1. What is globalization?

1. 1. What is globalization? Africa in the Global Economy Renata Serra Spring 2008

2. What does globalization mean? • Many use the term ‘globalization’ to imply: • Increasing internationalization processes • Liberalization of economies and societies • Westernization (1989 is the key date) • G. strictly speaking is however distinct concept and implies de-territorialization: • Trans-border phenomena take place in no particular space: it is the ‘trans-world’ space • Ex: Telephone calls, internet, electronic finance, and the depletion of stratospheric ozone

3. Qualities of truly global phenomena • Time-space compression • Round-the-clock operations • Border-less – borders are not obstacles • Inter-connected-ness, interdependencies • Is this the end of geography and territory? • No, because there is much in the world that is not globalized!!

4. The end-less debate • Enthusiasts: • Novelty of the de-territorial element • Increasing inter-dependencies • Information and technological innovations! • Skeptics: • G. is an ideological construct (neo-liberal) • G. is neither new nor unprecedented • There were higher rates of migration and trade, in relative terms, during 1870-1914 than now

5. The main drivers of G • Transport revolution • Technology • Internet continues to double every 100 days! • Economic policies • Changes in economic regulation and governance • Multilateral arrangements

6. Economic globalization • Global production chains • TNCs account for 20% of world production, 70% of world trade and 54 millions direct jobs • Integration of financial markets • Increased trade flows • Including in services (travel, insurance, financial, computer and information services) • Relocation of production processes across national borders (surge in FDI) • Outsourcing of a wide range of activities • Ex. Outsourcing of radiology services to India • But also contagion of financial crises!!

7. Political globalization • Rise in trans-national/international organizations • UN but also civil society, pressure groups and social movements • Global governance • Increased regionalism (EU) • Peace and security as global public goods • The nation state is less autonomous • Skeptics: the business of politics is still in the hand of the nation state. The latter has never been so strong

8. Cultural globalization? Yes • Technological advances  unrivalled export and import of cultural products, exchange of information, new media • Popular culture is truly global • Companies rather than nation states drive cultural G. • Shared and cross-cutting cultural identities • Global goals transcend the objectives of nation states • ‘Global consciousness’ may lay the basis for a ‘global civil society’ • Commitment to global human rights

9. Cultural Globalization? No • Historical role of national culture and nationalist movements • Crucial in the decolonization process, e.g. Africa • National identity today as political/ideological tool • Modern technologies serve the purposes of ethnic communities • Flows of ideas enable knowledge of diversity but also emphasize distinctiveness/idiosyncracies

10. Global public goods (GPG) • Public goods: non-rival and non-excludable (typically under-provided) • Global goods: effects reach across borders, generations and population groups. • Global public goods are both a: • driver of G • an outcome of G • Governance gap is the result of: • Increasing externalities but lack of recognized global actors

11. Examples of GPG • Equity, justice and peace • Can a collective system emerge? • Health • Increased international travel + new diseases • Environmental protection • Climate change, bio-diversity, water • Knowledge • Issues of unequal access and pricing

12. G. and development • “G is good” argument: • Increased competition, more jobs and greater welfare • Importation of knowledge for health advancement • Pressure against un-democratic governments • “G is bad” argument: • Unequal: few benefit at others’ expenses • Dominance of global production channels and TNCs • Increases in global risks • Western-centric: no alternative discourses

13. Sub-Saharan Africa (SSA) • By many standards, SSA is the least integrated region: • Trade/GDP increased little, against massive world increases • SSA’s share in world X was 1.5% in 2000 (against 3.9% in 1980) • Marginal FDI flows (mainly to Gabon, Nigeria, and South Africa) • ODA declined from 4 billions US$ in 1995 to 1 billion in 2002 • Number of internet users is about 1% of world total • 17 mobile phones/1000 people (123 in LA&C, 530 in OECD). • Recent setbacks despite global progress: • The number of poor people has increased • Health and education have deteriorated in some parts

14. SSA predicaments: causes • External factors • 1980s oil crisis, deterioration in the terms of trade, huge debt overhang, Sahelian droughts, civil wars and conflicts • Internal factors • State weak capacity, corruption, bad policies • Roles and responsibilities of the international community • Neo-colonialism • SAPs and dominance of externally driven policies

15. G: what’s in it for Africa? • Optimists • G. can bring both benefits and costs, the secret is to learn how to “navigate it” • Cosmopolitanism has been an African trait for long time; one needs only to re-actualize it • Pessimists • African renaissance should involve a new African ideology/discourse of resistance • Reviving African history, culture, social relations, and entrepreneurial spirit

16. Global convergence… Yes, but

17. … but Africa’s falling behind…

18. … and gaps between skilled and unskilled wages increase

19. Inequality across countries: why • Rules of the game may not be fair • Even when they are, the interpretation or implementation may favor one side • E.g. Limited use of compulsory license within TRIPs • Poor countries are disadvantaged to start with • High commodity dependence • Weak or inappropriate institutions • Global markets are imperfect and create risks • Volatility is particularly detrimental to poor countries

20. Inequality across individuals: why • Individuals/households may differ in their: • Distribution of skills • High skills are better compensated • Distribution of assets • Education especially, but also land and capital • Degree of geographical mobility • Ability to move where opportunities are better • Ability to cushion risks • This is crucial given volatility • Ex: financial crises are especially detrimental to the poor

21. Why does inequality matter? • Inequality may be harmful to growth • Countries with low initial asset inequality have grown faster e.g. East Asian countries • Inequality may lead to social tensions • Inequality undermines good public policy • Inequality is particularly harmful in poor countries, which lack effective mediating institutions and protective mechanisms

22. 1. Inequality may be harmful to growth

23. 2. Inequality may lead to socio-economic instability • Tensions between global markets and socio-economic stability (see economist Dani Rodrik): • Asymmetry in individuals’ capabilities to ‘go global’ • D for unskilled labor is more elastic • Threat to domestic norms and social arrangements • Demand for procedural fairness e.g. no child labor • Threat to the welfare state and its social provisions • Precisely when social insurance is highly needed • The risks of not resolving these tensions are social fissures and resurgence of protectionism

24. What to do? • If G creates asymmetries, then corrective institutions and policies are needed • Economic theory tells us that market imperfections and asymmetric risks require global solutions • A global social contract? • We are definitely not (yet?) there!