venerdì 5 ottobre 2018

What are the main characteristics, benefits and drawbacks of globalization?


These notes go with the long article on globalization that I will put in the dropbox.
Globalization (or globalisation) refers to the increasingly global interconnectedness of cultures, people and economic activity. Most often, it refers to economics: the increasingly global distribution of the production of goods and services, through reduction in barriers to international trade such as tariffs, export fees, and import quotas (as well as invisible barriers such as complex and slow bureaucracy) and the transfer of such goods and services to consumers. It also involves the freer movement and circulation of workers around the world, delocalization (relocation of factory and service providers from one country to another) and glocalization of products and services. Globalization contributes to economic growth in developed and developing countries through increased specialization and the principle of comparative advantage. All this helps to lower the price of goods and thus benefits the consumer and raises the standard of living. Globalization of financial markets makes money available at low interest rates for investment.
The rapid increase in the process of globalization has been the result of a number of factors: the end of the Cold War and the end of the relative isolation of countries like Russia, the old Warsaw Pact states and China, and their integration into the global trading system; the work of the World Trade Organization to eliminate or reduce trade barriers; the work of the World Bank, which is a lending institution whose aim is to help integrate countries into the wider world economy and promote long-term economic development; the work of the International Monetary Fund which aims at promoting global monetary cooperation and financial stability and thus supporting trade; developments in transport technologies, infrastructure and procedures and thus reductions in transport costs, e.g. container ships and ports, low-cost airlines; developments in Information and Communications Technologies (ICTs) that facilitate trade, e.g. the internet, cell phones and satellite technologies.
Supporters of globalization also argue that it promotes peace. In the 1960s and’70s there was very little trade between the West and the Communist bloc. Today the level of trade between, for example, the US and China or the EU and the Russian Federation is very high, and it is difficult to imagine how such trading partners could become involved in a conflict without seriously damaging their own economies (even in a situation like that in Ukraine where tensions are high).
The countries that gain least from globalization will be those least integrated within the global trading system, either by choice (by political decision and the maintenance of strong trade barriers) or through a lack of the necessary infrastructure (e.g. ports, airports and roads), or know-how and expertise, or technology, or an adequate industrial base or a secure business environment (e.g. failed or partially failed states or states with high levels of corruption, bureaucracy, red-tape and insecurity of ownership).
The term globalization can also refer to the transnational circulation of ideas, languages, and popular culture, particularly via the internet and social media or on satellite TV across political borders. Many Western political commentators identify its most positive effects in the spread of democratic and human rights values at a grass roots level, a phenomenon which authoritarian regimes may find difficult to control. Paradoxically, cultural globalization in this sense may actually lead to tension and political instability, at least in the short term, as the rapid changes taking place in the Arab world demonstrate. On the other hand, globalization may lead to a mixing of cultures and an enriched, more vibrant multicultural society. This is an important argument both for the EU and for a city like New York.
Globalization also means the growing role of international organizations, both global and regional, like the UN, the WTO, the IMF or the EU and AU, and the diminishing ability of nation states to confront their problems alone – problems which are now often global challenges requiring international cooperation at an ever increasing level.
Critics of globalization make a series of points:
Globalization encourages competition to lower prices. This may damage developed economies with strong social welfare systems which find themselves in competition with countries like China where social welfare costs for companies are small or non-existent, and overheads may also be relatively low. Many Europeans commentators would argue that this aspect of globalization outweighs the benefits to Western consumers of low-cost goods because European companies will be unable to compete and either close, move their factories and other production facilities abroad where costs are lower, or outsource part, or all, of the production process to other companies located in low-cost areas. This will lead to more unemployment in the developed economies. They call for trade limits on countries like China until those countries provide their own workers with adequate health care, education and pensions. The freer movement and circulation of workers around the world has also been criticized as leading to a decline in salaries as workers from the host state compete with migrants (often willing, or forced, to work at lower pay rates and usually less organized in terms of unions), and a rise in social tensions between these two groups. There may also be rising friction due to cultural and linguistic differences. Further criticisms in this field concern the risk of increased threats to security, terrorism and pandemics. The greater volume of trade makes it difficult for the customs authorities to effectively check the goods being transported and this has, it is argued, made illegal trafficking in drugs, arms, organs and human beings easier. The same argument is made for the increased number of people moving across borders.
