Globalization: Issues and Perspectives

1. Globalization: Issues and Perspectives Gordon Slethaug

2. Today’s Task: Discussion • Based on current events, for instance the Arab Spring, the global financial crisis, or your college education, argue whether globalization is good, problematic, or bad.

3. Definitions and Distinctions • Globalization • Combination of global trade, political alliances, sophisticated technology, and hyper-mobility that informs our life and takes our age forward • Characterized by extensiveness, intensity, speed, and impact • Globalism • Putting the whole world ahead of a single country • Promoting globalization • Internationalization and transnationalism • The soft side of globalization—education and culture

4. Globalization Arguments • Commentators: • Robertson, Osland, Friedman, Tyrrell, Chanda (Yale/Global Online) • Argument 1: Globalization Is Good • Argument 2: Globalization Is Problematic • Argument 3: Globalization Is Bad • What Can Be Done?

5. Globalization Is Good • Communications • Trade • Agriculture • Political Responsibility • Human Rights • Sharing of Culture • Education • Migration • Rise of China and India, among others

6. Globalization Is Good—Increasing Communications • Technology available internationally, facilitating easy communication • Telecommunications industry (telephone and Internet) links the world cheaply • Cost of making calls almost meaningless • Links through social networking—Facebook, Twitter, Skype • IT revolution has created strong cross-country ties in banking industry • Stock market information and trade available to the world direct • E.g., Charles Schwab, CNBC, Bloomberg

7. Globalization Is Good—Increasing Market Benefits • Increases economic ties and opportunities for trade and lowers poverty • Raises people out of poverty • In 20 years, people living on $1 a day dropped from 79% to 27% in China, 63% to 42% in India, and 55% to 11% in Indonesia (Chanda 299) • 300 million people have joined middle class in China alone • Capital moves freely where needed • Creates individual benefits and emerging economies • Capital flows to developing countries have increased 6X in 6 years. • Fosters strategic manufacturing • Brings down the price of manufactured goods • Helps to control inflation • Negotiates trade agreements fairly—WTO

8. Globalization Is Good—Agricultural Benefits • Countries can strategize their agriculture and exchange products • Poor countries have access to markets in developed countries, helping many countries in Africa • New agricultural varieties are available internationally • Gives consumer additional food choices

9. Globalization Is Good—More Responsive Governments • Development of cosmo-political democracy • Especially in former Soviet states, Asia, and Arab block • More accountability in countries, regardless of democracy (e.g., China) • More globally comprehensive political systems (e.g., EU) • More inclusive societies

10. Globalization Is Good—Human Rights • Raises awareness of human rights • Laws and policies now apply to more people • “CNN Effect” puts pressure for accountability on countries internationally when demonstrations, riots, and wars are broadcast in the media (Russian invasion of Georgia, Tunisian and Egyptian protests, Libyan Civil War) • Increasing global social equality

11. Globalization Is Good—Sharing of Cultures • Globalization creates choice, diversity, and multi-culturalism • Makes those of one country more tolerant and understanding of those in others—intercultural exchanges • Creates a global civil society

12. Globalization Is Good—Increasing Educational Benefits • International flow of ideas and sharing of knowledge • English as a lingua franca • Increasing standards of education • UN targets for literacy • PISA examinations and international ranking • Ranking of universities creates standards • Increasing ability to get educational materials online • Ability to study abroad (exchanges such as Erasmus) • International schools with certified programs supplement local schools (e.g., IB system)

13. Globalization Is Good:International Migration • Pools of labor deployed internationally • 130 million Chinese migrate from rural areas China to cities for work • 11 million Filipinos work abroad • 30 million Hispanics in US for work (legally and illegally) • 940 million international tourists annually • Professionals (academics, doctors, nurses, engineers) move from country to country

14. Globalization is Good—Phenomenal Rise of Third-World Countries BRIC, especially China and India

15. Globalization Is Good:China and India • China and India—low cost, high tech • Cheap labor (10% cost of EU/US) • China—manufacturing from toys to electronics • India—call centers, outsourcing of professions (accounting, law, medicine), pharmaceuticals , R & D • High value on education • US has largest university system worldwide, next China, third India • China has 11 million of 150 million university students worldwide • India has 3.5 million students but especially high quality

16. Contemporary China • China the largest economy and arguably the most globalized country in the world • Large population of 1.3 billion • High degree of urbanization • Has redefined the modern city • Single writing system with Mandarin as language of government, trade, and 2/3 of population—communication • Complex system of governance, education, and examinations for the civil service • 50,000 kilometers of canals and river networks for transportationalong with complex air systems and rapidly developing highway systems

17. Seeds of Globalization in China • 1972 • President Richard Nixon’s visit to China and Mao Zedong allowed for rapprochement and US-China trade, including export of US wheat and cotton to China • 1978 • Deng Xiao Ping’s “To get rich is glorious” • Deng’s “four modernizations” intended to create modern industrialized state • Encourage new enterprises • Increase rural incentives and incomes • Curtail central direction • Promote foreign direct investment (FDI)

