Globalization
A Changing Context
Overview
Globalization refers to a process of increased interconnectivity between people around the world. This
interconnectivity creates greater interdependence, with this global interdependence then forming the foundations to
some form of global organization. As such globalization should be understood not simply as increased connectivity
but ultimately refer instead to the formation of a global system of organization. Once this global interdependence has
emerged the question then inevitably turns to how to manage this combined organization, what are the rules for this
new level of organization? What principles are these rules based upon and who gets to make them? This is clearly
going to be a very contentious issue. The central challenge of globalization today is, though, the formation of some
form of institutional structure for the management of this global system of organization that has emerged.
In the absence of a compelling and unified vision for the development of a global system of organization its
development has been driven by the local incentives of individual people, organizations, and nations. With some of
those individuals and organizations perceiving benefits from it, while others see threats, the result being a heated
debate about the winners and losers and competition over the perceived division of the pie. Globalization may
represent a millennia old abstract evolution in the complexity of our systems of organization and such an evolution
can not be said to be good or bad - evolution is simply a process that generates new levels of complexity - however
that process of evolution can be managed and developed in an effective way, or in an ineffective way. Thus it is not
for us to debate whether the process of globalization is good or bad, but it is up for debate how that process is
managed. Often this management process has been distorted around those with the power to guide it towards
advancing their interests at the expense of others, and this story has marred the development of the process of
globalization to date.
The result is that the rules that have been written for the development of globalization over the past few decades
have been undemocratic and distorted along many dimensions, both social, economic and environmental. This
remains a critical challenge facing the development of the global economy today.
A central component of this challenge of global governance is the issue of the complexity of these global systems that
need managing. The process of globalization refers to the ongoing evolution of a new, more complex level of socioeconomic organization on a global level, one that transcends our existing national institutional framework. Existing
Industrial Age management theory and methods that worked well at the lower level of complexity of the nation state where we created the centralized bureaucratic organs of the modern welfare government - are not sufficed for the
more complex level of the global environment. The global systems of organization that make up globalization operate
on a different set of principles to that of the territorial state. Instead of being about independent nations and cultures
they are about the interdependence between people. Instead of being based on a well-bounded system of
organization it is about open global networks. Instead of being static it is about dynamic change. This change in the
nature of the organization due to its increased complexity requires, in turn, new approaches to its management that
are aligned with these features. An approach that works with these new dynamics not against them, to enable the
new set of possibilities that are engendered in this new form of organization we are currently developing around the
planet.
This paper presents an analysis of the current stage in the process of globalization, the most salient challenges that it
presents and various potential solutions to these challenges based on complex systems theory.
Part 1:
Global Systems
Setting The Context
People have been exchanging goods and ideas on a global scale for millennia, but in the past few decades since the
fall of the Berlin Wall, the opening up of capital markets, the rise of information technology and the reduction in trade
tariffs, the pace of global connectivity has greatly increased with about a hundred countries having come into the
global economy. This dense network of interconnections and interdependencies that have emerged on the global
scale over the past few decades is a key source of heightened complexity and primary shaper of the 21st-century
environment in which organizations operate.
Before the advent of industrial technologies, the capacity to maintain some form of global relation was highly costly,
and thus, the privilege of a tiny minority of any society. The aristocratic women of the Roman Empire could wear fine
silk garments imported from China but the vast majority of people lived out their lives interacting only with their local
social, cultural and physical environment. Tribes, clans, lordships and other forms of traditional society were
organized around a cosmose of local level interactions and relations.
With the advent of industrial technologies such as the steam engine and later the telephone and radio, the mass of
society could communicate with people and travel to places far from their indigenous locality. The railroad was one of
the truly revolutionary elements of the Industrial Revolution, for not only did it create a new economic dimension but
also it rapidly expanded the geographic mentally of people. For the first time in history human beings had true mobility
over a large geographical area beyond their local community. For the first time the horizons of ordinary people
expanded beyond the local and it expand out into a national system of organization that formed over the coming
centuries.
Economic industrialization went hand in hand with the rise of the modern nation-state, as transportation technologies
enabled people to experience a wider geographic area as if it was one. National culture was frosted and sustained
through the telephone, radio and later the television, which allowed a geographically dispersed population to share
their collective set of ideas and experiences. Today, the modern nation state is the primary macro-scale system of
organization in the world. Sovereign states are designed to have supreme and independent authority over a
geographic area. All organizations on the regional and the international level operate through or are regulated by the
machinery of the nation-state. Thus the nation-state represents a whole world of cultural, social, economic and
technological relations on a particular geographical scale, and it is a fundamental organizational structure of an
industrial society.
"Where are political communities
organized today? By and large
political communities are
organized at the level of the
nation-state, don't go looking for
global governance anywhere, don't
go looking for global politics
anywhere" - Dani Rodrik, Prof Harvard
Enabling Technology
But whereas the industrial technologies of the railway,
automobile, radio and newspaper enabled the modern
state, the advanced industrial technologies of
information, communications, and global transportation
are interconnecting people and places in ways that go
beyond the paradigm of the nation-state. The global
connections that these technologies enable, whether
they are airline routes, the flow of financial capital, or
supply chains, they all start local and travel globally
with limited reference to the national level.
The Information Revolution has enabled a new era of
economic globalization as geography gradually
disappears as a barrier to economic organization and
activity. The world economy has undergone major
globalization processes before, particularly in the late
19th and early 20th centuries, but the process was
continually rising and falling with the fortunes of social
and political change. The level of globalization fostered
by the Information Revolution, however, is altogether
unprecedented in human history, as the speed with
which information, transactions, and capital can travel
virtually anywhere in the world renders certain key
economic dimensions free from distance and
geography. Coupled with the rise of these technologies
has been the development of economic institutions that
have enabled the emergence of our high-tech global
economy, such as multinational corporations,
international trade agreements, and financial
institutions. Today, these economic organizations and
the rapid technological development that enables them
represent the most powerful force driving the global
economy forward as they disaggregate the previously,
vertically integrated, well-bounded industrial economies
of the nation-state and transform them into global
networks.
Economic globalization is primarily driven by global
connectivity. This interconnectivity is enabled by two
primary factors, one technology, and the other
institutional, that is to say, the reduction in the
discontinuity and boundaries between jurisdictions.
Corporations have harnessed both of these to develop
global networks. These global networks are the primary
structure and drivers to this process of economic
globalization to date. Starting in the late eighties a new
economic and political ideology arose promoting the
idea of the free market, both internal to the nation state
through privatization and external through the reduction
in trade barriers, tariffs and other policies that were
designed to reduce the differences between national
jurisdictions and enable a global free market. The net
result of this coupled with new information technologies
has been a mass increase in global economic
exchange and with this increase in connectivity an
increase in interdependence.
"Historically global institutions have arisen out of crises,
out of the ashes and no doubt that will happen in the
future. My hope is that we are wise enough and connected
enough now to be able to preempt disaster and be able to
create institutions that will work proactively to stop
terrible tragedies happening. That's the real question are
we able to stop the tragedies happening or will we allow,
as in the past new institutions to supersede the existing
ones out of the ashes" - Ian Goldin Prof Oxford
New Organizational Structures
An economy is a system of organization for the production exchange and consumption of value within a society,
consisting of a set of parts that are coordinated in relation to each other. Globalization represents the development of
a global system of organization. Through increases in connectivity of all kind on a global level, elements within the
global economy become differentiated and coordinated with respect to each other – thus, emerging some form of
global organization.
