FORD FOUNDATION INTERNATIONAL FELLOWSHIP PROGRAM

8TH COHORT PRE-DEPARTURE IMPERIAL RESORT BEACH HOTEL ENTEBBE –UGANDA By; Dr. John Nyerere Globalization Today’s discussion - Content 1. Defining globalisation 2. Description of the process of globalisation 3. Causes of globalisation; 4. Historic epochs of globalisation; 5. Consequences and dangers of globalisation; 6. Future of the globalisation process. 7. Globalization and Africa 8. Case Study

3 Globalisation

• Google’s search returns over 24, 000,000 hits to the searchphrase “globalisation”

• Globalisation as a buzz word – Is it the root of all evil or the engine of economic growth? Hence -- Social Justice !!!

4 What Is Globalization & What Are its Manifestations? Greater integration within the world via increased openness to: • International Transport, trade • International capital and labor movements • International flow of technology • International flow of information, knowledge, and ideas (Internet super-highway) Globalisation

• “...globalisation, is ...simply the logical extension of the tendency towards specialisation and trade, … has been going on almost since mankind first walked on the surface of the earth” (Eslake, 2000)

• In economic terms, globalization refers to the growing economic integration of the world, as trade, investment and money increasingly cross international borders

6 Globalisation • Broad definition (Nye, 2009): “increase in worldwide networks of interdependence”

• Not only economic globalisation Environmental: i.e. smallpox epidemic originated in Egypt in 1350 BC. It reached China in 49 AD, Europe after 700, the Americas in 1520, and Australia in 1789. Bubonic plague, or the Black Death, originated in Asia, but its spread killed a quarter to a third of Europe's population in the 14th century. Lately- Avian flu, swine flu?

7 Globalisation • Social globalization consists in the spread of – Peoples, – Cultures, – Images, and – Ideas.

Migration is a concrete example.

8 Globalisation • Ever increasing integration of the world economy from the early 1950s in terms of trade, investment and production; • The process in not new, but has garnered added attention of late; • Liberalisation of trade and finance has driven changes in functioning of the firms; • Progress in transport and telecommunications. • Technology

9 What is Globalization?

• “Process in which the constraints of geography recede and in which people become aware that they are receding” • “Widening, deepening and speeding up of worldwide interconnectedness in all aspects of life” • Process by which networks of interdependence become large and continuous, or “thick” What is Globalization? • A quantitative and qualitative change • Not only economic • Has 4 dimensions: – Space - extensiveness of global networks – Regularity - intensity of global interactions – Speed - velocity of global flows – Depth – impact of global interconnections on quality of life When did globalization begin? • Underway since dawn of history • Emerged with industrialization and capitalism – i.e 1. Slave trade to fuel western industrialization 2. Colonization • Recent development of Information Age • Globalization not linear • Ebbs and flows with politics Historical Forms of Globalization

• 21st century “thick globalization” – high extensity, intensity, velocity and impact • Western imperial expansion (18th century) – high extensity, impact; low intensity, velocity • Silk and luxury trade (200 BC-200 AD) – high extensity; low intensity, velocity, impact The Globalization Debate

• 3 Schools of thought

• Hyperglobalizers – new epoch in human history – logic of market trumps state power • benefit or oppressive? – emergence of global civil society – smooth unfolding of human progress The Globalization Debate

• Skeptics – current levels of interdependence not new • classical “Gold Standard” period 1870-1914 – power of national governments endures • hegemon important – regionalization prevails – inequality undermines global civilization – global culture not emerging – global governance illusory The Globalization Debate

• Transformationalists – current globalization unprecedented – but outcome unclear – globalization has contradictions – unclear if single world society will result – national governments not powerless but must share governance with IGOs and NGOs Theme 1: Integration-Fragmentation

• Integration - breaking down barriers historically separating people – communications, economics, security, ideas

• Fragmentation – nationalism, regionalization, religion, ethnic conflict, inequality Theme 1: Integration-Fragmentation

Dilemma

• integration satisfies material needs, freedom from want

• fragmentation satisfies non-material desires, freedom from fear Theme 1: Integration-Fragmentation • Examples of fragmentation and inequality • Africa – region of the world most excluded from global economy • Access to information technology – the “digital divide” • Science and technology for public health and food production skewed to solve problems of developed world over those of poor countries Theme 1: Integration-Fragmentation

