What does “Globalization” mean?

Term “Globalization” became – and has remained – popular in political and academic debate
from late 1980s onwards.
In 21st Century, impossible to escape constant references to “Globalization”. Talked about
by politicians, business people, union leaders, social movements, in books, newspapers,
academic journals, TV debates etc.
But very little consensus on what it means, and what its consequences are:
- Supporters: globalization is route to worldwide peace and prosperity via international
economic integration and development.
- Opponents: globalization makes the world’s poor even poorer, and the rich even
richer, devastates the environment, and destroys cultural diversity.

Peter Hall and Sidney Tarrow, The Chronicle of Higher Education (1998):
“Every era has concepts that capture the public imagination, and “globalization” has recently
emerged as one for our time. The term conveys a sense that international forces are driving
more and more developments in the world, and thus crystallizes both the hopes of some
people that we will finally achieve a global society and the fears of many others that their
lives and jobs are threatened by forces beyond their control”

How do we define Globalization?

Despite its popularity, no clear, concise definition

World Bank, 2000:

“Amazingly for so widely used a term, there does not seem to be any precise, widely-agreed
definition. Indeed, the breadth of meanings attached to it seems to be increasing rather than
narrowing over time, taking on cultural, political and other connotations in addition to the
economic”

Roland Robertson, Globalization: social theory and global culture (1992):

“the compression of the world and the intensification of the consciousness of the world as a
whole”.

Martin Albrow and Elizabeth King, Globalization, Knowledge and Society (1990):
“all those processes by which the peoples of the world are incorporated into a single world
society”.

Anthony Giddens, The Consequences of Modernity (1991):

“the intensification of worldwide social relations which link distant localities in such a way that
local happenings are shaped by events occurring many miles away and viceversa”.
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Thomas Larsson, The Race to the Top: The Real Story of Globalization (2001):
“the process of world shrinkage, of distances getting shorter, things moving closer. It pertains
to the increasing ease with which somebody on one side of the world can interact, to mutual
benefit, with somebody on the other side of the world”.

Economic Globalization

Nonetheless, globalization has been studied above all as an economic phenomenon.

Not to say that globalization does not have political or cultural aspects and consequences –
it does!

But economic aspects of globalization have been easier to observe and understand:
World Bank (2000):
“the most common or core sense of economic globalization surely refers to the observation
that in recent years a quickly rising share of economic activity in the world seems to be
taking place between people who live in different countries (rather than in the same
country)”.
Put simply, the world economy is increasingly integrated.

When did Globalization begin?

Economic historians: if Globalization means increasing international economic integration,

phenomenon not new. International trade and commerce fundamental to understanding
economic history of mankind.

Ancient World:
- Roman Empire’s conquest of Egypt led to trading ties between Rome and India and
East Africa.
- The “Silk Road” important in development of civilizations of China, India, Persia,
Europe and the Arab world.

Early Modern:
- Spanish expedition of Columbus discovers America in 1492.
- Rise of Portuguese, Spanish, Dutch and British maritime empires in 16th and 17th
Centuries.
- Founding of British East India Company (1600) and Dutch East India Company
(1602) – world’s first multinational companies?

Later Modern:
- Opium War of 1840: British invasion of China to facilitate export of opium
- 1860: first international free trade agreement, between Britain and France, leads to
similar agreements in rest of Europe
 - 19th Century: rise of international trade, European imperialism in Africa and Asia,
reduction of international transportation costs via the steamship and development of
railroads

History of international trade since ancient times shows that there is historical precedent for
Globalization of today. In fact, in late 19th Century/early 20th Century: strong connections,
via trade, between the different national economies.
But: historically, international trade took bilateral, or regional, form and was not truly global
In contrast, today, globalization is simply on different, much more massive, level.

Globalization Today

During and since late 20th Century:

- increased movement and migration of people;
- liberalization of trade regulations;
- increasing share of national economies taken up by imports and exports;
- hugely increased sophistication of communication (computers and internet).