The term global refers both to planet earth and importantly it refers to the whole of something. So whereas
globalization can be seen as essentially one more step in a millennia-long evolution of socio-economic organization from tribes to clans, to chieftains, to states and empires - it can also be seen as a very different stage in this
processes in that unlike its predecessors that always formed localized organizations, a truly global organization would
be a whole system not simply a set of local parts and this creates a very different dynamic to previous regimes.
Globalization defines the emergence of a new level of organization to our economies, a process where constituent
parts are re-contextualized and reorganized through networks into an integrated global economic system. Out of the
proliferation of global interconnectivity components become interdependent and differentiated with respect to each
other thus emerging some new form of organization where components are no longer differentiated within a national
system but become defined by their role within global networks that come to be the defining pattern of organization
through which the global economy is regulated. At the same time, the parts become dislocated on the national level
as they are no long closely integrated and differentiated on that level.
The result of this process is a shift from an industrial model to the global economy, that was defined by and managed
primarily through the well-bounded set of discrete components of the nation state based on territory, to being
increasingly regulated through distributed global networks that engender a complex variety of participants, the
classical example of which is the global corporation. In this interpretation, globalization is understood as an
organizational or structural transformation from component parts to whole networks. Such a transformation involves
major power restructuring and redistribution within a process of creative destruction. Resources come to flow through
new structures while others are made redundant, this inevitably affects many interest groups and creates a highly
contentious subject of ongoing debate.
Globalization can also be seen to represent the evolution of our economic systems of organization to a new level of
complexity on a new scale. From such a perspective globalization is seen as primarily a structural transformation in
our global economy as it is transformed into a more complex form of organization. Such evolution in structural
complexity - because it is systemic - is never good or bad it simply is. That is not to recognize that the process,
means and new capabilities it engenders will not be used to beneficial or detrimental ends.
"Today we don't have that kind of overarching
political process, we have in a way forms of
political interaction that are very flawed and
the result of this is a democratic deficit, a
democratic deficit at the global level and that
means that the decisions that are made at the
global level do not reflect the interest, the
well-being of all citizens of the world. Too
often this deficit results in the interest of
corporations, corporate special interests
dominating over those of ordinary citizens all
over the world" - Joseph Stiglitz, Prof Columbia
New Management Structures
One of the central questions of our time is how can we manage the global economy, how can we manage global
systems in an effective fashion? Today the case can be easily made that we have not and are not capable of doing
this, from financial crises and offshore tax havens, to an incapacity to deal with migration and refugees. Further,
environmental challenges such as global warming, cross-boundary water and air pollution, and overfishing of the
ocean are linked with lack of global governance. To date neither markets no public institutions have proven effective
at delivering sustainable solutions to the management of the global economy on its different levels.
The Industrial Age macro-scale management structure of the nation state has not transformed to meet the demands
of an emerging set of global systems that require a new form of management structure that is today significantly
lacking and this has many systemic detrimental effects. While private actors and markets have evolved into a global
structure, such a system of organization has proven too limited in its scope creating massive negative externalities
that are clearly unsustainable.
This form of globalization that we have developed has turned out to be very unsustainable. It created global
interconnectivity but interconnected people in a very superficial way. While it has worked to disintegrate the social
welfare state, in many ways it has not as yet replaced it with a viable model on the global level. While the formation of
a new level of organization will inevitably, in some way, involve the disintegration of the integrity of the previous level
of organization - or a least compromise its scope in some way - it is, of course, required that a new level of
management is formed to replace it.
Global institutions like that of the World Bank, WTO, IMF, UN although effective in some ways, are ultimately an
incomplete solution to global governance, as they are piecemeal, undemocratic, often ineffective and have not
created the desired results. Today few people desire the formation of a centralized global government that might be
able to manage the global commons in the same way that the nation state did for national economies.
"The international order itself is unraveling. In the past eight years
alone, the world has seen the worst financial crisis in decades, a
global recession, a historic debt crisis in the euro zone, a wave of
unrest across North Africa and the Middle East, civil war in Syria,
a migrant crisis that calls into question the future of Europe's
open borders, war between Russia and Ukraine, Brexit, an
explosion of cyber aggression and the election as U.S. President
of one Donald Trump. Call it geopolitical creative destruction or
just the sound of things falling apart, but the grinding of G-zero
gears has become too loud to ignore”- Ian Bremmer, Eurasia Group
The Rise of the Market Logic
A major aspect to the development of economic globalization is the story of the rise of market mechanisms and the
logic they embody as the central ordering principle to the management of the global economy. This is a shift from a
global political economy managed by the many different nations based upon the specific socio-political logic of their
society, to that of a single logic of the global market. After millennia of societies and economies being governed by
people making choices within a political context, today economies around the world are less governed by the choices
of their political institutions and more by abstract rules of markets and the possibilities enabled by technology. One of
the most profound shifts that the modern era and globalization represent is a shift from a human-centered form of
governance to a form of governance driven by market logic and available technology.
Since the origins of society, people have formed formal or informal political institutions to make collective decisions for
their community. Tribes, chieftains, states and empires have been governed predominantly be a small elite of people
making decisions in their own interests or the interests of their community, with these political systems forming
hierarchical centralized structures. The modern era, and particularly the industrial revolution gave rise to another
major modality for the management of resources within society, the market system. Markets have always been there,
but have traditionally operated within the confines and constraints of the cultural, social and political institutions of
their society. Typically in premodern societies most of the resources produced are for direct family consumption,
excess resources are typically extracted and controlled by the ruling political authorities, markets play a relatively
limited role in terms of decision making within these societies.
One of the primary characteristics of the modern era has been the rise of capitalism and the market system,
particularly since the industrial revolution. With urbanization, mass production and the specialization of labor the mass
of people became dependent on market systems for their everyday livelihood. In a modern society, the market system
comes to take on a new role. Instead of being a means to an end that is controlled by the political, social and cultural
elite, it becomes an end in itself and increasingly liberated from socio-political constraints as an ever more important
means for decision making in relation to the allocation of resources.
Organic Solidarity
s
Organic solidarity is social unity
based on a division of labor that
results in people depending on
each other; In sociology, organic
solidarity explains what binds
technologically advanced,
industrialized societies together
The economy becomes the glue that binds people together
through their interdependency on each other. Through the
process of industrialization, it becomes a major independent
organizational structure. During this process of
industrialization, it became accepted that the market system
needs independence from socio-cultural and political control.
Although this idea was challenged during the 20th century by
centrally planned economies like the USSR, it eventually
came to dominate. With the rise of neoliberalism the idea of
the free market system became a powerful ideology driving
globalization. At the height of neoliberal globalization, before
the financial crisis, we saw a high point in the centuries-long
process of rationalization and the shift in power and decisionmaking from political organizations to the market.