18. Maturing Globalization in China • 1980s • New government initiatives • Special economic zones, beginning with Shenzen, originally the size of Horsens, now 15,000,000 • Free-trade zones • High-tech zones • Commerce incentives at local, provincial, and national levels • Investment assistance • Required joint ventures • Tax holidays • Capital grants of up to ½ cost of facilities • Education reform at all levels • To make up for loss during 60’s cultural revolution

19. Contemporary India • 1990s • Call centers • Outsourcing of tax returns, accounting, medical analyses • Growth of IT • 2000—Magic year • Y2K bug created opportunity for Indian programmers • Especially, creation of global fiber-optic network infrastructure

20. Hesitant Globalization in India • Post-World War II • 1947—Achieved independence from UK • 1951—Jawaharlar Nehru, India’s first prime minister • Set up the first of 7 Institutes of Technology to train people in sciences, engineering, and medicine • wanted to steer middle course between capitalism and communism • Built up large state-owned industrial sector—10th largest in the world • 80% of population remained agricultural peasants, undermining state-planned economy • 1980—mere .5% share of world trade

21. Growth of Capitalism in India • 1984—Election of Rajiv Gandhi • Became prime minister • Reduced trade barriers • Initiated deregulation • Late 1980s—Multi-nationals begin to look at India, but limited by govt. • 1985—Texas Instruments • 1989—Jack Welsh of GE

22. Development of Educated and Entrepreneurial Elite in India • Educated elite in science and engineering • Many left for foreign destinations, esp. US, because of lack of opportunities at home • Human capital to US • 1970—20,000 Asian Indians in U.S. • 1980—387,223 Asian Indians • 1990—815,447 Asian Indians • 1995—900,000 Asian Indians • 2000—1,856,000 • 2004—2,245,239

23. Individual-Based Globalization • 1991—Amid the threat of fiscal collapse • Gandhi assassinated • Government-introduced economic reforms • Additional multi-nationals allowed in • Satellite television arrived • 1994—HealthScribe India set up to outsource medical transcriptions for US • 1996—Telecom deregulation

24. Globalization is Problematic • Economic volatility and risk • Shaped by politics and economic interests of both advanced and advancing countries • Economic inequality for countries and workers • Environmental and agricultural issues • Concern about water • Pollution • Agricultural uncertainty • Concern about illegal migration • Cultural dislocation • Issues concerning China and India

25. Globalization is Problematic: Volatility in Financial Markets • Capitalist model stimulates economy but is responsible for financial inequalities • Globalization exposes weaknesses in individual financial sectors and creates global perils (Portugal, Ireland, Greece, Italy) • Currency valuations distort markets • Stock markets tend to work as a grid • Traders create contagion across regions • Asian crisis of 1997 • Run on Chinese stock market (Fall 2008) • January 2008 across the world

26. Globalization is Problematic: Economic Inequality • Inequality across countries, favoring advancing economies • Per capita global income has advanced, income has converged in developed and many developing countries, but global inequality rose. • Per capita income rose faster in globalizing developing countries (5% on average) than in rich countries (2.2%) in 1990s; now even greater disparities • Advanced economies driving changes, but vulnerable • Occupy Wall Street protests • Per capita income has NOT risen in non-globalizing countries • Trade good for growth but neutral in income distribution • Money follows profit—no local commitment

27. Globalization is Problematic: Problems for Workers • Globalization may help those with financial capital but hurts the workers in developed countries— • Owners are winners and workers losers—“Fat cats and hairdressers” (Chanda) • Sense of insecurity for manufacturing workers in developed countries and for those in developing countries who fear their jobs could be moved/outsourced • Undeveloped countries snatch work from developed countries; developed countries take profit from undeveloped countries • Workers become resentful of their counterparts/competitors in other countries • Leads to battles of taxes and tariffs and unemployed workers • Tariffs decried, but lack of tariffs may have helped cause Great Recession

28. Globalization is Problematic: Economic Inequality • Inequality within countries • Economic gap (measured by Gini coefficient) in US increased from 1960 to 2009—rose from 34.8 to 46.8; China has widened from 39 to 47; Europe is 31; Sweden fell from 33 to 24 • Absolute poverty numbers have dropped in many countries, but population has increased so poverty has increased • 1.7 billion people still live in poverty (under $2 day) • In developed countries, manufacturing jobs are disappearing without replacements • Widening “skill premium” reflected in increasing gap between skilled and unskilled workers in all countries • Higher education • English literacy—reading and writing • Computer literacy

29. Globalization is Problematic: Environmental • Challenges to the environment • Population growth (now 7 billion) • Higher income may lower growth • Better health increases growth • Pollution • Demise of forests • Automobile expansion • Poor air and water from urban expansion • Building construction • Lack of water • Risk of global diseases

