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Article 1
GLOBALISATION
~Essence and fundamentals~
1. Definition and overview
Globalisation is a process of interaction and integration [RESULT] among the people, companies, and
governments of different nations [ROLEPLAYERS], a process driven by international trade and
investment and aided by information and telecommunication technology [METHODS]. This process
impacts on the environment, on culture, on political systems, on economic development and prosperity,
and on human physical well-being in societies around the world. It’s about the ‘big picture’. The world
has seen a transformation from the “Industrial revolution” to the “Information revolution”. Distinguishing
the current wave of globalisation from earlier ones is that today globalisation is “faster, farther,
cheaper, and deeper.” Globalisation is about worldwide economic activity - about open markets,
competition and the free flow of goods, services, capital and knowledge. A critical question, however,
is whether the current global world economy is merely “more” international, or is it more than that (truly
global)? This is a very debatable issue.
Many refer to GLOBALISATION as being a multi-dimensional process. It’s true, but what does this
mean? It means that not only is globalisation driven by multiple forces (trade, investment and
technology), it is also guided by the ideologies and influences of various fields: economics (neoliberalism & capitalism), politics (democracy & Americanisation) and social sciences (humanism &
individualism) and judicial systems (human rights). Additionally, contemporary globalisation is in a
transitory phase, moving form postmodernism and internationalisation (1970s and 80s) to neopostmodernism and possibly globalism (1990s and 2000s). As a matter of great global concern,
globalisation is inscribed with contradictions: it offers opportunities & threats; wealth & poverty;
answers (tech.) & new questions (e.g. ethical); imperialism & globality. All these factors (and others)
are what makes globalisation a multi-dimentsional process. It is continually evolving and redefining
itself. It is an open-ended conception and might lead anywhere – depending on how all these factors
above will cause change in the world, and how people (humankind) will react to all this.
The new economy can be defined as the combination of three inter-related CHARACTERISTICS that
cannot function without each other. Firstly, it is an economy in which productivity and competitiveness
are based on knowledge and information. Knowledge and information have always been very
important but they are now more important than ever in the sense that new information and
communication technologies allow info and knowledge to be processed and distributed throughout the
entire realm of productive activity (eg. Internet). Thus, productivity is generated through knowledge
and information, powered by information technology.
Secondly, this new economy is a global economy. A global economy does NOT mean that the entire
world is one single economic system. In fact, in terms of jobs, most jobs are not global, they operate in
local, regional and national labour markets at the level of planning. But most jobs, if not all jobs, are
influenced by what happens in this global core of the economy. In more precise terms, the global
economy is that particular economy which has the capacity to work as a unit in real time, on a
planetary scale. This capacity refers fundamentally to its core activities, not to everything.
This capacity is, thirdly, technological, organisational and institutional. Technological capacity refers to
its ability to structure the entire planet through telecommunictions and informational systems (global
web of interconnectedness). It has organisational capacity because the firms and networks working in
this economy organise themselves to be active globally, both in terms of the supplies they receive and
the markets they look for. It is also based on institutional capacity which basically means deregulation
and liberalisation, which opens up the possibility for this economy to operate globally. In that sense
governments are the main globalisers by creating the institutions of the new economy throughout the
world. After that they lose control……. Given all this, it is essential to recognise that globalisation
entails a qualitative transformation of the international world economy.
2. Background
The world economic and political system is experiencing its most profound transformation since
emergence of the international economy in the seventeenth and eighteenth centuries. The end of the
Cold War, the collapse of the Soviet Union, a stagnant yet enormously rich Japan, the reunification of
Germany and its consequent return as the dominant power in Western Europe, and the rise of China
and Pacific Asia are influencing almost every aspect of international affairs. And more recently, the
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terrorist-attacks on 11 September 2001 (9/11) in Washington and New York, and also the Madrid
train-bombings (3/11) in 2004, and most recently, the Underground-bombings in the heart of London
on 7 July 2005 (7/7). Changes originating in earlier decades have also become more prominent; these
developments include the technological revolution associated with the computer and the information
economy and the redistribution of economic power from the industrialized West to the rapidly
industrializing and crisis-riven economies of Pacific Asia. The worldwide shift to greater reliance on the
MARKET in the management of economic affairs, and what many call the "retreat of the STATE," are
integrating national economies everywhere into a global economy of expanding trade and financial
flows. As the global economy is becoming highly integrated, some believe that markets have become,
or are becoming, the most important mechanism determining both domestic and international affairs.
This financial revolution has linked national economies closely to one another, significantly increased
the capital available for developing countries, and, in the case of the East Asian emerging markets,
accelerated economic development. However, as a large portion of these financial flows is short-term,
highly volatile, and speculative, international finance has become the most vulnerable and unstable
aspect of the global capitalist economy. The immense scale, velocity, and speculative nature of
financial movements across national borders have made governments more vulnerable to sudden
shifts in these movements. Governments can therefore easily fall prey to currency speculators.
Whereas for some, financial globalisation exemplifies the healthy and beneficial triumph of global
capitalism, for others the international financial system seems "out of control" and in need of improved
regulation. Although there is general agreement on the increased importance of the market and of
globalisation, there is intense controversy over the role of economic factors in the determination of
international economic affairs and over the likelihood of cooperation versus conflict.
Never before in history has CAPITALISM been the only economy on the planet, as it is now – to a
large extent. This, combined with global DEMOCRACY, highlights the growing similarity and
reconcilableness of economic and political systems around the world. In the years since the Second
World War, and especially during the past two decades, many governments have adopted free-market
economic systems, vastly increasing their own productive potential and creating myriad new
opportunities for international trade and investment. Governments have also negotiated dramatic
reductions in barriers to commerce (tariffs & quotas) and have established international agreements to
promote trade in goods, services, and investment. Technology has been the other principal driver of
globalisation. Advances in IT and telecommunications have dramatically transformed economic life.
Consumers, investors and business now have valuable new tools for identifying and pursuing
economic opportunities.