The current global economic system is still underpinned by a
neoliberal ideology, and this has meant that the majority of
countries the world over have adopted neoliberal policies
and strategies into their own national agendas. The practical
implication of neoliberalism is the move of power from
political to economic processes, from state to markets and
individuals. The result has been the emergence of a single
global economy that goes beyond the capacity of any one
national society to manage, regulate or fully effect
unilaterally, and this is at the heart of current issues
surrounding globalization.
Today the economy has evolved into a global form that is too complex for
any nation state or centralized organization to manage. At the same time
that the economy has evolved into a form to complex for our traditional
management methods, it still has many negative externalities that require
the nation-state to manage, both environmental and social. The kind of
market systems that we created in the Industrial Age are not self-creating
they require a large network of public institutions to provide a supporting
infrastructure, they are not self-stabilizing and they are not selfregulating, as the past financial crisis illustrated. The traditional free
market structure based around the concept of utility has many positive
and negative externalities that are not managed effectively by the
market. Traditionally in order to get a market system that works for
society it is required to have strong public institutions to regulate these
externalities.
Our current market system works to the extent that there are a large and
functioning set of public institutions that support them, however this
supporting infrastructure primarily remains at the level of the nation-state
and this creates a miss match. A central issue facing the development of
globalization today is the massive negative externalities created by the
free market system. This is certainly not the only issue but it is a primary
point of contention for many people, from those protesting for work's
rights to those protesting against environmental degradation.
The question today remains though how to manage a global economy
that goes beyond the political jurisdictions of nation-states; one that is
too complex for any centralized organization to manage but still requires
all of their support to deal with the negative externalities.
"Markets work well only when
you have a broad range of
strong institutions that
underpin those markets, you
don't have markets without
legal institutions what makes
markets last and provide for
prosperity are these other
institutions mostly provided by
collective action, by the public
sector, by government in
modern days” - Dani Rodrik
Managing Externalities
Globalization has to be managed as a whole, not as a
set of parts. Globalization is made of global processes
that transcend any individual organization and can not
be managed by any individual nation. These global
processes can not be managed by a set of individual
parts in a piecemeal fashion that stops and starts at
borders. Likewise, it can not be imposed in a top-down
fashion from some global government institution. The
management of such a system has to be built into it in a
distributed fashion.
Pure markets are distributed management systems,
they are large-scale networks of interactions between
producers and consumers that work to manage
allocation without centralized control. Markets can
manage the allocation of any resource, any form of
value, social, cultural, industrial, natural it is simply
required that all dimensions are incorporated into the
system through their appropriate evaluation and
quantification.
It is now well established that neither standard
accounting numbers nor standard economic metrics
capture all the effects of economic actions. The kind of
accounting used to guide national and international
policy making and to assess the effectiveness of their
policies largely ignores anything that does not have a
conventional utility-based financial price tag on it︎. The
consequences of this are clear as︎ important economic
and business decisions are made with little or no
concern for the externalities.
Today we increasingly have the understanding and
technology to measure all the different forms of value
and to make them explicit by building them into markets
and the value proposition of products. This expansion
of markets to account for the full cost - both
environmental, social and economy - represents a
distributed management system that is appropriate for
dealing with the kind of complexity engendered in our
global economy. This is because it works to harness the
distributed intelligence of all members in the economy
towards its management by placing the true cost that is
required to maintain a functioning whole at the point of
decision-making within the large, distributed networks
of markets.
"These are interesting times for us. I think
externalities are frankly the biggest free lunch
in the history of this universe... I do hope that
we can stop the biggest free lunch in history"
- Pavan Sukhdev TEEB
Full Cost Economy
Full-cost accounting is a method of cost accounting that traces direct costs and allocates indirect costs by
aggregating and presenting information about the possible environmental, social and economic costs or benefits for
each proposed alternative. It is a system which allows current accounting and economic numbers to incorporate all
costs and benefits into their equations, including environmental and social externalities to ︎try and get the prices right︎︎,
the incentives right and thus the decisions right and effective overall management.
New scientific knowledge and information technology are greatly expanding our capacity to quantify and define value
and this is a key part in enabling this new economic model. With social networking technologies and the Internet of
Things, information technology is giving us the capacity to quantify our world like never before. To quantify things like
friendship or CO2 emissions, as increasingly we have real values associated with them; such as likes on Facebook.
And as we start to embed sensors in all kinds of devices and objects we can get real data about many aspects to our
natural environment that were never possible before. What this means is that it is increasingly possible to virtualize all
forms of value, social capital, cultural capital, ecological capital and industrial capital. They are all converging onto
common IP platforms.
The more information we have, the more we can directly translate all forms of value onto a common platform and see
before our eyes how they are exchanged. This means that value is less a single thing, as we increasingly recognize,
quantify and correlate different forms of value. With information technology, we now have the capacity to make these
different forms of value and externalities transparent and accessible, by leveraging this technology the positive and
negative externalities that were previously not accounted for within the market system can be incorporated in working
towards a self-regulating system.
Full cost accounting can potentially enable the management of self-sustaining economies in a distributed fashion,
without dependence on centralized national institutions. It works to remove responsibility for the environmental and
social management of global systems away from national governments and place the responsibility in the hands of
everyone; every citizen in that every citizen is a consumer in some fashion. The responsibility is shifted to the hands
of every person within society, in that as consumers they have to demand products and services that take full account
of their externalities and thus incentives businesses to produce goods that work to reduce externalities. By setting up
markets for social capital and natural capital businesses can become social businesses or environmental businesses,
working to manage social and natural capital in a sustainable fashion.
Full cost accounting is not a simple solution for managing our global economy, it is an inherently complex solution.
However, simple solutions do not work in complex environments. Complex challenges require an equally complex
approach. Complex systems can not be managed through centralized methods they require the harnessing of the
distributed local intelligence and capabilities of all members. Harnessing these capabilities requires the development
of the appropriate structures and context and this is what full cost accounting is. It creates the context that incentives
the members towards optimal overall outcomes and this is how to manage a complex system, as without centralized
control, you can only create the context that will enable the emergence of optimal outcomes.
Currently, in our attempt to manage our global economy billions of people sit on the sidelines watching and waiting for
a few people within centralized organizations to do something. The result of this is paralysis, as the vast majority of
the capabilities, intelligence and resources in the system get locked up and under utilized, while their responsibilities
are shifted to a tiny minority who could never possibly hope to manage such a complex system effectively while only
harnessing a small fraction of its resources.
As the Journalist H. L. Mencken once said: "for every complex problem there is an answer that is clear, simple, and
wrong." This is the case with globalization, there are many traditional straightforward and simple approaches to
dealing with the challenges of globalization which will not work due to the complexity of the issue. The development of
a full cost economy is certainly not a simple or straightforward approach nor will it be easy. However, it does though
have the appropriate structure to enable real and sustainable solutions in the long run. The theory of full cost
accounting is one thing its implementation is another; a long and winding road that would over time transform our
economies into a more stable, sustainable and mature form.
