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Globalization: General

Globalization: General

Globalization is a complex and controversial concept. There is little agreement in the literature on what it is, whether it is or is not taking place, whether it is new or old, and if it is good or bad. In its narrower conception, globalization signifies a process of intensification of economic, political, and cultural interconnectedness among the various actors in the global system. In the economic arena, where globalization is pursued more systematically, it represents a process of integration of national economies with the aim of making the global economy develop the capacity to work as a unit.

Conceptualizing Globalization

The process of intensification of interconnectedness, however, does not come about without certain underlying socioeconomic conditions and policy mechanisms. Globalization, thus, needs to be understood not merely in terms of greater interconnectedness or of creating a single global economic space but also in terms of the underlying context that has made it possible, as well as the institutional arrangements and policy instruments that serve as mechanisms for promoting it. A brief examination of some of the most important changes that have precipitated globalization over the last two or more decades helps shed some light on what constitutes globalization's broader conception.

One major change in the global system that facilitated globalization was the reconfiguration of the distribution of power at the global level and the emergence of the United States as the sole superpower following the collapse of the Soviet Union. This reconfiguration of the distribution of power has largely eliminated (at least for now) the contest among competing powers for global dominance and leadership. It would be unlikely for the global system to move in the direction of forming a single economic space when there are contending superpowers. From this angle, the view that globalization is essentially a U.S.-dominated global system seems to be compelling. This view also implies that globalization emerges from a single, unchallenged configuration of power and that the process would be reversible if another center of power should emerge to counteract the hegemony of the United States.

Another underlying factor that facilitated globalization is the restoration of the global hegemony of capitalism and of the market system following the collapse of the Soviet economic system. Contending economic systems and visions would be incompatible with the process of creating a single economic space. The rise to prominence of the neoliberal ideology and the absence of a serious competition between different economic visions has created a conducive environment for globalization.

With the establishment of the identified underlying conditions, various policy instruments, crafted along the lines of neoliberal doctrine, have been developed to serve as mechanisms of globalization. New multilateral institutions have also been created and older ones have been retooled to promote and manage globalization mechanisms. The World Trade Organization (WTO), the International Monetary Fund (IMF), and the World Bank are among the key institutions. Policy mechanisms crafted along the lines of the neoliberal ideology have also been developed to foster globalization. Such mechanisms include the retrenchment of state involvement in economic activity (including its regulatory measures) and institutional changes such as privatization, restriction of trade barriers, and liberalization of capital mobility. These mechanisms have been promoted in much of the developing world through the IMF and World Banksponsored structural adjustment programs.

Two main reasons may help us explain why globalization entails homogenization of economic policy along neoliberal lines. The first is that it would be almost impossible to conceive of an integration of national economies into a single space dominated by a hegemonic power where states are unrestrained from exercising their own power to unilaterally design economic policies in a manner that corresponds to their specific circumstances. Another explanation is that the identified underlying changes represent a shift in the balance of power among social classes in favor of capital at the global level. This shift, in conjunction with U.S. hegemony, has created a condition for the consolidation of capital's vision of the global economic system. The vision entails liberalization of trade and the flow of capital and the deregulation of labor markets in line with the interests of big capital. Liberalization of the flow of capital across borders, together with advances in communication technology, have, in turn, reinforced the surge in the power of capital by giving it the power of mobility. By contrast, labor's ability to organize and to maintain collective bargaining has been weakened by deregulation of the labor market (and capital mobility) and by technological advances, which either replace labor or reorganize work.

In light of the identified underlying changes and the globalizing mechanisms, globalization can be defined more comprehensively as a process of intensification of interconnectedness among national economies with the vision of creating a single economic space, largely corresponding with the interests of capital, and spearheaded by a hegemonic power and promoted through various institutional arrangements and policy instruments.

Is Globalization New?