30. Globalization is Problematic: Agricultural • Western countries subsidize farmers to keep out global competition • Strategizing agriculture can lead to mono-cultures that are easy targets for disease • To feed the hungry world requires GM plants (genetically modified), and that might disrupt plant balance • As Korean Lee Kyung-hae’s suicide at WTO Cancun indicated, farmers are often the victims of global mass production and distribution

31. Globalization Is Problematic: Cultural • Creates climate of materialism and consumerism • Erodes sovereignty of individual countries (e.g. those in EU) • Overpowers local cultures

32. Globalization is Problematic: Migration • Workers from poor countries want access to incomes of rich countries • Legal migration can be of benefit • Countries depend upon immigration to fill the need for skilled and unskilled workers • IT in Silicon Valley; workers across EU • Hispanics in American agriculture and housing • Germany hoping to gain more Eastern European workers • Some countries depend upon remittances from workers (Philippines, India, Indonesia, Mexico) • Illegal (and sometimes legal) migration can cause social turmoil and local outrage • Dangerous circumvention of immigration laws • Stress to services in social systems • Pressure on wages for legal workers

33. Globalization Is Problematic: China and India Rise at West’s Expense • Concern that basic manufacturing is disappearing from developed countries • Software, chips, pharmaceuticals now manufactured mainly in China and India • China now largest automobile manufacturer • Manufacturing in EU and US has diminished • US lost 39% of manufacturing jobs from 1980-2000 • When US shrank by 1/3, China’s doubled • By 2020 China and India will have ½ world output • China expected to be largest economy by 2020 • Concern that, although multi-national corporations repatriate international income from China and India for the wealthy, middle class and poor suffer

34. Globalization is Problematic:China’s and India’s Problems • China • Inefficient: largely planned economy • Wasteful: investing in glutted areas like crude steel, vehicles, and office buildings • Risky: 20% of bank loans are risky • Manipulative: currency, financial markets, dumping • Inadequate social benefits : lacks health care and pensions • India • Marked by bureaucracy, rigid labor laws, poor infrastructure • 1/3 of citizens illiterate • Both • Marked by corruption • Have urban-rural gap

35. Globalization Is Bad • Economies are driven by US and EU-driven regulations of WTO and IMF • Extreme manufacturing and trading • Too much technology • Local manufacturing and service jobs taken away • Climate in a crisis

36. Globalization Is Bad—WTO and IMF • Globalization manipulated by WTO, IMF, and World Bank • Concern that WTO membership and requirements mean a “race to the bottom” • Concern that IMF is neo-liberal plot, requiring free trade, capital market liberalization, property rights, deregulation, and transfer of assets from public to private sectors (Stiglitz) • Extreme capitalism and free-market policies—especially from US and Europe—disrupt local economies, both in kind and scale, and work against local labor force

37. Globalization Is Bad:Extreme Manufacturing and Trading • Wal-Mart Effect • Takes jobs off-shore • Dislocates workers • Drives the price of production down • Drives other manufacturers and retailers out of business • Partly responsible for EU and US trade deficits

38. Globalization Is Bad—Technology Is Disruptive • Too much technology and too many intellectual property rights • Under control of big multinational corporations, therefore thought to be a new demonic religion (Chanda 274) • Technology replaces the personal and human interface • Fear that everyone is forced to be too competitive (Friedman)

39. Globalization Is Bad—Agriculture • Negative effects on agriculture and food chain • Loss of national agricultural autonomy • Farmers want “food sovereignty” South Korean protests against WTO in Cancun • Jose Bové destroys McDonalds as protest against invasion of foreign agricultural products • Forces countries to protect their agriculture and shuts out competitive products of developing countries • European farms put up barriers against American bio-engineered products (GMOs or genetically modified organisms)

40. Globalization Is Bad—Destroys Traditional Occupations and Cultures • Tariff walls and subsidies hold back those in farming, fishing, and textile production (esp. Africa and South America) • Fear loss of national cultures under new global consumerism • Spread of crime, disease, terrorism • Erosion of the environment • Deforestation • Spread of manufacturing pollution

41. Globalization Is Bad:China’s and India’s Need for Resources • Global urbanization • China needs to build one NYC each year • India needs to build one Chicago each year • Race for Resources • China’s control of rare earths • China’s quest for agricultural resources in Africa • China’s quest for timber, minerals, and oil in Canada as well as minerals and coal in Australia

42. What Can Be Done? • Make IMF and World Bank more democratic and less “old boy” country clubs (Stiglitz) • Enforce international financial guidelines • Governments to promote development and infrastructure to manage instability (Stiglitz) • Liberalize trade to open domestic markets to imports and help locals (Stiglitz) • Develop strong national social nets to ensure health, education, and reasonable wages • Address the challenge of supporting local agriculture and accepting imports • Forgive debt to undeveloped countries (Stiglitz) • Work toward fair tax policy with growth incentives • Protect the environment (Stiglitz)