These factors have led to increasing economic interdependence of national economies

across the world through a rapid increase in the cross-national movement of goods,
services, technology and capital. Increasingly, production, markets, competition, technology,
businesses etc. operate in a global context.

So – for good or bad, for better or worse – Globalization in late 20th Century/early 21st
Century is leading to the emergence of a global marketplace or single world market.
→ And this is a new phenomenon!

Economic Globalization

Increasing integration of world economy has manifested itself in several ways:

- The rise of international business:
- Revolution in transportation and, above all, communication has enabled private
companies to expand and operate globally >> the “multinational” (or “transnational”)
- Many famous examples:
1. Fast food: McDonald’s and Starbuck’s (US companies operating in tens of
thousands of locations around the world)
2. Automobiles: General Motors, Ford (USA), Toyota (Japan)
3. Electronics: Sony (Japan), Samsung and LG (South Korea)
4. Energy: Exxon-Mobil (USA), Shell (UK-Dutch), BP (UK)
All examples of powerful companies operating in multiple national markets,
with international workforces .
.
International trade (exchange of goods, services, capital across international borders):
Phenomenal growth of international trade over last 50 years represents a fundamental part
of Globalization Sum of Imports and Exports as a Share of World GDP:
- in 1960: 23.8%;
- in 2012: 57.9%*
So more of the world’s total economy is taken up by international trade than ever before.
* World Bank data

Foreign Direct Investment (FDI): FDI: Companies based in one country increasingly make
investments to establish and run business operations in another country.
For example, in USA in 1998: US companies invested US $ 133 billion in other countries,
while foreign companies invested US $ 193 billion in the USA.
On global scale, huge increase in world FDI, from US $ 192 billion in 1988 to US $ 1,400
billion in 2013*
* OECD data

Capital flight: With an increasingly integrated international economy, and the emergence of a
global financial system, multinational companies and the financial markets have acquired
immense powers:
In “unfavourable” conditions (for example, tax increases, wage rises for workers, political
uncertainty etc.), investors and companies can move money and assets (factories) to other
countries very rapidly >> “capital flight”.
Examples:
- In 2009: British government introduced a top income tax rate of 50%, leading to flight
of wealthy financiers and business people to low-tax destinations (“tax havens”) such
as Channel Islands or British Virgin Islands
- In 2012: banking crisis in Southern Europe. Indecisive election result in Greece in
May 2012 led to capital flight of 4 billion euros per week.
In Spain: 97 billion euros left Spanish economy during first quarter of 2012.

Remittances (transfer of money by foreign workers back to his/her home country)

Globalization has involved increasing rates of migration, largely from developing to
developed countries. (North >> South)*
- Migrant workers in developed countries send significant sums of money to their
native countries.**
In 2009, World Bank estimated that 192 million migrant workers around the world
sent US $ 316 billion back to the developing countries.
By 2013, this had increased to US $ 404 billion, and was estimated to reach over US
$516 billion by 2016
* In 21st Century, increasing rates of migration within southern hemisphere (South >>
South)
** On one hand, important economic resource for the poorest developing countries;
on other hand, a significant loss, in terms of human capital, for these same countries
Illegal international trade: “Dark side” of globalization. Increasing operation of “black
markets” and organized crime on global scale. For example: Global drug trafficking. In 2010,
United Nations Office on Drugs and Crime reported that global drug trade generated more
than US $ 320 billion per year. International trade of endangered species.
 Implications of Globalization

Globalization not just an economic phenomenon. It has cultural consequences, too.

In the cultural realm, critics of Globalization argue that it is harmful to the diversity of world’s
cultures. Argument that as a dominating country’s culture is introduced into a receiving
country through Globalization, it threatens the diversity and uniqueness of local culture.