Part 2:
Interdependency
From Independence to Interdependence
Globalization means the greater interconnectivity
between people around the world. When organizations
interact they typically respond by adapting to each
other, they coordinate their activities in some way to
enable a more effective overall outcome and through
this process, they become differentiated with respect to
each other and form a combined organization. This is
part of the central insight of Adam Smith and is a key
concept within the basic theory of globalization where it
is captured in the ideas of specialization and trade. By
each member specializing in what they do best meaning they differentiate their activities with respect to
others - and then all coordinate their activities through
trade, the overall pie can get bigger and everyone
come away better off. The overall result of this is,
though, increased interdependency.
two sets of rules one for the overall organization based
around interdependence and one for the local parts that
have to maintain their autonomy and difference. This is
a key part of the core dynamic and complexity
engendered within the process of globalization.
This interdependence creates a new dynamic that is
very different from that of independences which prevails
within the autonomous nation-state paradigm.
Interdependence creates a two-tier system where the
parts must work together on one level as a combined
organization, but also must be different and separate on
another so as to specialize. The result is a system with
As people, cultures, and economies have become
increasingly integrated into a single global organization,
as people have begun to experience the reduction of
borders and the flattening of the world, so to have they
come to identify their interdependence. This
interdependence creates a new dynamic and a
fundamental challenge to traditional organizations
based upon the conception of their independence.
As with the formation of all complex organizations,
globalization engenders a complex dynamic between
local and global structures. People and nations become
interconnected within a global economy, but the
formation of this overall organization then feeds back to
enable or constrain the member parts, whether that is
companies, economies, individuals or societies. Local
events come to shape global events and global events
come to shape the local as the members become
interdependent within the overall organization.
"Globalization is...a term that
reflects the real interdependence
of human civilization at this point
in our existence"
- Shashi Tharoor
A Non-Zero Sum World
Throughout the modern era, the concept of autonomy and independence has been very important. The autonomy of
the individual and society to make choices, act as independent agents, rationally considering options and making
choices to benefit their own ends. Groups of people that had a common cultural heritage formed autonomous nation
states declaring their independence from all others. It is this concept that people and cultures should be autonomous
and independent that forms the basis of the nation-state as the organizational principle for the world today. Equally, it
forms the basis for the free market as a set of independent actors pursuing their own rationally considered ends.
The dominant model for understanding human interaction and organization that rose to prominence during the 20th
century was that of zero-sum games. It was assumed that people and nations acted as individuals rationally pursuing
their desired ends and that this would inevitably lead to conflicts of interest as they pursued the attainment of scarce
resources. This zero-sum game model to independent actors was illustrated most clearly in the Cold War where the
political strategists literally modeled the interaction between the US and USSR as a zero-sum mathematical model.
The post-Cold War world underwent great transformation. The political agendas of traditional military power and
national security were now dominated by the actors’ “quest for a stable and peaceful global order conducive to their
economic development.” The post-Cold War era witnessed a realization among the nation-states that the criteria for
achieving real power was something more than simply hard power, in fact, it required a secure economic and
technological advancement.
As globalization has developed through the rapid expansion of the free market system after the fall of the Berlin Wall
the interdependence between economies and nations has broadened and deepened and traditional assumptions
about independent actors competing within zero sum games has come to be challenged in political theory by the idea
of complex interdependence theory. The idea that people and nations are bound together by a complex web of
interconnections that makes their fate no longer independent but now, interdependent.
Complex Interdependence
With the rise of outsourcing, a single global marketplace, the internet and global environmental challenges the term
interdependence has come to replace the traditional principle of independence creating a very new dynamic that our
socio-political institutions have struggled to adapt to. The reduction in national boundaries and heightened global
connectivity means events can propagate through the global economy rapidly. The financial crisis of 2007 is a good
example where an event within one relatively small part of a nation’s financial system rapidly spread to affect almost
all economies, showing how we are increasingly dealing with an integrated system and no one element has
autonomy but all are interdependent. Increasingly, if an individual or organization of people care about their own
future they need to care about the future of others to some extent.
Mutual dependence at a global level. One country depends on another country for something and that country may
depend on another country, which eventually creates global interdependence. Importing and exporting of goods and
services highly contributes to global interdependence. Certain commodities such as oil have created a global
interdependence between countries that produce the precious commodity and those that require it. As nations have
opened up to the global economy, processes that previously took place within their borders are increasingly
distributed out over many different nations as elements within national economies become less dependent on others
within the nation and more dependent on their specific role within global processes. The traditional vertically
integrated national economies become unbundled as the parts become more dependent on their role within global
processes, creating this network of complex interdependency.
For example, with globalization, we get the emergence of tourist villages in rural Norway or in some Caribbean island
that are specifically designed to cater for international cruise ships. These villages are then differentiated with respect
to this global process but in so doing they are no longer shaped by their local context, which works to disintegrate that
level of organization. The economy and level of employment of one of these villages may become more dependent
upon the currency strength of another country than on anything that local authorities try to do to affect their economy.
Indeed, leading up to the previous financial crisis a small village in rural Norway invested their savings into subprime
mortgages and the economic fate of this small village became dependent on what was happening in New York and
other financial centers. It is this network of interdependencies that cuts across all forms of vertical territorial structures
that creates complex interdependence and facilitates a new dynamic of collaboration.
"The more we connect, the more interconnected we
become, the more interdependent we become and those
interconnections and interdependencies create a lot of
new challenges that we never thought about before, at a
global scale, at a nation state to nation state scale or a
business to business scale we start to see some new
kinds of challenges that some of the mechanisms and
processes we have in place in the world don't solve"
- Alan Marcus, The World Economic Forum
"Closer integration means that we are more interdependent, when we are more interdependent
we need to act more together, we need to act cooperatively. A hundred and fifty years ago a
similar process was in play with the formation of the nation state, transportation costs were
coming down, communications costs were coming down and national units were being
created, but then we had the nation state, that could regulate, that could make nation building
work, make sure that these enormous economic forces worked to the benefit of all the citizens
in the country, today we don’t have that kind of overarching political process"
- Joseph Stiglitz Economist
Collaboration
Interdependence leads to a different form of organizational dynamic, that of collaboration. Traditional organizations
based on the idea of independence and a low level of connectivity lead naturally to structures built around zero sum
games and competition. Independent members with divergent agendas are expected to compete, businesses
compete within markets, politicians and political parties have to compete for votes, athletes compete to win
tournaments etc. But this form of organization ceases to function when dealing with dynamics of interdependence;
such as with the challenge of climate change. With interdependence, the requirement shifts more towards optimal
overall outcomes and that facilitates collaboration. Institutions that involve competition or trade like exchange
interactions cease to be effective in the way they were when dealing with independent organizations in a context that
involved a low level of interconnectivity.
Collaboration is not about being nice and helping others. It is a specific structure to a context within which
organizations interact, where the end goal of each can only be achieved by the other achieving their end goal and
thus working together becomes the default position, instead of competing. Collaboration is what emerges as a default
logic when people perceive their interdependence. If people believe they are independent then collaboration is not a
default position and typically not sustainable. A collaborative organizational structure then is very different from that of
traditional hierarchies. In any environment that involves the interdependence of actors in outcomes the organization
paradigm needs to shift from control to information exchange.
Globalization involves many complex challenges representing an interaction between the global and local, such as
the clash of civilizations, migration, global environmental issue, global inequality and economic development. To
tackle these complex challenges that globalization presents - which involve at their core issues of interdependency requires organizational structures that harness this interdependency by using connectivity, information, and
transparency to enable collaboration. Trying to solve these issues that involve interdependence with traditional closed
organizational structures is like pushing an elephant up a hill.