Globalization is criticized as producing a tendency towards a global mono culture (and the destruction of local cultures) and towards a mono culture of crops, which reduces agricultural biodiversity and could put the world at risk of sudden reductions in food production due to crop diseases.
Since the start of the current economic recession in 2008 many experts have argued that globalization makes the spread of a financial or economic crisis more likely because of the interconnectedness of the world economy, and thus renders the global trading system less stable, rather than more stable as supporters claim. However, other economists point out that this interconnectedness is not a new phenomenon as the Wall Street Crash of 1929 and the Depression of the 1930s demonstrates. In fact, they argue that today’s global institutions and our awareness of global economic realities have made it possible for countries to react more effectively this time by adopting common policies rather than pursuing protectionist policies as happened in the 1930s. However, the globalization of financial markets and the removal of or reduction in the rules controlling financial and banking transactions, together with the availability of credit on easy terms to those who were not really credit-worthy led, in the opinion of many critics, to a financial culture of irresponsibility based on short term gains from the stock market and property markets, and lending to high-risk borrowers rather than sound, long term investment of this money in industrial and technological projects and research. This, they say, led directly to the financial bubble and crisis in the US real estate market, in particular the sub-prime mortgage market (but also in the Spanish and Irish real estate markets). It also allowed too much lending to some states and now too much speculation against these states and their currencies (e.g. Greece, Greek Treasury bonds and the Euro) on financial markets. Critics argue that a distinction should be made between the real economy (the production of goods and services) where the bankruptcy of even the biggest company will not create an economic crisis for a government, and the financial sector where financial institutions may lend on such an enormous scale that should they face bankruptcy they put the country’s entire economic system at risk. This argument leads to the conclusion that financial institutions require much stricter regulation and oversight than other types of companies.
Critics argue that poor countries, particularly small poor countries with little or no industrial base, and thus dependent on the export of agricultural produce or raw materials are under pressure from developed economies and emerging economies to open up their economies to foreign companies. They may thus be exploited or face very great fluctuations in the global price of the commodities that they export. See the current situation:
This may prevent them from accumulating enough capital to develop and grow their economies. It is argued that they may need to protect strategic industries, with trade barriers and national institutions and management, in the early stages of the development of these industries, as most developed countries themselves (e.g. Italy and Japan) did and China still does.
Globalization has also been criticized for prioritizing global economic growth (in which it has been very successful) over global issues such as sustainable development, climate change, deforestation, the reduction in biodiversity and global warming. A series of conferences (the most recent, the UN Climate Change Conference in Paris November 2015, in Lima in December 2014, and at UN HQ in New York in September 2014) ) have attempted to address these issues, but there is great disagreement among commentators as to the effectiveness of these conferences and the extent of the progress made. Some praise conferences as a ‘breakthrough’ (the UN) in terms of commitment, while others see them as too little, too late (many NGOs).
Cultural globalization has also been criticized as leading to a dehumanized monoculture based on materialist and essentially Western values. In this context we should note the rising criticism, in the more traditional fringes of some cultures, of international institutions like the WTO, the World Bank, the IMF and even the UN itself as Western (i.e. ‘foreign’) and imperialist.
Finally, globalization has also given international criminal and terrorist organizations more space to operate and these threats to security will require an ongoing, collective response.
Conclusion – Concern about a trade war and a sudden reversal of the trend to economic globalization is rising with President Trump tariffs on Chinese imports, and the Chinese response, and his use of the threat of tariffs in negotiations with Europe, Mexico and Canada. A trade war would, in the opinion of most economists be disastrous. However, the reintroduction of more effective rules to govern international finance is an aim shared by the EU and many experts, but Trump has moved in the opposite direction
See also: https://youngdip.blogspot.com/2018/10/globalization-some-history-and-current.html
A re-examination of the terms of trade between developed, emerging, and developing countries is also clearly necessary and the goal of ongoing global negotiations. Moreover, as many of the problems of the 21st century are now on a global scale only shared global strategies and cooperation will succeed in dealing with them (e.g. climate change and the COP21 meeting in Paris in 2015). As Sustainable Development Goal 17 makes clear, in order to deal with the problems caused or made worse by population trends a global partnership will be necessary. However, critics argue that so far negotiations on global challenges have produced only modest consensus and even less in terms of practical results.
https://www.theguardian.com/commentisfree/2016/nov/20/the-guardian-view-on-globalisation-its-death-is-the-making-of-it
https://www.theguardian.com/commentisfree/2011/aug/25/dead-end-globalisation-youth-rage
2018 Trump, Tariffs, Aims, Trade War? Dangers?


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