There are lingering questions as to whether or not globalization is new. Some consider it to be not only new but revolutionary. Others, such as Kenneth Waltz, dispute the claim that global interconnectedness has intensified, noting that the current global system has not even attained the level of integration that existed during the preWorld War I era. Waltz also contends that governments now intervene much more than they did in the preWorld War I era. The points raised in this argument are valid. However, they do not repudiate the fact that capitalism has now resumed a vigorous pace of global integration that was interrupted during the interwar period (19181939) and during much of the Cold War era, when the Keynesian welfare state system was predominant in the Western world and the socialist system prevailed in the East. The levels of integration of the global system of production and state disengagement from economic activity may not yet have exceeded the levels of 1910, but they are rapidly intensifying and are likely to soon surpass the levels of 1910 if globalization continues at its present pace.

The welfare state system that predominated since the interwar years of the last century has also declined notably and a new vision of global order, crafted along the lines of the intellectual tradition of Friedrich Hayek and Milton Friedman, has emerged. In Hayek's view, for instance, concerns of social inequality are mere vestiges of the bygone era of primitive communalism that need to be weeded out and replaced by individual freedom and responsibility, irrespective of the problems of inequality and poverty. There has also been a surge in the perception that national economies have converged into a single space of global economy and that there is only one appropriate form of social organization. A single world economy is far from being a reality. However, there has emerged a powerful advocacy for such a perspective.

In any case, as Kevin O'Rourke and Jeffrey Williamson point out, in historical terms the liberal order that globalization represents is not new, as it was the predominant order in the nineteenth century, roughly between 1840 and 1914. However, globalization represents a significant departure from the global order that prevailed between the outbreak of World War I and the end of the Cold War.

There is also controversy over the factors that promote globalization. Some view globalization as largely driven by technology. Needless to say, technological advances have facilitated the intensification of interconnectedness. It is not likely, however, that technological changes, by themselves, would bring about globalization without a corresponding ideological homogenization or the growing disengagement of the state from economic activity that is currently underway. It is not clear, for example, that capital mobility would come about as a result of technological changes alone, although advances in communication technology, along with the deregulation of capital flows, have enhanced capital mobility.

Others contend that globalization is shaped by market forces. However, an economic system cannot be realized without a corresponding political system, and globalization is shaped by the acquiescence (if not active support) of governments, especially the U.S. hegemonic power and other advanced countries, as Thomas Friedman notes. Adherents of the market forces argument claim that globalization is forced upon governments and that these governments cannot stand in the way of globalization without incurring severe costs. Powerful capital interests are certainly in a position to punish governments that adopt fiscal and monetary policies that adversely impact their goals. The government of South Africa, for example, can be punished by capital flight if it insists on implementing its agenda of social reform outlined in its Reconstruction and Development Program. However, the masses of South Africa are likely to sustain heavier costs if the government abandons its mandate for social reforms in order to comply with the demands of globalization. Faced with such a dilemma, governments in developing countries have generally selected the side of capital, largely because of the pressure they face from governments in advanced countries and the multilateral agents of globalization.

Capital has now succeeded in capturing the attention of most governments. It is unlikely that the global economic order projected by globalization would be possible in an environment in which labor is organized enough to counterbalance the influence of capital on governments. Powerful countries such as the United States are not helpless against globalization. They can prevent it if they choose to do so or if the balance of power among social classes within the powerful countries changes. The demise of nineteenth-century globalization, due primarily to political forces, as O'Rourke and Williamson note, also indicates that globalization does not come and go merely as a result of market forces or technological change. The view that the state has facilitated (if not authored) globalization is thus compelling. Yet there is little doubt that changes in economic forces and advances in technology, along with changes in government policies reflecting changes in the balance of power among social classes, have all contributed to making globalization possible.

Implications of Globalization

Views on the positive or negative impact of globalization are also highly polarized. Proponents credit globalization with promoting global prosperity, peace, stability, and democracy. Critics, however, attribute to globalization a long list of societal ills, including rising inequality and poverty, environmental mismanagement, and the narrowing of the scope of democracy. Some even view it as a veil for imperialist domination of the developing world. The global cultural interconnectedness that has expanded with the rise of economic interconnectedness is also often viewed as Western cultural imperialism. Some, however, reject this view. Anthony Giddens, for example, claims that global economic and cultural influences are mutual since, as the West is increasingly influenced by the rest of the world, "reverse colonialism" has become more common. Others contend that, along with economic boundaries, cultural boundaries are coming down and culture without space is emerging. Claims of cultural hybridization or cultural deterritorialization, however, grossly understate the disparity in the levels of influence reflected in the imbalance of the control of capital, technology, and media outlets between the advanced West and the developing world.