"There is clearly a rising platform economy
shaping our global business landscape and
affecting the lives of citizens worldwide...This
new form of organization seems to be a robust
- some would even say dominant – form of
business enterprise in the digital economy…
While significant challenges lie ahead, the
opportunities that platforms reveal are
enormous, tapping into an unprecedented level
of global Internet connectivity" - CGE report
Nonlinearity
Not only does interconnectivity create interdependency but it also creates nonlinearity. When parts are independent
then there is a linear relationship between them, meaning the combined effect of what they all do is a simple
summation of their individual effects. However when they become interdependent this changes as they form part of
combined processes where what one does affects the others and this then feeds back to affect the first creating a
feedback loop that can build upon itself over time to create large outcomes given only small inputs.
Highly interconnected global markets make it possible for a small effect - in say the subprime mortgages of the
American economy - to have many knock-on effects and feedback loops that result in large outcomes over time.
Within the industrial model, political and economic capability and resources were primarily invested in a limited
number of large organizations. Large effects within the global system were caused by large players. Analyzing the
system and modeling its future trajectory was a much simpler equation of understanding the objectives of these
primary stakeholders.
Today, technology enables small startups to disrupt large incumbents and restructure whole markets. Governments
spend billions on fighting small terrorist organizations and still fail. Individual hackers can manipulate information
systems that whole societies many depend upon. In this nonlinear world, small actors can have large effects whilst
large actors can have insignificant effects.
The writer Thomas Friedman calls the current era of globalization "3.0" describing how it has shrunk the world from
size small to size tiny and flattened the global economic playing field. This era of globalization is not characterized by
countries globalizing nor organizations globalizing as it has been in the past but by the individual. What is exciting and
somewhat frightening about this era is the degree to which it empowers and enables individuals to have a global
effect, both a constructive one but also a potentially destructive one, making the world highly nonlinear.
As Thomas Friedman puts it in a recent article "there’s never been a time when we need more people living by the
Golden Rule: Do unto others as you would have them do unto you. Because, in today’s world, more people can see
into you and do unto you than ever before. Otherwise, we’re going to end up with a “gotcha” society, lurching from
outrage to outrage, where in order to survive you’ll either have to disconnect or constantly censor yourself because
every careless act or utterance could ruin your life. Who wants to live that way?"
In all cases when dealing with dynamics that involve nonlinearity and interdependence it is required - for their own
benefit - that organizations invest not just in their development but that of the environment or joint context within
which they are involved. In environments of independence, organizations can focus their resources on their own
development or on bilateral/multilateral cooperation to get ahead. However, as the system becomes more nonlinear
there has to be an ever greater investment in what is external to the organization, that is to say, the whole
environment or context.
For example, with security previously a nation could adopt a strategy of securing itself by simply building up a large
army and ensuring its military capabilities were greater than others or by forming military alliance. Today when a few
terrorists can come from anywhere and cause massive damage, security has to switch to a more proactive
engagement outside of one's borders, looking at the whole social and economic context that creates terrorists, both in
developing nations but also in the disadvantaged suburbs of the developed nations. The same is true for the refugee
crisis, up to a certain point is might be worth investing in greater border security to prevent people entering a nation
but beyond a certain level of instability within the environment this will no longer be successful and it is required that
the nation look outside of its borders to the context or environmental conditions that are creating the instability and
deal with it in a systematic fashion.
Nonlinearity changes the dynamics - and thus the rules of the game - from focusing on the parts to having to look at
and invest in the whole context or environment. Not because this is a nice thing to do but because it is the only way
for any of the individual organizations to succeed. Information technology can be a key tool enabling this recognized
interdependence between what is going on in the environment of the organization and their internal interests through
greater information exchange and greater transparency. But also information technology offers us much greater
potential to create effective loosely coupled organizations outside of organizations making it much more viable to
tackle issues within the overall environment in a distributed fashion before they become focused critical issues, at
which time it may not be even possible to solve them.
Globalization is at its core the development of a global system of organization. Like all organization, if it is going to be
effective all the members have to perceive their joint interests in overall outcomes. Unlike other forms of organization,
though, globalization is a massive and heterogeneous "organization of organizations". To enable effective
coordination across such a system requires the development of open platforms that cross all those boundaries,
interconnect and enable all the members, and this is precisely what information technology and the internet today
gives us the capacity to do. The internet is a potential global solutions platform, a key tool for tackling the challenges
of globalization. Building online platforms should be seen as the central strategy in developing solutions to the
challenge of managing a global economy of billions of interdependent people. It is no accident that the rise of
globalization has gone hand in hand with the rise of information.
Globalization is a new type of organization, traditional thinking, methods, and technologies will not be sufficed for
managing it effectively. The successful management of this new kind of organization can only be achieved through
both new thinking and management approaches but also leveraging information technology to build global platforms
for self-organization and emergence.
Part 3:
Global Networks
Networks Overview
The fundamental "building block" of globalization is connectivity. Globalization is built out of people and organizations
choosing to form connections on a global level and out of this emerges a global pattern of organization with a
networked structure. Networks are the true structure and geometry of globalization. For what is globalization? It is a
mass of logistics networks, financial networks, transport networks, communication, migration and political networks. It
is out of all of these networks that we get some form of global organization.
But connectivity and networks operate in a very different type of geometry to the normal one that we are used to. We
are used to dealing with things that exist within a three-dimensional space that constrains then and forms the context
for their existence and operation. But connectivity is not like this it is defined by flow, the rate of exchange and
network structure. You can own a car and it matters how big it is, how fast and far it will go but you can't own the
internet. In networks what matters is the rate of flow you have access to and this is conditioned by where you are in
the network. The networks that form this new global system of organization come to create their own kind of geometry
or geography. One that is not defined by space in the traditional sense but by access.
During the Industrial Age, our available technologies promoted centralized systems of economic and political
organization based on a specific geography. The nation-state formed with a capital or largest city as the center of this
hierarchy. Space was structured around urban centers of industrial production, economic and political power that
were dependent upon and deeply connected with their hinterland. This created a territorial structure of organization to
nations, different local places that are served by one central place. This is the model of central places theory that tries
to define how big a city can be by the size of the number of people and wealth of its periphery.
This geography that forms our traditional conception of the nation creates a hierarchy out of concentric circles with a
center and periphery. This is what is called "the space of places" by the famous globalization theorist Manuel Castells
and it forms a coherent organizing principle to an industrial economy and our traditional conception of geography
based on the inherent physical constraints of location.
"For thousands of years, markets and hierarchies
were the only alternatives when it came to
aggregating human effort. Now there's a third
option: real time, distributed networks"
- Gary Hamel
The new technologies that enable global interconnectivity fundamentally transform this industrial model of geography,
in that they enable and facilitate - even greatly promote - global interconnectivity relative to their predecessors,
creating what is called the "space of flow". When one gets on an airplane and flies from London to Rome one does
not pass through England and France and Italy, one goes from one city hub to another city hub, hopping over the
space in between. The cities are hubs and what is in between is less important than the relationship between these
two.