Cultural Globalization

For a long time, “dominating countries” meant USA and, to lesser extent, European
countries. So many authors argued that Globalization was, in fact, a process of
“Americanization” (or “Westernization”), whereby the dominating cultural symbols,
references, and concepts of the most economically and politically powerful countries would
spread across the world and diminish local cultures.
Evidence: global reach of US brands (McDonald’s, Starbuck’s, Coca-Cola etc.) and huge
“cultural production” (film, music, television..) of West.

But maybe cultural consequences of Globalization not so clear:

- First, “Cultural production” of West is, in relative terms, in decline, while that of
Eastern Asia is rising. UNESCO Report in 2005: China was third largest exporter in
world of “cultural goods” (behind USA and Britain).
But long-term trends in favour of the East and against the West.
“Globalization-as-Americanization” may actually belong to a particular period of time
when the USA did dominate and was able to introduce its products, markets and
elements of its culture into other countries.
So with the rise in population and economic strength of China in 21st Century,
cultural consequences of Globalization more uncertain.
Nonetheless, issue of language: what are the cultural consequences of the
consolidation of English as the global language of the 21st Century?

- Second, Globalization could generate an opposite cultural effect – i.e., fear of

growing “homogeneity”, or declining diversity, could lead national populations to
value their own local cultures more, rather than less.

- Third, long-term cultural consequences of the phenomenal expansion of the Internet

are not clear. In first decade of 21st Century, number of Internet users rose from c.
400 million to over 1,8 billion. In 2010, 22% of world’s population with access to
computers
Now, true that Internet access not distributed evenly, but its use and availability is
expanding globally. Not clear why Internet should be vehicle for promoting dominant
cultures, or promoting growing global uniformity of cultures. It could promote reverse
effect of maintaining diversity.
In sum, no clear consensus on long-term cultural effects of Globalization.
 - On one hand, some argue that Globalization is generating a global popular culture,
and that Globalization is eroding fixed, national, political identities.
- On other hand, others argue for increased support for local/national cultures as a
result of the pressures of Globalization. And, in some cases, to the resurgence of
nationalism and to the growing obsession with national “identity” and “traditions”,
supposedly under threat from Globalization.*
*Key element of discourse of Extreme Right, for example.

Is Globalization Good or Bad?

Uncertainties with respect to definition and consequences of Globalization means that it is a

deeply divisive concept – no agreement at all on whether it is a positive or negative
development.
Politically: key issue is whether the power and influence of the nation-state is declining in the
face of Globalization.
Some argue that the nation-state remains the key actor in world politics, it can regulate the
economy, it can do things to attract foreign investment and promote economic development
etc.
But others argue the opposite: international financial markets, multinational companies are
immensely powerful: they can damage national economies very quickly,
by-passing/blackmailing national governments, and are accountable to no-one – hence, to
quote Hall and Tarrow again, people’s fears that “their lives and jobs are threatened by
forces beyond their control”.

Economically, does Globalization generate wealth, and is it spreading that wealth around the
world? Many authors point to the economic growth and development of China, India, Mexico,
Brazil as evidence of the benefits of an increasingly globalised world economy. Economic
wealth and development is being dispersed – i.e. new sites of economic wealth are
appearing around the world.

Globalization is Good

Razeen Sally, London School of Economics:

“Globalization .. is growth-promoting. Growth, in turn, reduces poverty* ... the liberalization of
international transactions is good for freedom and prosperity. The anti-liberal critique is
wrong: marginalisation is in large part caused by not enough rather than too much
globalization”.

Jonah Goldberg, National Review Online:

“[Globalization] encourages .. economic growth. And ... economic growth creates a middle
class, and a middle class, eventually, demands democracy. That is the story of the 20th
century and, God willing, it will be the story of the 21st”.