Proponents of globalization assert that there is a strong positive relationship between the "openness" attained by reducing the allocating and regulatory roles of states and success in industrial development and socioeconomic transformation in those states. Others show that the claim is at best contentious. There is also strong historical evidence that countries that have successfully industrialized did so behind protectionist policies and strong state involvement in their economies. The Dutch Golden Age of the seventeenth century, for example, was perpetuated by strong state involvement in the importation of raw materials and exportation of manufactured goods. During the eighteenth century, Britain stimulated industrialization, especially in the area of textiles, not only by imposing tariffs on imports from India and China but also by outlawing the wearing of some imported items. In the nineteenth century, countries like France, Germany, and the United States, in an effort to develop national industries, counteracted British hegemony through nationalist economic strategies that included protective tariffs and credit facilities from state banks. In the twentieth century Japan, South Korea, and Taiwan promoted industrialization through a number of state-instituted policy measures, including land reform, targeting of investments and credits to selected industries, and the protection of young industries, and by providing extensive support for marketing and research facilities.

With regard to the relationship between globalization and democracy, opponents argue that globalization reduces democracy to mere electoral contestations with little of substance determined by popular vote. They note that the more limited the role of the state, the more the sphere of public decisions narrows, resulting in hollow democracy. For proponents such as Hayek (1978), Samuel Brittan (1977), and Hutt (1979), only market democracy constitutes genuine democracy, and state involvement in economic activityas in the welfare state systemrepresents the transfer of control from the people and market democracy to politicians and coercive interest groups.

Despite the polarization of views, globalization appears to present gains and opportunities to some and losses and challenges to others both within and among countries. Generally, the more advanced economies, which have the ability to compete in open markets, face opportunities, while those less able to compete, such as sub-Saharan African countries, face challenges. Globalization's economic vision, including deregulation of labor and the retrenchment of the welfare state, has also increased inequality and relative (if not absolute) poverty. Various aspects of workers' rights have been rolled back in order to bolster the bottom line of corporations. The plight of the masses in low-income countries, such as those in sub-Saharan Africa, where governments have been unable or unwilling to provide their populations with even the most basic protection from the brunt of the structural adjustment programs, has been particularly severe.

The impact of globalization on democracy also has been both positive and negative. Globalization has contributed to the spread of democracy but it has also limited the scope of democracy by narrowing the sphere of public decisions. The argument that market democracy is more genuine (and less exclusive) is not convincing. Market democracy, in which voting rests on a base of purchasing power, is inherently oligarchic in an economic system that is characterized by inequalityas capitalism is.

Conclusion

According to the foregoing analysis, globalization is not merely an intensification of global interconnectedness brought about by market forces and technological change. Rather, it is a worldview shaped by capital and hegemonic power that aspires to establish a global system in line with the interests of capital. Capitalism, as a market-oriented system of production, has an inherent globalizing tendency. However, capitalism is not always characterized by the level of adherence to the liberal principles that globalization represents. In E. M. Wood's penetrating analysis, globalization represents a new phase of capitalism that is more universal, more unchallenged, more pure, and more unadulterated, than ever before.

The financial crises affecting different countries have shaken the confidence of the advocates of globalization. The World Bank, for example, in stark contrast to the minimalist state dictum it advocated in the 1980s, in the early twenty-first century recognizes the importance of the role of the state in protecting and correcting markets. There also has been a growing realization that unfettered financial flows, especially from advanced countries to emerging markets, can create profound instability. Some proponents of globalization have even admitted that Keynes's skepticism about financial mobility may still be relevant today. The September 11, 2001, terrorist attacks on the United States also (temporarily, at least) raised questions about the wisdom of supporting globalization. Yet despite notable setbacks and shaken confidence, the advocacy for globalization remains strong.

See also Capitalism ; Economics ; Hegemony ; Human Rights ; Modernization ; Neoliberalism ; Technology ; Third World .

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Kidane Mengisteab

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