These transport and communication links of the information age are like tubes that directly connect one city to
another with little reference to the hinterland of either. As the exchange along these linkages increases what were
once national capitals become global cities. They become shaped more and more by their network of connections to
other hubs in the world rather than to their traditional hinterland. This works to erode the traditional national
hierarchical geography and promote that of global networks and globalizations. At the same time, this restructuring
can also work to create new divides between metropolis - that are linked into global networks and defined by their
logic - and the logic of local rural areas the continue to operate along an industrial age model.
"Urbanization is this
opportunity for whole
societies to remake
themselves and if we shape
urbanization we can speed up
progress and direct it in ways
that could lead to substantial
bigger improvements in the
quality of life for billions of
people” - Paul Romer Prof NYU
Global Cities
In a world where access to global networks is central to success, and this access is enabled by technology,
infrastructure has become the tool of connectivity and global cities the locus of access to these networks and success
in the global economy. Global cities have risen hand in hand with globalization as locations for access into global
networks for multinational corporations, financial institutions, and individuals. As globalization unfolds and the global
economy becomes more interconnected with greater and greater flows of resources and exchange happening within
these networks then cities and even whole economies come to be increasingly defined by their role within global
networks.
Cities exist in different networks and become differentiated in relation to those networks instead of their traditional role
in supporting their hinterland and national economy. Singapore becomes a global financial center, Milan a fashion
capital, Bangalore a software center, Silicon Valley etc. Cities are the home of connectivity; connectivity is what they
do. Global cities have come to form the physical architecture to these global networks. Urbanization and globalization
have worked to convert cities into metropolitan areas and whole conglomerates of urban centers into metropolitan
corridors. Whereas previously we structured the global system around the static space of the nation-state, today
global cities are a central part of the geometry to globalization in that they give access - from the hinterland they
connect people and economies to global networks.
For many reasons both practical and theoretical, urban networks are proving particularly adapted to the changes
brought about by globalization and are emerging as a new post-nation state organizational principle aligned with the
pervasive proliferation of networked structures within postindustrial society. The world is moving into a more volatile,
uncertain, unpredictable and less orderly period. Within such a context agility and flexibility will become increasingly
central requirements for organizations to operate successfully and survive. Large macro-level closed hierarchical
organizational structures will increasingly appear less desirable and be rendered less effective. The emphasis will
shift to agility and adaptability in the face of fast pace change and volatility and this will change structures of
governance.
Global information based platforms will emerge as a new dominant organizational structure within society, economy,
and technology infrastructure. Space and locality will still matter, but they will be more on the local or global level
instead of national level. Global cities provide people with access to their physical demands within a compact locality,
while also linking them directly to global networks. They are an organizational structure that is adapted to the
emerging reality of the Information Age and globalization.
"Globalization will spread from the major metros to a network of two-tier metros.
With the rise of China and the other emerging markets and as economies around
the world have urbanized, they have redefined the classic notion of a global city. No
longer is the global economy driven by a select few major financial centers like New
York, London, and Tokyo. Today, members of a vast and complex network of cities
participate in international flows of goods, services, people, capital, and ideas, and
thus make distinctive contributions to global growth and opportunity”
-Brookings Institute Redefining Defining Global Cities Report
Decentralization
Previously, global systems of organization were primarily governed and run by a small group of western countries that
shared a common cultural and ideological consensus. This framework that continues to operate through the United
Nations, IMF and the G7 among others, is increasingly a misrepresentation though, as economic and political power
become increasingly decentralized and globally distributed. Coupled with this is the shift from what has been called a
G1 world with one dominant superpower to a G0 world where there is no one dominant node but a more complex
network of international relations between actors that have very heterogeneous economic, cultural and political
systems.
The industrial model was born and developed by a small elite of the world's population living in the western counties.
For centuries the world had a coherent center of military, economic, political and cultural dominance that was
somewhere in the North-Western hemisphere. A common western culture formed the foundations for a set of quasiglobal institutions, the Bretton Woods framework, while the US played the role of the world's policeman.
It was simple, everything seemed to lead in one direction to the most developed western nations, with centers like
London and then Paris and then New York forming the epicenter of this order to the global economy. It was a simple
model that told us clearly which way was up and which way was down, but for better or for worse this centuries-old
order to the global system is no more.
Having perfected the industrial model it has been duplicated around the world. First with Japan and South America,
then the Asian Tigers, now China and India and over the next 15 years we will double the world's middle class. Many
of this new global middle class will be in places most people know little about, like Chongqing, Ghaziabad or Lagos.
The global economy is scaling up rapidly and economic power is becoming distributed out. We can set up industrial
institutions, build skyscrapers and subways systems almost anywhere where finance flows. And we are doing this on
a new scale, cities are no long a few million people they are megacities with tens of millions, the counties involved are
not a 100 million people they can be a billion plus, the flow of goods an order of magnitude larger, capital markets an
order of magnitude larger and the pace of development is 10 times faster than that of the industrial revolution.
In this world of globalization there is no gentlemen's club with a common culture and political consensus, but a widely
divergent set of socio-cultural structures that remain divided. It is a new paradigm in global socio-political and
economic organization. Our traditional categories that served us well are disintegrating, as metropolitan areas are
becoming larger than nations.
A Changing Model
The form of hyper-globalization we saw during the past couple of decades has been somewhat top-down and
centralized, as exemplified by the famous “trickle-down" hypothesis. However, the model for globalization will become
more complex and distributed in the coming decades. Globalization was once driven almost exclusively by
governments, large multinational corporations, and major financial institutions but information technology is changing
the rules of the game. Today artisans, entrepreneurs, app developers, freelancers, small businesses, and even
individuals can participate directly on digital platforms with global reach. This stage in the process of globalization
deepens and broadens it by taking it out of the elite domain of large organizations and making it much more about the
average person connecting.
The 1990s form of globalization was characterized by the reduction in trade barriers and increases in trade flows.
Communication technology made it feasible to separate complex activities over distance, improvements in transport
systems and reduction in the discontinuities between state jurisdictions made outsourcing the buzzword of the
nineties. It was about the formation of global supply chains and the production and trade of tangible goods, but this
model is changing.
"If you look at the traditional metrics of globalization they are to do with global trade as a share
of global GDP or the growth of FDI which measures the financial flows across countries or
movement of people. But in the new model of globalization, you will need to look more at
information flows, data flows, services flows, bandwidth that is being shared between counties.
For the companies which are globalizing or are already globalized, they need to look at much
more country specific, cross country themes and that is how you should measure
globalization. I think the model of globalization has become a lot more complex, a lot more
complex... managing this complexity is going to be very important"
- Arindam Bhattacharya Boston Consulting Group
Even though much of the public discussion surrounding globalization remains on the narrow topic of trade surpluses
and deficits. This lens fails to take into account the new and more complex reality of a digitally connected global
economy. While the global goods trade and financial flows have leveled off since the Great Recession, cross-border
flows of data are rising fast. They now interconnect the world economy just as much as exchanges of traditional
manufactured goods did in the previous era.