Summary - Fragmentation can be viewed as:

• Nationalism, ethnic conflict, identity • Regionalization • Inequality Theme 2: Universalism-Particularism

• Focus on global culture vs. local culture – globalization as convergence, homogenization, uniformity • Cultural imperialism thesis - variants: – Americanization – Westernization – Core over periphery – Modern over traditional – Global capitalist monoculture Theme 3: Borderless World-Sovereignty

• What are states? • Why are states under pressure? • Causes of state decline – market forces; technology; skills revolution • But states not powerless • Historically rooted political agents interact with increasingly globalized economic agents Transmission Belts for Globalization

• Media • Tourism • MNCs, TNCs, MNEs • Air • Capital • Water • Labor • Science and • Transportation Technology • Communication • Others? Globalization Summary

• Globalization best conceived as a dialectical process stimulating:

– integration and fragmentation – cultural differentiation and convergence – borderless world and evolution of state Advantages and Disadvantages of Globalization

Realm of Advantages Disadvantages Globalization Weakens power of Unwanted external authoritarian influences difficult to Political governments control

Jobs, capital, more Exploitative; benefits Economic choices uneven

Offers exposure to Risks cultural Cultural other cultures imperialism

Arguments for and against globalisation • Globalisation’s critics: – against free trade; – effect of corporations on souvereign governments; – ecological standards; – rights of local communities; • Supporters of globalisation: – free trade; – world without borders; – end of “national” economies. 26 Antiglobalisation movement

• Critics of globalisation believe that the rulling elites garner all benefits of globalisation, leaving nothing for the people/workers • Against “neoliberalism”

27 Antiglobalisation movement • Heterogeneity – anarchists; – socialists; – NGOs; – developed country unions; – rare 3rd world protesters; – environmentalists; – even some economists who oppose certain aspects of globalisation (J. Stiglitz (2002): “Globalization and its discontents”, D. Rodrik (1997): “Has globalization gone too far?”) 28 Criticism of antiglobalisation • Critics argue that antiglobalists have no empirical evidence; – There has been a decrease in the absolute and relative number of people living in absolute poverty (wage below 1$ per day); – Average income per capita in the period 2002-2007 has experienced fastest growth in recorded history, but the benefits were not equaly distributed; – Life expectency in most of the world (except sub- Saharan Africa) has increased markably. In sub- Saharan Africa it stayed more or less equal. 29 Criticism of antiglobalisation (poverty level) Source: Sachs (2005)

30 Criticism of antiglobalisation • Antiglobalist criticism is misdirected: – Farming sectors of the third world are mainly harmed by restrictions to developed countries’ markets and not free trade as antiglobalists tend to believe; – Third world workers have a choice between opitons on offer to them (take on a job at a TNC or get a job at a local plant); – There is broad agreement amongst economists that greater transparency in the functioning of TNCs and capital flows is needed. 31 Two epochs of globalisation • 1492-1820: Anti-globalist (mercantilist) restrictions; – Discovery of America, sailable root to India,... – Strong impact on commerce, growing share of trade in GDP; – Trade is NOT a consequence of falling trade restrictions and global integration; – There was, namely, no decrease in price differences between the export and import centers, – Discoveries and the progress made in transport technology lead to trade monopoly markups, tariffs, non-tariff barriers, wars, pirates,... 32 Two epochs of globalisation • 1820-1913: first global century – With the end of mercantilism, a period of relative peace (after the Napoleonic wars) and improving transport connections (pax Britannica); – Convergence of prices (not only across the Atlantic), but primarily with Asia and Africa, where there was a strong presence of European colonial powers; – Integration of factor markets, global capital markets after 1913 were comparable to those of today in terms of global coverage (J.G.Williamson, 2002), labor migration reaches its climax (no restrictions33) Two epochs of globalisation • 1913-1950: antiglobalisation – complete disintegration of the world economy – formation of trade and migration barriers many of which are still in use today (share of foreign- born US citizens falls from 14.6 (1913) to 6.8 (1950)); – price differences across the Atlantic double and reach the 1870 level; – fall in investment into new technologies and a fall in foreign direct investment.