The end of the Cold War in 1989 and the collapse of the Soviet Union in 1991 sparked an international
debate on the nature of the "new world order" – a “new age/phase” George Bush proclaimed to be
“dawning” upon the world. Even a couple of years before this, Margaret Thatcher announced the
TINA-proclamation (There Is No Alternative). Both of these declarations refer to the growing speed
and intensity of globalisation on the economic, political and social fronts. Indeed, it seems like the
world is in for tremendous change and there seem to be no going back to a global system in which
each country is an island.
The undeniable global trends of integration, interaction and
interdependence are uniquely intertwined (with growing intensity) in the current global capitalist
system. Countries around the world realise more than ever that they need each other in order to
generate more economic growth and prosperity.
However, globalisation is deeply controversial as it means different things to different people. There’s
a gap between the ‘rich’ and the ‘poor’, the ‘haves’ and the ‘have nots’, the ‘winners’ and the ‘losers’,
those ‘included’ and those ‘excluded’. It is important to note that globalisation does not integrate
everybody. In fact, it currently excludes more people on the planet but at the same time, affects
everybody. Globalisation has stimulated entrepreneurship and empowered people and countries in a
position to participate in the process. This is not the case for the poorest nations. They need technical
and financial assistance to acquire the tools to join the process of globalisation. This requires a major
joint effort on their part and on the part of the international community. By all indications, the
international community needs to act to reduce the debt burden of the poorest countries and to
improve market access for their exports. Apparently,crucial to enabling the benefits of globalisation to
spread to all mankind, is the maintenance of peaceful conditions between and within sovereign states.
☞☞Some
‘scary’ stats:
☞☞
Some 3 billion people – or half of humanity – live on $2 per day.
The GDP of the poorest 48 nations (i.e. a quarter of the world's countries) is less than the
wealth of the world's three richest people combined.
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86% of the world’s resources are consumed by the world’s wealthiest 20%.
20% of the population in the developed nations, consume 86% of the world’s goods.
About 0.13% of the world’s population controlled 25% of the world’s assest in 2004.
51% of the world’s wealthiest bodies are corporations.
The number of children in the world living in poverty is about 1 billion (every second child).
The 48 poorest countries account for less than 0.4 of global exports.
Nearly a billion people entered the 21st century unable to read a book or sign their names.
SUMMARY OF THE GREAT GLOBALISATION DEBATE:
Sceptics
Concepts
Internationalisation not globalisation
Regionalisation
Power
The nation-state rules
Globalists
One world, shaped by highly extensive, intensive and rapid
flows, movements and networks
across regions and continents
Erosion of state sovereignty,
autonomy and legitimacy
Intergovernmentalism (IGOs)
Decline of nation-state
Rise of multilateralism
Culture
Resurgence of nationalism and
Emergence of global popular
culture
national identity
Erosion of fixed political identities
Hybridisation
Economy
Inequality
Development of regional blocs
Global informational capitalism
Triadisation
The transnational economy
New imperialism
A new global division of labour
Growing North-South divide
Growing inequality within and
across societies
Irreconcilable conflicts of interest
Erosion of old hierarchies
Order
International society of states
Multilayered global governance
Political conflict between states
inevitably persists
Global civil society
Global polity
International governance and
geopolitics
Communitarianism
Cosmopolitanism
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As indicated in the Summary on the previous page, the debate about globalisation stretches further
than just the mere question of ‘global equality’ and poverty. Although this is may be the ‘hot topic’ in
the debate, there are a number of other areas of concern which affect people around the world in
adverse ways – even those living in the same country. [1]People are concerned about the actual
meaning of globalisation and its implications, [2]they are concerned about the changing nature of
global governance and state sovereignty, [3]and also about the ‘global economic reality’ which is
‘brought upon’ by globalisation, [4]and then they also feel threatened in terms of their cultural identity.
All of these are different reactions to the forces of globalisation (METHODS) and all of them deserves
merit as they directly and indirectly affect people all over the world’s daily lives.
3. Theories
The two underlying ideologies supporting globalisation is NEOLIBERALISM and CONVERGENCE
THEORY. Firstly, neoliberalism is essentially about making trade between nations easier. It is about
freer movement of goods, resources and enterprises in a bid to always find cheaper resources, to
maximise profits and efficiency. To help accomplish this, neoliberalism requires the removal of various
controls deemed as barriers to free trade (eg. tariffs, regulations and capital controlls). The goal is to
be able to to allow the free market to naturally balance itself via the pressures of market demands; a
key to successful market-based economies. The main points of neoliberalism includes:
•
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The rule of the market – freedom for capital, goods and services, where the market is selfregulating allowing the “trickle down” notion of wealth distribution. It also includes the
deunionising of labor forces and removals of any impediments to capital mobility, such as
regulations. The freedom is from the state, or government.
Reducing public expenditure for social services, such as health and education, by the
government.
Deregulation, to allow market forces to act as a self-regulating mechanism.
Privatisation of public enterprise (from water to even the Internet).
Changing perceptions of public and community good to individualism and individual
responsibility.
Secondly, the theory of convergence stresses the growing homogeneity (similarity) of economic
activities, cultures, habits, life-styles and thinking-patterns of people around the world. It is the idea
that societies move toward a condition of similarity – that they converge in one or more respects – and
that differences among societies decrease over time. Some refer to it as a global conciousness that is
emerging; awakening people around the world to become more aware of the fact that everyone
(whether they know or choose it or not) is part of the “GLOBAL VILLAGE”. There are 4 basic FORCES
of convergence:
i.
Economic trade: Trade has been a force for convergence of disparate groups both
within and without territorial boundaries even among hunter-gatherer societies before
the rise of agriculture. Modern globalisation has now created worldwide bourgeois and
working classes sharing the same interests and conditions without national
distinctions, and has (to some degree) "deminished” the peculiar individuality of the
various nationalities. In addition, Foreign Direct Investment (FDI) plays a hugh role in
introducing new products and services to foreign communities (eg. McDonalds
opening up in Indonesia and SA, etc.).
ii.
Political consolidation: Political consolidation into nationality groups has constituted
the pinnacle of modern convergence. However, the next step can already be
ascertained in the slow increase in the number, scope and authority of international,
regional and global coalitions and institutions (such as the IMF, UN, Worldbank, and
WTO).
iii.