The global economy is evolving very fast at present and globalization has already moved on from it pre-financial crisis
form. The world economy is in a profound macro transformation from tangible products to intangible services. After
millennia of agriculture and industrial goods dominating, today the global economy is rapidly becoming dominated by
the "dark matter" of services and information flows. This new form of globalization is becoming centered much more
on the flow of information and the rise of digital platforms as a new organizational paradigm to the global economy.
The world is big and has much social, cultural and economic heterogeneity. This was the case until very recently, with
the increase in global interconnectivity that we have seen in the past few decades a very significant but relatively
superficial set of global relations proliferated on top of this to create a layer of homogeneity and a widespread
perception of global integration when in fact this is far from the case. The data tells us that the world remains very
much defined by location and borders and that people over-perceive the depth and breadth of globalization.
This vision of the world as flat is one from the center of London, Tokyo or New York, the select focal points of
globalization. It is what we see when we sit in an airport or tune into the mass media. But this is not the only vision of
the world, the perspective of many people and places outside of the mainstream of globalization presents a very
different picture of a not so integrate world.
The DHL Global Connectedness Index supports the case for what they call the two laws of globalization. The socalled law of semi-globalization which means that international interactions, while non-negligible, are significantly less
intense than domestic interactions. And the second law of distance that international interactions are dampened by
the distance along cultural, administrative, and geographic dimensions.
"As of the end of 2015, some
3.2 billion people around the
world—accounting for 43.4
percent of the global
population—were online. The
expansion of the Internet,
combined with the
introduction of digital
platforms and other types of
digital tools, has opened a new
chapter in the story of
globalization”
- McKinsey Digital Globalization Report
Platform Economy
Whereas the globalization of the 90s developed by neoliberalism was a top-down model driven by organizations and
global cities, the globalization of today is driven by the global flow of information that creates a much more complex
and subtle form of globalization that is ever more decentralized geographically and complex in nature. The flow of
cross-border data is up 45 times over the past ten years. Trade flows relative to GDP have not increased since the
financial crisis, globalization is no longer driven by increasing exchange of goods but instead information. Today’s
more information based form of globalization is changing who can participate as the barriers to entry get lower and
lower. It is changing how business is done across borders, how fast competition can move, and where new
opportunities and benefits are flowing.
Even though developed nations, by and large, continue to be the leaders along many dimensions, the model to
globalization is getting ever more granular and distributed as access to the global market has opened to more
nations, to small businesses and startups, and to potentially anyone with internet connection. In a recent report from
The McKinsey Global Institute they found that countries at the periphery of the network of data flow stand to gain
even more than those at the center, which is in contrast to previous reports that they have published on the topic.
According to the report 86% of start-ups are producing their products for a global market, these companies are not
defining themselves in terms of national markets but instead from the outset, they think of themselves as global. With
the internet and companies like Google, Alibaba, and Facebook, small companies now have at their disposal a global
cloud computing, collaboration, e-commerce, and marketing infrastructure for their business, on-demand, at virtually
zero cost and almost infinitely scalable, this is a new game. Whereas previously corporations would have to build
their own IT infrastructure at great cost and time, this is now instantly available for anyone with an internet connection
and the know-how. As such success in the global economy becomes much more linked to technology know-how,
innovation and entrepreneurial drive rather than finance and capital assets.
"Today’s more digital form of globalization is changing who is participating, how
business is done across borders, how rapidly competition moves, and where the
economic benefits are flowing. Even though advanced economies in general
continue to be the leaders in most flows, the door has opened to more countries, to
small companies and startups, and to billions of individuals" - Mckinsey Digital Globalization
Report
This new model of globalization is much less capital-intensive. Rather than establishing a large physical presence in
many countries, some companies focus local offices on sales and marketing only. Those that deliver digital goods
and services can enter new international markets without establishing a physical presence at all. Globalization is no
longer a hunt for the cheapest labor, with automation and the shift into an information services economy, where
production can be reshored to be close to end demand and sources of high-skilled workers. Added to this 3D printing
and other distribute technology will in the not too distant future have an impact on the manufacturing and trade
landscape.
Ours in an age of networks and the global networks that proliferated with the previous round of globalization are
transforming to become richer and deeper and more distributed through the proliferation of information technology. As
we will discuss in the final section this has the potential to bypass the centralized hubs that previously dominated
globalization and to truly bring all into this global economic organization that is forming.
Part 4:
Economic
Development
Development Overview
The process of globalization holds out one of the most extraordinary opportunities of our age in its capacity to
duplicate or transfer technologies and institutions that have proven effective in one part of the planet to solving
problems and enabling rapid economic development in another. It offers the possibility for countries to rise out of
poverty by tapping into these global networks of finance, logistics, and expertise to grow their economy and
potentially lift millions out of poverty at an unprecedented speed.
This was first made most apparent with the rise of the Asian economies such as Taiwan, Hong Kong, and Singapore.
But with increased global connectivity the speed at which we can transfer and duplicate solutions to new locations is
ever increasing as we have seen more recently with the rise of cities like Dubai and Shenzhen. But along with this
capacity for regions of the world to connect into global networks and develop rapidly has come the flip side of
inequality and an ever more acute awareness of global inequalities in standards of living. The capacity for the world to
become ever more divided as some economies, organizations, and people develop rapidly while others do not have
the means to access and make use of this potential for development. Globalization is the development of a new level
of organization, unless there is a concerted effort for an inclusive process so that all have the means to develop, then
the disparity between those who avail of these new opportunities and those who don't will grow, and given the current
rate of change it will grow very quickly creating many socio-political problems along the way. The question remains
somewhat open, though, will globalization lead to greater divergence or greater convergence on aggregate, in the
long run? The answer to this will, of course, depend on how it is managed.
Global development is now primarily a function of enabling countries and their people to function productively in the
global economy and the network society. This means the ongoing development of information and trade networks
throughout the world. But it also requires the development of the human resources required to operate within these
networks. The new, informational model of development redefines the conditions for integrated growth in the world. In
fact, hundreds of millions of people have already benefited from the global flows within these networks and the
dynamism it has brought to the global economy. Large sections of India, China, Southeast Asia, the Middle East, and
some areas of Latin American are now integrated in a functional way into the global networked economy. However
many people are not connected to these networks as they do not have the resources required and they will be left
behind at a very fast pace creating an ever-widening inequality and an ever more explosive situation for all. Every
economic divide creates the potential for socio-political insecurity and fragility.
Convergence
Before the industrial revolution in Western Europe, the world was relatively equal in poverty, with industrialization
began what is called the "Great Divergence" in global economic conditions as developed nations became
astronomically wealthy relative to the developing. In the 1700s the richest country in the world was probably four
times wealthier than that of the poorest. By the end of the 20th century, the richest countries in the world are about
250 times richer than the poorest. Industrialization and colonialism lead to a great centralization of wealth in the
global economy centered around western nations. Wealth accumulated in the G7 developed nations because it was
difficult to move people, ideas, and factories.
But whereas industrial technologies such as the
stream engine worked to concentrate comparative
Global Income Distribution
advantages within a single nation leading to a great
divergence between nations, the information and
telecommunications technologies have worked in the
opposite direction, enabling the distribution of
capabilities and expertise globally, leading to a reconvergence. After five hundred years of western
ascendancy the gap has closed very rapidly over the
past 30 years. The poorer countries, especially in
Southeast Asia, have caught up. World income
inequality has declined. Through globalization we
have seen a global income distribution that was
divided into lumps - one high, one poor - start to
converge into one single lump with the emergence of
a global middle class. In essence, a shift from bipolar
to global middle class.
"The great divergence is everything that happens in
economic history from the late 1500s to the 1970s
and the story of the great convergence is everything
that happens after that. The great divergence means
the average American is 22 times richer than the
average Chinese by 1978. Today it is just 5 times,
that's the biggest story of economic history and it is
probably the biggest story of our lives”
- Niall Ferguson Author
Growth In Middle Class
Today we think we have something like 1.9 billion
middle-class consumers - someone with over ten
dollars purchasing power a day - by 2030 it is believed
that this will be 4.9 billion according to OECD figures. 3
billion more, to put this into a historical context from the
beginning of the Industrial Revolution in England to a
doubling of the GDP it was over a hundred and twenty
years and that was on the base of a population of 10
million people. From the beginning of the Industrial
Revolution in Germany, it took 60 years to double GDP
on the base of a population of 30 million. In China, it
took 12 years on the base of a population of one point
two billion, so that's 10 times as fast and that's 100
times as many people.
This convergence is very significant, we will soon be in
a world where the majority of people will have middleclass living standards providing depth and resilience to
the formation of a global socioeconomic organization. A
global middle-class with commonalities signals the true
formation of a global society and economy. This is
particularly so given the fact that this middle class is
increasingly spread around the world in East Asia,
India, Latin America and parts of Africa. A much greater
balance and distribution of power. The benefits of
globalization have shifted and are accruing to a middleclass in emerging markets, that's where the factories
are where the growth of professional services lies.
Ours is a time of change and massive change can lead
to massive inequality very quickly. Globalization can be
a powerful force for economic development but it can
also be a powerful force for inequality when it is not
inclusive. Globalization means the development of a
new level of organization and economies and societies
that are able to access those networks that form this
organization are able to tap into the resources flowing
through those networks and grow their economies
rapidly. But for them to be able to do that they have to
have the social, economic and technological
infrastructure in place, in the form of basic industrial
infrastructure, financial institutions and functioning
governmental institutions. Places like China that have
managed to do this have fared well enabling the rise in
material standards of living for hundreds of millions of
people. But many nations do not have that
infrastructure, the result is often the development of a
global elite and huge inequality.
For many countries that are simply natural resource exporters of energy or minerals this single linkage into the global
economy is an easy locus for control and exploitation by the elite with the result not being a trickle-down but growing
inequality. It is this exclusionary potential in globalization that people reject and that has been one of the primary
issues of contention for people around the world.
Due to their global nature much greater resources flow on these global networks than on the national level, again
creating a dislocation between those who can successfully perform some function within a global network - thus
attracting the resources on that network - and those that do not have the resources for value creation within one of
these networks. This has the potential to create an order of magnitude disparity between them, again working to
hollow out the traditional national structures as they become polarized between the global and the regional. A good
illustration of this is the extremely high cost of property in global cities like Hong Kong, Vancouver or central London,
where a global elite invest in local property driving prices up too high for locals.
The post 1990s period of hyper-globalization correlates to the emergence of a new form of inequality that we would
expect from such a dynamic. Rising national inequality in places like the US is driven significantly by changes in
technology but just as significantly through access, or lack of access, to global networks. We have seen much greater
national inequality in developed nations with the global elite becoming much wealthier. At the same time that the
national middle class has become hollowed out we have seen the rise of a new global middle class. A very significant
pattern as the middle class are central to any form of socio-economic cohesion, or at least any perceived form of
cohesion. When a society becomes too polarized it essentially ceases to function as a single unit, and this is part of
what is happening to developed nations and feeding through to political disruption.
At the same time that global networks and global cities have played a major role in the decline of the national middle
class in developed nations they have created a global middle class. The question of inequality can then be seen as a
question of understanding networks and how resources flow through them. Asking what is required to integrate
members and enable their equal access to the network? Finding new ways to channel financial capital and other
resources directly to the least developed.
"A major risk is backlash and that will take the form of what we see in Europe in
extremist parties gaining votes. It will be from some of the countries that don't
feel like they gain from globalization which might move towards protectionism.
It might be the complete collapse of global cooperation, that is the risk”
- Dani Rodrik Economist
Global Solutions Platforms
At the heart of globalization is the potential for huge benefit to all through cooperation. This global collaboration can
potentially enable very rapid economic development for any country. In a previous era we had to a certain extent a
scenario of many different nations developing different solutions within their own countries individually - thus having
each nation to a certain extent reinventing the wheel with the result being slow progress and a massive amount of
redundancy when taken as a whole.
With increased connectivity, a shared set of standards and cooperation this model can change to one where different
societies collaborate on the same generic solution on the global level which is then duplicated and customized for the
different nations. This is to a certain extent what has happened with industrialization. England first industrialized and
then other countries copied this and added their own innovations which then fed back for others to use. With the
previous round of globalization these industrial solutions got duplicated around the world.
The potential for this model - of creating once and duplicating many times - is vastly increased as we move into a
global information and services economy, particularly when we add distributed technologies into this mix. With
information technology the capacity to duplicate information and ideas is radically increased, likewise is the capacity
to move them to any place on the planet at the click of a button. When this is combined with a new set of distributed
technologies such as solar cells, wind turbines, blockchain, drones, 3D printing, a whole new model to economic
development starts to emerge, one that has the potential to be radically more efficient, more distributed and inclusive.
A model where global information platforms allow for mass collaboration in the development of solutions online - like
Wikipedia or Linux OS - and then the rapid duplication and deployment of these solutions virtually anywhere,
bypassing traditional centralized systems of organization to enable a bottom-up era of global economic development.
"This is the first time in history when
the most advanced technologies
have also gone to the poorest
counties. So in Africa many countries
have been able to skip the whole
fixed telephone lines and go straight
to the mobile phone, the same might
be true of renewables”
- Lord Anthony Giddens
Conclusion
This paper has been designed to present a fresh perspective on the issues of globalization. The central thesis of this
paper has been that globalization is ultimately about the formation of a global model of economic organization. One
that represents a new level of complexity to our systems of organization. It is precisely this new level of complexity
that renders much of our traditional management methods - that worked on the national level - ineffective when
dealing with globalization.
Globalization has to be seen as a new type of organization with new features. Instead of being about individual parts
it is about whole global systems, instead of independence it is about interdependence, it is a switch from borders and
boundaries to connections, from static command and control governance to evolutionary market mechanisms. This
change in the fundamental features of the organization we are trying to develop management solitons to, in turn,
requires a fundamental change in our management approach, one that works with these new characteristics instead
of against them.
An approach that is based around open systems, one that uses intelligent design to harness interdependencies
towards enabling collaboration. An approach that looks at connections and networks to ensure that resources are
flowing to all areas and that people have the tools and capacity to access them. The development of solutions to the
challenges of globalization will require new thinking and management methods but also new tools and information
technology will be the key enabler as we go into this next ear of digital global platforms.
A Complexity Labs Publication
Curated By Joss Colchester
Published 2018
www.complexitylabs.io