*Principal affirmation of neoliberalism: a direct link between wealth creation and poverty
reduction (“trickle-down” economics)
Clare Short, British Secretary of State for International Development, 1997-2003:
“Globalization is generating great wealth. This could* be used to massively reduce poverty
worldwide and to reduce global inequality ... We must try to manage this new era, in a way ...
which helps to lift millions of people out of poverty”.
* i.e., goes against principal affirmation of neoliberalism. There is no direct link between the
generation of wealth and its redistribution. Latter is result of political priority and intervention.

Globalization is Bad

In contrast, others argue that Globalization is a negative phenomenon:

- Big business can move around the globe more easily before, in search of profits.
Tendency is for multinationals to move to countries where labour and manufacturing
costs are lower, unions are weaker or non-existent, and businesses can impose
harsh working conditions and low wages.
- In worst cases, severe abuse of workers (including children) in developing countries.
National governments of poorest countries make huge concessions to attract
multinationals.
→ Thus Globalization promotes further global inequality and an increasing, rather
than declining, North-South divide.

Some criticisms of Globalization:

Kevin Danaher, Globalization and the Downsizing of the American Dream (1997):

“the increasing globalization of U.S. corporations gives them the leverage to hold down
wages and resist unionization. Average real wages .. have been falling since the early
1970s. By 1992, average weekly earnings in the private, non-agricultural part of the U.S.
economy were 19 percent below their peak in the early 1970s. Nearly one-fourth of the U.S.
workforce now earns less in real terms than the 1968 minimum wage!”
→ So “blackmailing” power of multinationals (to move elsewhere) is damaging to interests
and welfare of workers even in the rich, advanced, economies.

John A. Powell and S.P. Udayakumar, Poverty and Race (2000):

“While the U.S. has been aggressive in protecting capital both at home and abroad, it has
encouraged both the weakening of organized labour and removing protections for workers”

“…Workers are told that pushing hard for benefits will cause capital to leave to another
location in the country or the world where workers are willing to work for less with fewer
benefits”.

“Capital is being actively directed to workers with low wages, where workers are sometimes
abused and labor organizations suppressed. The wealth this globalism is creating is being
forcefully subsidized by vulnerable workers .. especially in the Southern Hemisphere.

“..This logic is then used to weaken the position of labor in the North, as we are required to
compete with unorganized, suppressed labor in the South”

Duncan Green and Claire Melamed, A Human Development Approach to Globalisation

(2001):
“While globalisation has led to benefits for some, it has not led to benefits for all. The
benefits appear to have gone to those who already have the most, while many of the poorest
have failed to benefit fully and some have even been made poorer”.

Summary

No agreement, either among academic scholars or politicians, about long-term effects of

Globalization:
- Politically: some argue that Globalization is dismishing the power of individual
nation-states; others argue that the nation-state remains key actor.
- Economically: some argue that Globalization is generating and redistributing wealth
across the globe; others argue that it reinforces existing North-South divide.
- Culturally: some argue that Globalization destroys cultural diversity; others argue that
it may reinforce diversity.

Not all Countries are Equally Globalized

What is clear that not all countries are equally integrated into this increasingly Globalized
economic and political system.

Put differently:
- Some countries are highly integrated, with high levels of imports and exports, high
levels of emigration and immigration, strong presence of foreign companies in their
national economies.
- In contrast, other countries have weaker links with, or are isolated, from the global
economy.
Index of Globalization

Swiss Federal Institute of Technology, Zurich, has devised an “Index of Globalization”, to

measure the degree to which a country is economically, politically, and socially integrated
into the world system.
Higher the score, the more a country is “globalized”
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Majority of “Most Globalized” countries are small and highly developed economically

In contrast, the “Least Globalized” countries are problematic, in one form or another:
- Comoros, Solomon Islands, Tonga: small, geographically isolated nations.
- Eritrea: war-torn country.
- Equatorial Guinea: world’s worst record on human rights abuse.
Does the geopolitical context of a country help explain degree to which it is integrated into
world economy, and what are the consequences of this for its economic development?