followed by the hype of advertisements in newspapers, magazines, websites and television. Near the launch of the movie, the Disney Park would be filled with the actors and actresses of the movie. After the launch, cinemas would be the hot spot of entertainment. Even after months, to renew the concept, a console game would be launched. All of the above account to the achievement of one objective, which is the common denominator for all of the multinationals that is profit.
We analyzed what globalization means. How is free trade used as a tool to exploit the weaker nations, and to ensure their submissiveness to the ones who dictate them the policies for implementation. Global trade agreements, and international trade organizations such as the World Trade Organization, have hastened the establishment of global free trade. Organizations such as the World Bank and the International Monetary Fund play a much more subsidiary role, compared to the establishment of free-trade regimes. (Evans and Mooney, 19)
All of the above facts highlighted in the paper leads to the conclusion that when giants collide in the name of competition, they eliminate anyone who truly stands as a competitor, whereas, when they have to battle between themselves, the look to reconciliation, in this case, forming mergers. This method is adopted for none other than capitalizing and eliminating their opponents so that these giant corporations would control the economy of countries and would enslave them by legislating according to their desires.
For a solution of this web in which all of us are entangled, I recall what Ellen Hodgson Brown (2008) said: “we the people of the West can sit back and wait for the revolt, or we can be proactive and work to solve the problem at its source. We can start by designing legislation that would disempower the private international banking spider and empower the people worldwide”.
A Bigger World. The Economist. 2008: 1-2.
Brown, Ellen Hodgson. Web of debt. Louisiana: Third Millennium Press, 2008.
Conway, Edmund. G7 accused of being ‘asleep at the wheel’. Daily Telegraph UK. 2009.
Globalization. Longman Dictionary of Contemporary English. 4th ed. 2005.
Mooney, Annabelle and Busty Evans. Globalization – The Key Concepts. New York: Routledge, 2007.
Nugroho, Yanuar. 21st-century crusade to reduce world poverty. The Jakarta Post – Headline News. 2003: 1-2.
Richard H. Robbins. Global Problems and the Culture of Capitalism. 2nd ed. Arlington: Allyn & Bacon A, 2002.
World Bank. World Bank Development Report, 2009.