Technological development: In modern times, advances in transportation have
facilitated migration. Mass transportation and communications further break down
barriers and tend to tie disparate groups together. Via the Internet, for example,
people are introdused to other cultures and traditions and can even become part of
‘virtual communities’ through ‘chat-rooms’ where ideas could be shared. All this could
contribute to ‘global cultural adjustment’.
iv.
Religion/Spirituality: Even religion has been a force for convergence. Although well
aware that fundamentalist forces within modern religions are still influential and serve
to differentiate "true believers" from "others," today, "universalist" religions are forces
for convergence irrespective of national and cultural boundaries. The reason why
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religion (or spirituality) is of such significance is that it creates a ‘believe-system’ and
people generally act according to their ‘believe-systems’. In recent times greater
emphasis have been placed on common values which serves humanity arguably the
best – of which the most prominent example is human rights (eg. UN declaration on
Human Rights).
Convergence is a "process," not a "result." It can occur with respect to certain factors and in certain places
while remaining wholly absent from others.
However, many particular instances of divergence are still clearly evident.
4. International institutions of Global governance
A core part of understanding globalisation is the realisation that there are a number of different
institutions at work in the global environment which, from a governance point of view, serves as a
stimulus for global economic integration. These institutions forms part of the global web of
interconnection created to enhance economic and political cooperation between the countries of the
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world. They are among the most important authoritative roleplayers in the Global governance
structure. Note that most of these institutions are not directly linked to each other and may work
together on diverse grounds.
i.
Multilateral institutions:
In the aftermath of World War II in 1944, besides the United Nations (UN), the important
international economic organisations created at the conference held at Bretton Woods
were the International Monetary Fund (IMF) and the International Bank for Reconstruction
and Development (IBRD), now known as the World Bank. The IBRD-World Bank was
established to help finance the reconstruction of war-torn Europe and the development of
the poorer countries of the world. The IMF mandate was to regulate an international
monetary system based on convertible currencies to facilitate global trade while leaving
sovereign governments in charge of their own monetary, fiscal, and international
investment policies. Significantly, the effort to establish the International Trade
Organization (ITO) ended in failure, leaving the General Agreement on Tariffs and Trade
(GATT) as its surviving remnant. But all that was more than 50 years ago. The IMF has
now become the "point person" for efforts to "liberalize," or deregulate the international
economic system.
The World Trade Organisation (WTO) was created in 1995, by the passage of the
provisions of the "Uruguay Round" of the General Agreement on Tariffs and Trade
(GATT). Prior to the Uruguay Round, GATT focused on promoting world trade by
pressuring countries to reduce tariffs. But with the creation of the WTO, this corporateinspired agenda was significantly ratcheted up by targeting so-called "non-tariff barriers to
trade"—essentially any national or local protective legislation that might be construed as
impacting trade. The WTO is an international organization of 134 member countries that is
a forum for negotiating international trade agreements and the monitoring and regulating
body for enforcing agreements. The WTO is among the most powerful international bodies
on earth. It is rapidly assuming the role of global government, as 134 nation-states,
including the U.S., have ceded to its vast authority and powers. The WTO represents the
rules-based regime of the policy of economic globalisation. The central operating principal
of the WTO is that commercial interests should supersede all others.
In terms of the origin of all these Bretton Woods institutions (183 member countries), one
must remember that they were created to enhance economic coordination amongst states
as a way to ensure economic renewal, prosperity, and peace. This signified a prominent
shift in approach to global economic management, moving away from one which was
based on ad-hoc bilateral cooperative arrangements, in the form of gentlemen’s
agreements primarily amongst central banks in the major economies, to one which was
centred on a formalised multilateral system.
ii.
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The United Nations (UN):
The original central role envisaged for the UN in global economic affairs remains
unfulfilled. From the outset, major ‘multilateral’ developments in the economic sphere took
Global governance refers to a process of political and economic co-ordination among governments, intergovernmental and transnational agencies (both public and private), and multilateral institutions. It works towards
common purposes or collectively agreed goals, through making or implementing global or transnational rules,
and managing trans-border problems.
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place outside the UN framework. This has been an intentional move as the G7 (without
Russia during the Cold War) have preferred to work through mainly the Bretton Woods
institutions where they can extend full control. Although an institutions of immense
importance in international affairs, the UN agencies are viewed more as a fora where
opinion polls are taken on issues of global interest than as a fora where hard decisions are
made and implemented.
iii.
Inter-governmental organisations (IGOs) and NGOs:
In the last fifty years there has been a phenomenal expansion in the number, jurisdiction
and global impact of IGOs; that is, international bodies brought into being by formal
agreements between governments. At the global level there has been an explosive growth
in the number of IGOs – from 37 in 1909 to almost 300 in 1999 – whose activities mirror
the functional responsibilities of national government departments, embracing everything
from finance to flora and fauna. What distinguishes the major IGOs from more informal cooperative arrangements is usually that the former have a ‘cafeteria and a pension scheme’;
namely, they have some kind of autonomous legal personality. Moreover, membership of
such organisations has been increasing such that most now have almost universal
coverage. And in addition, there are clearly a multiplicity of high-level working groups of
officials, summits, conferences and congresses and much informal contact and coordination exists. For instance, a century ago, few international summits were held; today
there are in excess of 4 000 annually.
Alongside this global polity is a developing infrastructure of transnational civil society. The
plethora of Non-governmental Organisations (NGOs), transnational organisations (from
the International Chamber of Commerce to the Catholic Church), advocacy networks (from
the Women’s Movement to “Nazis on the Net”) and citizens’ groups play a significant role
in mobilising, organising, and exercising people-power across national boundaries. The
explosion of ‘citizen diplomacy’ constitutes a rudimentary transnational civil society, in
other words, a political and economic arena in which citizens and private interests
collaborate across borders to advance their mutual goals or to bring governments,
corporations and the formal institutions of global governance to account for their activities.
iv.
The Group of 8 (G8):
The G8 includes the USA, Japan, Germany, France, the UK, Italy, Canada and in
categorised terms Russia. It is often regarded as a kind of ‘global directorate’ since it
brings together the leaders of the world’s most economically (and militarily) powerful states
whose collective decisions or veto can have a critical influence on the global agenda and
the politics of global governance. It is considered to be a selective IGO with limited
membership. The G8 acts as the engine of current global economic governance, using its
influence to provide direction and to set the agenda for global governance, and is to some
degree, undermining the role of the UN in general. It has no secretariat, headquarters,
rules of operation nor legal/formal powers. Yet its actions have consequences on a global
level and therefore its legitimacy and representation is facing increasing challenge. Other
‘bodies’ of the G8 is the G77 or the G20 or the G15 where different “combinations” of the
developing countries are included in global decision-making processes.
The G8 has significant influence over setting the global agenda on economic policies,
and establishing the policy margins in which discussion will take place. The G8’s
influential position within global governance is reflected in its ability to create new bodies
(ie. FSF, G20) and to determine which existing bodies (usually the Bretton Woods
institutions and WTO) will deal with certain issues. Within these institutions, the agenda is
reinforced as the same countries hold the balance of power in them as in the G8.
5. A last word…
Economic globalisation is a process by which markets and production in different countries are
becoming increasingly interdependent due to the dynamics of trade in goods and services, and flows of
capital and technology. It is not a new phenomenon but the continuation of developments that have
been in train for some considerable time. Advances in communication and transportation technology,
COMBINED with free-market ideology, have given goods, services, and capital unprecedented
mobility. Human societies across the globe have established progressively closer contacts over many
centuries, but recently the pace has dramatically increased. Jet airplanes, cheap telephone service,
email, computers, huge ocean-going sailing vessels, instant capital flows, all these have made the
world more interdependent than ever. Multinational corporations (MNCs) manufacture products in
many countries and sell to consumers around the world. Northern countries want to open world
markets to their goods and take advantage of abundant, cheap labour in the South, policies often
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supported by Southern elites. They use international financial institutions and regional trade
agreements to compel poor countries to ‘integrate’ by reducing tariffs, privatising state enterprises, and
relaxing environmental and labour standards. The results have enlarged profits for investors but
offered pittances to labourers, provoding a strong backlash from civil society.
Money, technology and raw materials move ever more swiftly across national borders. Along with
products and finances, ideas and cultures circulate more freely. As a result, laws, economies, and
social movements are forming at the international level. Many economists, politicians, academics, and
journalists treat these trends as both inevitable and (on the whole) welcome. But for billions of the
world’s people, business-driven globalisation means uprooting old ways of life and threatening
livelihoods and cultures. This implies that intense political and economic disputes will continue over
globalisation’s meaning and its future direction.
QUESTIONS
1. In terms of the definition of globalisation and also the formation of the new global economy, firstly
explain what is meant by the ‘big picture’ and secondly, how all the different parts/components are
interrelated.
2. There seems to be some controversy about the global pro’s and con’s of globalisation. Explain the
validity of this debate in the context of current global changes. (Also, provide your own opinion).
3. In what ways do the theories of Neoliberalism and Convergence (all their dimensions) help create a
global framework within which the process of globalisation could function?
4. How would you qualify and describe the role of institutions of global governance in enhancing the
process of globalisation? Also, why do you think this (role) is important to them and to the rest of
the world?
5. Given the fact that globalisation is a process which makes the world more interdependent, what
implications could this have in terms of future changes in the global economy?
VRAE
1. In terme van die definisie van globalisering en ook die totstandkoming van die nuwe globale
ekonomie, verduidelik eerstens wat bedoel word met die ‘big picture’ en tweedens, hoe al die
verskillende dele/komponente interverwant is.
2. Dit wil voorkom asof daar ‘n mate van kontroversie bestaan rakende die globale voor- en nadele
van globalisering. Verduidelik die geldigheid van hierdie debat in die konteks van huidige globale
veranderinge. (Gee ook u eie mening.)
3. Op watter wyses help die teorieë van Neoliberalisme en “Convergence” (al hul dimensies) om ‘n
globale raamwerk te skep waarin die proses van globalisering kan funksioneer?
4. Hoe sou u die rol van globale bestuursinstellings kwalifiseer en beskryf met betrekking tot die
bevordering van die proses van globalisering? Voorts, hoekom dink u is hierdie (rol) so belangrik vir
hulle en vir die res van die wêreld?
5. Gegewe die feit dat globalisering ‘n proses is wat die wêreld meer interafhanklik maak, watter
implikasies kan dit inhou in terme van toekomstige veranderinge in die globale ekonomie?
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Article 2
GLOBALISATION
~Major driving forces~
1. Introduction
A key to understanding globalisation is being aware of the fact that it is a process which is DRIVEN by
a number of factors. Obviously there must be a reason why people from around the world see it as an
opportunity to cooperate and have contact with each other. Besides the social need to interact there is
also the economic need to make profit and experience financial gain on a win/win basis. Therefore, in
accomodating these needs, people have created (for centuries) “networks of interaction” which one
might call the driving forces of globalisation. More specifically these driving forces are mainly TRADE,
INVESTMENT and TECHNOLOGY. They are the main cogs in facilitating the process of globalisation
as they can be considered as both the cause and the result of globalisation. With the process of
globalisation finding momentum in the late nineteenth and twentieth century, more emphasise was
being placed on the role of trade, investment and technology in creating a global web of
interconnectedness. Given this, what is especially important here is understanding how these driving
forces are interrelated. That means: how they impact on each other and what their combined effect
is in creating a framework for global economic integration. The reason for this is because the main
factors that drive the process of economic integration exert not only independent influences but also
interact in important and complex ways.
2. Trade
A major dimension of globalisation is the transformation of international trade. Dating back from the
earliest centuries when tea-trade ‘routes’ were established and the trading activities of Marco Polo
seven centuries ago, trade was always seen as the FIRST move by mankind to seek opportunities
beyond its realm of habitual experience. International trade has continued to grow but it is affected
fundamentally by two elements or trends that one has to consider:
The first trend is the transformation of the COMPOSITION of international trade. Communities
and raw materials are increasingly displaced as sources of value by manufactured goods and
manufactured goods are being displaced by advanced services. And within manufactured
goods you have a growing discrepancy between low value added, low-tech manufactured
goods and high-value added, high-tech manufactured goods, which is the heart of
international trade today.
The second trend is that the developing countries’ SHARE of international trade has
increased quite substantially. Obviously the intertrade of the Organisation for Economic
Cooperation and Development (OECD) (or first world) countries still accounts for the bulk of
international trade. Actually at this point, OECD countries which have 19% of the world’s
population account for about 74% of the world’s total export of goods and services. So the
notion that we have a development of trade in the developing countries is true vis-á-vis the
importance of this trade in developing countries – but it’s not true that developing countries
now represent a substantial share of OECD countries.
It must be highlighted that the value that trade adds to a country fundamentally depends on what is
being traded, for whom, and at what price? If you trade cocoa and coffee and cotton against
microchips and advanced business services, you might not be in such a great business. Especially in
this regard, African and also South American countries are still way behind other developing countries
such as East Asia (not to mention the industrialised countries). Whereas African countries mainly
produce labour-intensive agricultural goods for exports, East Asia specialise in producing
manufactured goods and services, thereby earning much MORE with their exports.
Something different is the fact that there has been a major debate on whether international trade is
creating regions (trading blocs) in the world, such as the European Union or South America
(Mercusur), the United States, Canada and Mexico forming NAFTA, or Asian Pacific countries forming
the ANSEAN-group, or even SADC-countries; or whether on the contrary, it is creating a global
economy; or both. Well, to some degree it is neither. Instead, there are networks of trade. In other
words, the European Union, for example, is not simply a ‘trading bloc’ – it is one economy.
Remember, that’s what has changed. You have one central bank and one currency (the euro), you
have one economy (resulting from one monetary system).
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Returning to the discussion about the trends, economists traditionally tend to focus on trade in goods
and, to a lesser extent, services as the key mechanism for integrating economic activities across
countries and as a critical channel (but not the only important one) for transmitting disturbances
between national economies. Indeed, in the economic theory of international trade (specifically the
Hecksher-Ohlin theory), trade in goods is seen as a substitute for mobility of factors of production.
Under certain restricted conditions, which do not apply completely in practice, the theory says trade in
the outputs of production processes may be an essentially perfect substitute for mobility of factors, with
the result that factor returns are equalized internationally – i.e., factor price equalization is achieved –
without the necessity for factors to move internationally to achieve this equalization. If the conditions for
factor price equalization did apply, there would be no economic benefit from international mobility of
factors of production. Full economic efficiency could be achieved exclusively through trading outputs.
A key reason why the conditions for factor price equalization do not fully apply is because of barriers
to trade in outputs that effectively prevent the equalization of relative output prices at different
locations. These barriers take two forms: natural barriers to trade in the form of transportation costs
and also costs of information about product prices and availabilities at different locations; and artificial
barriers to trade arising from tariffs, quotas, and other public policy interventions.
In general, the higher are the barriers to trade, the lower will be the degree of international integration
through trade, and conversely. Thus, it is relevant to consider what has been happening to barriers to
trade as a means of assessing what has been happening to international economic integration through
this important channel. Gradually, as sailing vessels became larger and piracy and other hazards to
ocean-borne commerce were reduced, ocean-borne shipping costs did decline significantly and longerdistance trade expanded as a result. Nevertheless, well into the 1800s, transportation costs remained
an important natural barrier to global trade. The invention and development of steam-powered iron
th
ships during the second half of the 19 century further reduced the costs of ocean shipping. By the end
of the century, the cost of shipping a ton of cargo across the Atlantic was probably less than one-fifth of
what it had been at the start of the century. This REDUCTION in shipping costs contributed
importantly to the expansion of world trade and to the range of products participating in that trade.
Artificial barriers to trade in the form of import tariffs and other public policy interventions have a very
long history. No doubt, there has always been some interest in such measures as means of providing
protection to domestic producers from foreign competition. Raising revenue for the state probably
th
remained the most important reason for the imposition of tariffs until the 19 century. In the United
States, in particular, tariffs were generally the most important source of revenue for the federal
government up to World War I. Despite the continuing importance of revenue as a reason for imposing
tariffs, it appears that interest in these measures as a means of providing protection to domestic
producers increased as natural barriers to trade from transportation costs declined and as the
revolution in manufacturing technology created important new competitive threats to more traditional
and higher cost producers.
Economic globalisation has been propelled by political, economic, and technological developments.
The compression of time and space by advances in communications and transportation has greatly
reduced the costs of international commerce while both the industrialised and industrialising
economies have taken a number of initiatives to lower trade and investment barriers. Eight rounds of
multilateral trade negotiations under the General Agreement on Tariffs and Trade (GATT), the principal
forum for trade liberalisation, have significantly decreased trade barriers.
Since World War II, the world economy has enjoyed a remarkable era of prosperity that has spread
quite broadly, but NOT universally, across the globe. Over the past five decades, real world GDP has
risen at somewhat more than a 4% annual rate, with real GDP in developing countries (as a group)
growing in per capita terms at about the same pace as the industrial countries. The RESULT has been
that real living standards, as measured by real per capita GDP, have improved on average about
three-fold in just half a century. During this era of remarkable economic growth, world trade in goods
and services has expanded at nearly double the pace of world real GDP. As a result the volume of
world trade in goods and services (the sum of both exports and imports) rose from barely one-tenth of
world GDP in 1950 to about ⅓ of world GDP in 2000. By this measure – and by others as well – there
has indeed been an increase in the degree of global economic integration through trade in goods and
services (especially financial services) during the past half century.
The two fundamental factors that appear to have driven this increasing global economic integration
are ①continuing improvements in the technology of transportation (eg. air cargo and trucking and rail)
and ②communication (eg. voice, text, and data) and a very substantial, progressive reduction in
artificial barriers to international commerce resulting from public policy interventions. Costs of
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technology have dramatically declined in the past half century. The postwar era has lead to a
drastic reduction in artifical barriers to trade. During the past 20 years there has been a significant
MOVE by most economically important developing countries to liberalise their trade regimes. It is
possible that levels of protection for domestic manufacturing industries in especially industrial countries
have declined by as much as 90% since World War II. This is obviously an enormous accomplishment
in the direction of public POLICIES that seek to secure the benefits of a more efficiently integrated
world economy. However, the resort to voluntary export restraints and other non-tariff interventions in
more recent years is still a difficulty. Given this, the conclusion remains that the massive reduction in
artificial barriers to trade and the substantial, although quantitatively less significant, reduction in
natural barriers to trade in the postwar era contributed very importantly to increasing globalisation…☜
3. Investment
In understanding the supportive role of international investment with regards to globalisation, one first
needs to recognise the meaning and distinction between two primary types of international investment:
foreign direct investment (FDI) and international portfolio investment. Firstly, FDI means that a
company is spesifically opening up a subsidiary or branch in one or more countries. It implies the
investment of physical capital such as machinery, building material, etc. Examples of this is a factory
being opened up by a manufacturing company (like Toyota in Amanzimtoti) and a McDonald’s branch
in Bloemfontein, for instance. Usually in the case of FDI, the labour of the country invested in (host
country) is used in the production process. The second type of international investment is portfolio
investment. This occurs when investors from around the world invest in foreign capital markets. For
instance an American investor buying shares on our JSE and vice versa. Note that at the HEART of
the process of globalisation is the emergence of global financial markets, the integration of capital
markets and money markets, in a interlinked global financial system that works as a unit in real time.
The keen interest in FDI is part of a broader interest in the forces propelling the ongoing integration of
the world economy in the form of globalisation. Together with the more or less steady rise in the
world's trade-to-GDP ratio, the increased importance of foreign-owned production and distribution
facilities in most countries is cited as tangible evidence of globalisation. FDI is also viewed as a way of
increasing the efficiency with which the world's scarce resources are used. A recent and specific
example is the perceived role of FDI in efforts to stimulate economic growth in many of the world's
poorest countries. More importantly, FDI, very little of which currently flows to the poorest countries,
can be a source not just of badly needed capital, but also of new technology and intangibles such as
organisational and managerial skills, and marketing networks. FDI also affects trade flows through the
transfer of technology, as well as through its role as a stimulus to competition, innovation, savings and
capital formation. This then, helps with greater job creation and economic growth. Along with major
REFORMS in domestic policies and practices in the poorest countries, this is precisely what is needed
to turn-around an otherwise pessimistic outlook.
There are many reasons why FDI has become a much-discussed topic. One is the dramatic (fivefold)
increase in the annual global flow between 1985 and 1995, from around $60 billion to an estimated
$315 billion, and the resulting rise in its relative importance as a source of investment funds for most
countries. Stocks of FDI, in turn, have been growing and estimates suggest that the sales of foreign
affiliates of multinational corporations (MNCs) exceed the value of world trade in goods and services
(the latter was $6,100 billion in 1995).
A comparison of flows of FDI and flows of international portfolio investment for the period 1988-94
reveals that the average annual flows of the two types of international investment were more or less
equal during 1988-90, after which portfolio investment began three years of rapid growth that brought it
to a level ($630 billion in 1993) more than double that of FDI. A sharp slowdown in the growth in
portfolio investment in 1994 then narrowed the gap somewhat (data on portfolio investments for 1995
are not yet available). A secondary category of international financial flows, and one of particular
importance to many developing countries, is official development finance. In 1994, when the flow of
international portfolio investment was about $350 billion and the flow of FDI $230 billion (in both cases
to all destinations), the OECD countries (or rich countries) provided about $60 billion of official
development finance, of which about $50 billion went to developing countries and the remainder to the
transition economies.
In 1995, inflows of FDI into the non-OECD area totalled an estimated $112 billion. Of this,
approximately $65 billion went to Asia, and another $27 billion to Latin America (including Mexico). The
remaining $20 billion was divided almost equally between transition economies in Europe on the one
hand, and Africa and the Middle East on the other. Nearly one-third of the 20 leading host economies
for FDI during 1985-95 are developing economies. China is in fourth place, with Mexico, Singapore,
Malaysia, Argentina, Brazil and Hong Kong also on the list. The question remains: Where is Africa?
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With regards to international portfolio investment, capital markets in developing countries too are
becoming more closely integrated with markets in the rest of the world, although they have progressed
far less in that direction than the industrial countries. Though it is still way too early to speak of a
single, global capital market where most of world saving and wealth are auctioned to the highest bidder
and where a wide range of assets carry the same risk-adjusted expected return, the world is fast
moving in that direction. None of this, however, implies that authorities should be indifferent to the
potential prudential and systemic risks that may be associated with the trend toward global capital
market liberalisation and innovation. The message should NOT be to try and halt financial
liberalisation and the international integration of capital markets but rather to accompany that
liberalisation and integration WITH a strengthening of the supervisory framework that permits the
attendant risks to be properly priced and that encourages risk management programs to be upgraded.
IN SUM, the global interdependence of financial markets is the result of a number of developments:
1. The deregulation of financial markets and the liberalisation of cross-border transactions. The
global impact of the stockmarket crash in October 1987 in London and the collapse of the East
Asian Tigers in 1997 are good examples of this.
2. The existence of a technological infrastructure, including advanced telecommunications,
Internet, interactive information systems and powerful computers capable of high-speed
processing of models required to handle the complexity of transactions (eg. electronic trading).
By building electronic networks at the core of the global financial markets, we are in a process
in which savings are mobilised and invested constantly from anywhere to anywhere.
3. The connectedness results also from the nature of financial products such as derivatives.
Derivatives are synthetic securities that combine everything (products) that can be combined,
from any market to any market.
4. Market valuation firms such as Standard and Poor (S&P) or Moody’s are very powerful
elements for the integration of financial markets by establishing certain rules and certain
criteria, and enforcing them. For example, once Moody’s says something in the market, it
happens, not because that is the reality, but because Moody’s has said it.
5. The increasing role of international financial institutions such as the IMF make sure that the
criteria used by S&P and Moody’s actually work, as rules of the ‘game’. Thus, if you want to
be in the global ‘club’, you have to accept these rules or else not only will you (as a country)
not receive a loan, you will be judged and considered an unreliable market.
To this end, what we have is a new, exiting kind of system with countless opportunities and risks.
Global financial markets is now highly integrated, interdependent and at the same time, unstable in
their processes. If capital markets and currencies are interdependent, so are monetary policies and
interest rates, and therefore, so are economies everywhere. Capital flows become more global and
increasingly autonomous, at the same time, vis-á-vis the actual performance of the economies.
4. Technology
Some call it “the fifth factor of production”. Without technology the world would defitely not have been
the same place. Widespread fascination with technical ingenuity and growing capabilities has been a
consistent focus of attention: from the emergence of the ‘computer age’ in the 1950s and 60s,
through the ‘microchip revolution’ in the 1970s, to the Internet-based ‘superhighway’ and
‘information society’ of the 1980s and 90s, on to twenty-first century Internet-enabled ‘e-everything’
digitised globalisation. Reality is becoming more exotic than fantasy! Virtual companies, etc. The
Internet became the first truly GLOBAL knowledge network. For most people, the future that’s
emerging seems awesome and daunting all at the same time. Well, in fact we are heading toward an
extreme future where change occurs much faster than any of us realise – as if time itself is on fastforward. It’s time we start thinking “out of the box”.
It all STARTED with the “mathematication of logic” when the giant leap was made from the Industrial
Revolution to the Information Revolution. The future, coming closer every nanosecond, will
furthermore be marked by innovations that will startle even the most imaginative among us. Walking,
talking, smiling Robots. The elimination of most disease by genetic therapy. Virtual business that lives
on the Net. Digital TV that supports interaction. Virtual reality worlds that rival reality with their
authenticity. This millennium, spesifically, will be built upon technological miracles and they will seem
extreme to those of us who are alive now. This technology revolution will redefine how we live and
work, love and play, create and destroy. Until now, we have lived our lives marking time mostly by
personal changes – finishing high school, further studies, our first job, and marriage. No more. The
oncoming change catalysed by emerging technology will realign culture, reshape economies, turn
science upside down, release countless innovations, and transform every human endeavor (for good
or bad).
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The beginning stages of the technological revolution that the world is currently experiencing is
centered mainly around information and communication and transport technologies. At the same time
the Internet is the epitome and the most powerful medium of this revolution. Under the impulse of
new technologies and flexible forms of organisation and management we are witnessing the formation
of a new economy, characterised by rising productivity growth and global competition. Technology is
behind key transitions in the very foundations of our society. The prospects are for a acceleration of
this economic dynamism in core economies as well as in selected areas of the developing world.
As an essential dimension of globalisation, the selective globalisation of science and technology, is
the critical factor that is “fanning the globalisation-flame”. They are absolutely critical components of
especially the production process and, not only that, of the capacity for development of societies as
well. Technology are the MAIN CONTRIBUTOR to the global web of interconnection as it fascilitates
the architecture of the process of globalisation. Without advancement in technology the costs of trade
would not be able to decrease and international investment not be able to take place in real time on a
planetary scale. Technology are globally integrated in the sense that all major research centres have
connections to developing countries. In this regard two things need to be mentioned: ①…There is an
extraordinary concentration of science and technology and particularly information technology,
research and development, in the leading economies. ②…While there is a high degree of
concentration in specific research centres, their networks are interactive and therefore you have the
ability to diffuse technological capacity to a number of developing countries, while at the same time
being connected to the centres of information processing. A good example is Silicon Valley.
A key CHARACTERISTIC of the new global economy is that it is organised in networks
(interconnected nodes). These networks are decentralised networks that are within the large
corporations. Small and medium businesses connect to each other, forming networks, and these small
networks connect to these decentralised networks of the corporation, forming a network of networks –
and supported by technology. Consequently, increasingly many of these networking operations are
online, in terms of management, selling and production. People from around the world are fascinated
by e-commerce over the Internet. Interestingly, 80% of economic transactions over the Internet are
currently business to business, not business to consumers. The real essence of what’s happening
on the business side is that the actual production system is being produced online.
Accordingly, the new technological basis of the global economy is the Internet. The Internet is not
simply one more technology. Many consider it to be the equivalent of electricity and of the electrical
engine of industrialisation. With the emergence of the ‘online market’, it must be remembered that the
application of science and technology to production processes and products toward the end of the
nineteenth century, even then, provided an irresistible motive for the geographic expansion of markets.
However, at this point in time, it is the cost and risk of technology rather than the need for larger
production runs that are the primary motivation for the transnational integration of markets. Over
time this is expected to change as technology will in all probability prove itself more reliable and costeffective. Interestingly, technologies have become so complex and rapidly changing that even industry
leaders cannot master them internally. In light of this, the world economy is increasingly electronically
integrated and digital. Networks, especially transnational networks, are creatures of the information
age held together by information technology. Computers, facsimile machines, high-resolution
monitors, and the Internet are the “threads” of the global web of the emerging electronically networked
world economy.
More important, markets are migrating from geographic space to cyberspace as e-commerce grows in
both the business-to-business and the business-to-consumer spheres. Finally, physical products are
becoming digital services, data transmitted electronically over the Internet. We are entering an era in
which information in the form of electronic cash (or cashless society) will be routinely exchanged for
information in the form of a digital book, symphony, photograph, or computer program, etc. In short,
we face a DUAL REVOLUTION: the migration of markets from geographic space to cyberspace, and
the morphing of products from real “atoms” to digital “bits”. Both render geographically defined national
markets and economic governance rooted in territorial jurisdiction problematic. At the advent of the
st
21 century, national markets are losing meaning as the discrete units of the world economy, as the
scale of technology is fusing them into a larger whole. The transition to electronic networks and to
cyberspace also affects the structure of the world economy. Networks are inherently interdependent,
diminish all sorts of boundaries, and are constructed relationally, so that the concept of a center may
lose meaning.
Electronic information technology facilitates the integration of geographically dispersed operations and
allows networked coordination to replace ownership and hierarchy as a primary mode of control. One
result is the emergence of flexible networks replacing production by a single large firm. Hierarchical,
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vertically integrated transnational firms have “fragmented” into “diverse” networks reintegrated
through information technology. And in addition, the trend has already started that hierarchical
enterprises are being replaced by alliance capitalism. In this regard, one must remember that
networks are a manifestation of the bluring of the boundary between the factory and the marketplace
and that, especially global networks, are both real and virtual. The emergence of networks as a basic
mode of organisation of international economic transactions may be of more profound importance than
increases in the scale of technology.
☞☞☞In
☞☞☞ turning to the impact of telecommunications and transportation technology, the crucial
element to recognise is the fact that combined impact of technology on all fronts is what is making the
running of the globalisation-process more smoothly. Technology seems to be the answer to
everyone’s (including individuals, the corporate sector and the government) operational headaches –
and in some ways also the cause as network failures in many cases disrupt people’s productivity.
However, almost everyone will agree that the way to the future is via technological advancement.
For communications, the situation is particularly promising due to the ongoing technological
revolution. COSTS of communication, domestic and international, have fallen rapidly; and these
declines also seem likely to continue. International trade surely benefits from improvements in
communications. The areas likely to benefit the most are those that rely particularly heavily on
communications, with financial services being an important example. The rapid reductions in the costs
of storing, accessing, analyzing, and communicating information are both dramatically reducing the
costs of producing virtually all existing forms of financial services and creating new products and
services which would have been prohibitively expensive with older technologies. As a result of these
technological advances, the costs of processing and communicating all forms of information have been
all declining very rapidly. Of specific importance is the fact that most of these changes have also been
taking place at the international level in response to the principal driving force – technology. This
implies that we have strong reason to expect an increasing degree of capital market integration in the
future. Information and communications costs are a natural barrier to integration of capital markets
and financial services – just as transportation costs are for trade in physical goods. As these costs
come down, integration should increase.
Thus, the communication of economically relevant information and technology is an important
mechanism through which economic activities in different parts of the world affect each other. The
recent and continuing advances in communications promise to have profound effects on innovation
across a very broad spectrum and on a global scale. We are seeing the beginnings of this now.
Combined with advancement in all forms of technology, it promises to be a profound force driving
global economic integration in the future.
Given this, the real impact of technology lies in “tech convergence”. The convergence of leading-edge
technology will be the single most powerful driver of change for the next 100 years. As all userfriendly
technologies are becoming more digital and wireless in its use, more connected to the web and more
in tune with satelite connections, they are converging in order to be used simultaneously and without
‘distraction’. This will be the trend of the future and one will see more and more the use of, for
instance, cellphones for online purposes, household equipment such as refrigerators connected to the
web and also online-orientated ‘virtual reality’ applications. Half of all the products that will be sold in
the next 5 years haven’t even been invented yet. DNA databases are doubling every 8 months.
Bandwidth is doubling every 10 months. E-commerce sales are growing by 100 percent every 6
months. The Net is doubling every 90 days. This is just a taste of the oncoming, rapid changes.
The power-shift that technology is causing in our social and industrial landscape is redefining the
underlying assumptions of business, commerce and culture. This shift will effectively realign economic
and social boundaries. Traditional systems, from the distribution of goods to the nature of
entertainment to the very economics of supply and demand, will be unrecognizable in the 21st Century.
In light of this, it is important to assess what’s at stake for businesses, as well as how the quality of
our lives will be affected. Learning what the new rules of change are, will provide an essential EDGE
for competitiveness in the future. Having the wrong worldview about the impact of leading-edge
technology would be disastrous for any business leader – the price paid for his/her “awareness-gap”.
Of vital importance for any person looking to survive all this change, on a business or personal level, is
designing a viable strategy. Becoming aware of all the cool new technologies, the impact on
customers, and the emerging business models is all grist for the mill. We need to be able to use all
this radical thinking about what’s coming to formulate a strategy to apply to our business and our lives.
A holistic view of the interconnectedness among the new technologies, markets and customers will
help build this strategy. That perception is fundamental to using technology to leverage future
opportunities in this rapidly shifting global economy. In the end, we are all architects of tomorrow.
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A new development policy based on technological innovation and diffusion seems to be the
appropriate tool for development in the Information Age. All this sounds like techno-fantasy, when the
pressing problems are hunger, sanitation, epidemics, basic stuff. In fact, it is through technology-led
development that we can leap-frog stages of the development process to provide efficiently for human
needs, because only productivity, competitiveness, educated labour and efficient management can
overcome, in a stable pattern of economic growth, the obstacles that exist today for countries to
engage in a sustainable development process.
Clearly, the prospect is that the process of GLOBALISATION – which is being driven by essentially
irresistible forces of technological advance – will take place through voluntary means. People around
the world will decide to participate – through trade, through movements of people and capital, and
through accessing information and taking advantage of new technologies – because they see the
benefit to them of such participation. Without a doubt, technology's promise is here today and will
march forward. It will have widespread effects across the globe. Yet, the technology revolution will not
be uniform in its effect and will play out differently on the global stage. There will be no turning back,
however, since some societies will avail themselves of the revolution, and globalisation will thus
change the environment in which each society lives.
QUESTIONS
1. Explain how the type of changes that occurred in international trade over time (especially in the
last 50 years) contributed to the process of globalisation, and to people and companies’ awareness of
the fact that the world is greater (with more opportunities) than only the country where they live.
2. Given the global influence of international trade, give your opinion on (the debate) whether it is
fair, just and beneficial to a country if governments from around the world interfere in intl. trade
through tariffs, quotas and non-tariff barriers to trade.
3. Do you think that the extent to which FDI increased over the last couple of decades has placed
MNCs in a much stronger position (how, why)? And do you think that this trend is good for the
global economy as a whole or only for certain countries – or is it not good at all?
4. Given the massive escalation of technological usage, do you think that the ‘Technological
revolution’ is providing the world with more problems or more solutions – why?
5. Give a thorough explanation on how the three driving forces of trade, investment and technology
are interrelated; and how their combined impact facilitates increased globalisation.
VRAE
1. Verduidelik hoe die tipes veranderinge wat oor tyd plaasgevind het (veral in die laaste 50 jaar)
bygedra het tot die proses van globalisering, en tot mense en maatskappye se bewustheid van die feit
dat die wêreld groter is (met meer geleenthede) as slegs die land waar hulle bly.
2. