The winners and losers of globalisation
Economic integration and trade liberalisation have produced an
unstoppable movement toward economic globalisation.
Most economists applaud the trend, pointing to the modernisation and
growing wealth that have resulted.
But some countries have been left on the sidelines or have even been
harmed by globalisation.
What have been the positive and negative effects of the trend?
And more importantly, since globalisation seems certain to continue, what
can be done to make its benefits as widespread as possible?
One other issue to consider
Has soft power become as important as its hard power brother?
•New markets partly driven by privatisation ( FDI’s, why and where?),
deregulation,
•New Actors – MNC’s – some larger than small EU states
•New Communications and Global Networks - BBC World, CNC and - Al
Jazeera English
•New and faster/wider access to knowledge
•New rules – human rights, the environment and growing public awareness
Developed countries have been especially affected by new information and
communication technologies that boost efficiency but make some whitecollar workers redundant
Some food for thought? - 2/3 of international trade is accounted for by just
500 corporations. 40% of the trade they control is between different parts of
the same MNC. Of the world's 100 largest economies, 50 are MNCs.
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For
Capital flows will be determined by comparative
advantage of nations
There will be a wide distribution of technology and
'technology' and 'skills' transfer
Wider choice for consumers
Dismantling of any trade barriers
An increase in the level of world trade
Increased access to economies of scale making
products cheaper and more efficient to produce
Trade determined fully by comparative advantage
Increased worldwide economic growth
More efficient global markets
Against
Investment flows will often ignore the less developed countries
(LDC's)
Labour costs are driven down and living standards may also be
driven down
Increased monopoly power for multinational corporations
Increased urbanisation in many countries
International capital is mobile, but labour is not
Conditions of employment deteriorate and governments put
under pressure by multinational corporations
Less democratic control of economic forces as power moves to
multinational corporations
Financial instability
Unsustainable development around the world
Growth of consumerism which may not be appropriate to every
country
Productive Capacity - these economies who could attract capital
flows have been able to invest in the capacity to process and
produce low level products. Many have now moved up market.
They have added value effectively and moved into markets
previously dominated by producers in developed economies
People with assets – those with capital to invest, skills to sell and
the self confidence to feel at ease in a global markets internationally transferable skills – 10 years time the largest
number of English speakers will live in China
Profits – these could be moved across borders easily, quickly and
cheaply – so allowing them to be used to start-up new business
locations, or develop existing enterprises - the privatisation
boom that followed collapse of communism in the Soviet Union
and its eastern satellites
Adaptive firms and workers – could react to change, possibly
drive/predict it and so be ahead of the norm and charge
accordingly – short lead times
Techno-specialist – needed to support the changes driving
globalisation and the growth of MNC’s
Those not dependent on public services – could adapt to change
more quickly, not weave through red –tape and so react and lead
and move into profitable area s – again attractive lead times
Large companies – had the resources to adapt, take advantages of
innovation by smaller rivals and consolidate presence in markets
Men – perhaps less obvious but in many of the low income
countries men have moved into the ‘new’ industries leaving
women to remain at home, farming and bringing up families
International markets – again react, lead times, depth of core
competence and competitive advantage – they had the resources
the think global and adapt to changes
Global culture – the importance of global presence in art,
literature, politics, communications – these all drive tastes and
product acceptance
East, S.E. Asia - the economies with an abundance of labour,
less stringent legal systems, political certainty, local mass
markets, rural urban drift
Small companies – lack resources, bargaining power to
compete in global markets
Women – less educated, less flexible, less likely to move to
urban areas, cultural norms – left to work in fields etc
Local communities – lost some of their best people to cities,
lost revenues, services and ability to attract inward
investment
Local culture – fighting against the power of capital driving
mass culture
Inability to process resources – depressed income streams,
lower tax receipts, less central and local government
expenditure, poorer support infrastructure
Land locked economies – though Switzerland is OK, it’s in
developing world where the lack of infrastructure in
neighbouring economies is very important
An analysis of globalisation's winners and losers suggests a number of
policies that can be adopted to diminish the liabilities while encouraging the
benefits of economic integration:
Create transnational institutions to develop and enforce global antimonopoly, anti-cartel and anti-restrictive practices and legislation. What of a
Tobin Tax, favoured by Gordon Brown – or the role of IMF in financial
sector regulation across global transactions – have we really thought through
the consequences of globalisation?
Crime, soft power – Bin Laden – this and Palestine
In the developed countries, implement training and education programs, (
capacity building) provide income support for low-wage workers, and
adopt tax policies that create jobs.
Let’s return to the main determinants of globalisation and note how these
have impacted on the poorest – what Paul Collier calls the ‘ bottom billion’.
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Reduce uncertainty by signing up to international conventions on trade
and investment.
Encourage pro-poor business development services (especially better
flow of information on market requirements) via partially self-supporting
agencies. – the bottom of the pyramid ( Prahalad) – excellent read – soap
in India and girl’s products in Ghana and Rwanda.
Plan safety nets to ensure minimum living standards for globalisation’s
losers. – Who is going to pay?
Invest in construction and maintenance of infrastructure such as ports
and roads.
Allow marketing bodies to be quasi-autonomous with an element of selffinancing. Also, encourage self auditing by developing countries NEPAD
Let the market identify particular future growth sectors. The record of
states which have tried to do so is poor. But what of market failures?
Encourage women to take financial risks, encourage micro finance, female
only banks, family planning, education at night, distance learning etc
Resource dependency – 29% of those in the bottom billion live in resource
dominated economies
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Increase developing country market access particularly for
agricultural products. CAP but also inter-regional trade
(small at present – trade blocks/single markets)
A 40 percent cut in agricultural subsidies would deliver
estimated benefits of $70 billion, which would help
developing countries to make large gains relative to GDP.
Ensure developing countries receive an appropriate share of
income from taxing multinationals. Transfer pricing and tax
haven registration
Name and shame companies involved in environmental
asset stripping, financing conflict, tax evasion or other
morally reprehensible practices.
Support voluntary labour, environment and fair trade schemes.
Assist countries of the south to access bond markets. Or encourage them to
save/invest themselves – may be end direct aid – over a five year period?
Remove the current uncertainty about aid flows by an agreed international
system of transfers. How shall it be distributed and by who – some favour
more to sovereign government to cut corruption and make system more
transparency
Others fear that this would increase the above – what of role of NGO’s,
international institutions. Place on expanded P5, more UN offices in
developing world?
Improve infrastructures in neighbouring economies – especially in landlocked economies – growth spillovers
Improve coastal access, improve access to internet, encourage remittances,
look to reduce gap between rural and urban economy, try to attract highly
focused aid, that included technical ability capacity building