34 Antiglobalisation • From 1913 and especially after 1870 the world witnessed a period of accelerated globalisation; • This was brought on by the establishment of the gold standard and a reduction of transport costs; • Until 1929 antiglobalisation was driven by an increase in transport costs; • After 1930 the final step towards disintegration was made with the collaps of the gold standard. 35 Two epochs of globalisation • 1950-2007: second global century – in many aspects different from the first one, – much smaller factor migrations, – trade restrictions, on the other hand, are far smaller than they were in the first period of globalisation, – indications of a substitution effect between trade and factor movement.

36 Last globalisation phase

37 Comparison of the two epochs • Similar in terms of cumulative trade growth rate (400% in 471%) • Fall in trade costs greater in the 1st phase, therefore trade costs explain the majority of the first phase of globalisation, while only a third of the second phase; • In the collapse of the first globalisation epoch, trade costs play a crucial role. The contemporaneous growth of output at the time was namely 90%. 38 Myth of economic globalisation

• Hirst & Thompson (1999) propose that economic globalisation is a myth; • Internationalised global economy is not unprecedented. Furthermore, they argue that the world economy cca 1890-1914 was more open than that in the late 1990; • There was no shift towards multinationality as most firms are still national…

39 Consequences and dangers of globalisation • Production: – Creation of global markets for primary and consumer products; – Centralisation of global production into a couple of production centres; – Disintegration of the production process into several phases which need not be performed at the same location (outsourcing, subsourcing,...) • Consumption: 40 – Convergence of global consumer habits Consequences and dangers of globalisation • Finance: – Creation of global finance markets, easier access to credit; – Growth of financial markets, institutions and financial products (derivatives) surprised the national and global regulators, which ultimately lead to an unstable global financial system and the possibility of crysis spreading across the globe; • Politics: – Hegemony of the US, rise of China and India 41 Consequences and dangers of globalisation • Competition – Competition in global markets or globalisation of local markets bring cheaper products for consumers, but also mean greater operating risk, higher probability of loss of jobs or their reallocation; • Technology – Great advances in information technology fostered a fast pace development of globalisation, the appearance of global standards, greater availability of information and an increase of substandard information.

42 Consequences and dangers of globalisation • Ecology – Global environmental issues and the need for global action on environmental issues; – Environmental issues are becoming more important in developing countries due to production moving to those countries; • Culture – expansion of consumerism, global pop-culture; – increased turism, travel and migration; – Multiculturalism as a consequence of migration.

43 Dangers of globalisation • Increased operating risk even in “local” markets, as strong global competition presents dangers for all firms and introduces added risks; • Global regulations cannot keep track of the revolutions in global production and the global financial system, which ultimately breeds instability; • Lack of global standards for consumer goods and environmental standards can promote hazardous products; 44 Dangers of globalisation

• Oligopolization and even monopolization of the world markets by large cartels or multinational enterprises, – The remaining “giants” will be less responsive to their environment and less robust to changes in competition, consumer habits, etc.; – Growing differences between developed and developing countries will accentuate the political differences between them. 45 The future of globalisation

• Four drivers of globalisation – End of North Atlantic hegemony • Divergence turns into convergence, rise of Asia, South America future rise of Africa, away from the US and Western Europe; – Demographic change; • Demographic explosion since WWII, 85 mio growth per year (one Germany) 1830 – 1 bio, 1930 – 2 bio …9 bio 2050

46 The future of globalisation • Four drivers of globalisation – Ecosystem pressures; • Combined universality of economic development (eludes 20% of the World, but not the rest) • Use of resources: land, water, fossil fuels, hunting fishing,… • Climate change • Energy use + population increase – Failed states • Impoverished countries; • Lawless, disease prevention…

47 The future of globalisation • The end of the current global financial/production crisis will breed a new cycle of globalization; • Protectionism follows every cycle of globalization (“beggar-thy-neighbour” policies of the 1930s) • The legacy of the crisis will be a stricter legislation, which will limit some of the more obvious wrongdoings; • A new cycle of protectionism is not completely impossible as the fast spread of the crisis has given more support for mercantilist measures.

48 Questions

• Alternatives to globalization? • How would you stop globalization, if you wanted to, without restricting people’s freedom? • Is the answer this: building a better globalization? Smart Vs. Dumb globalization – Environment – Labor rights – Health – Technology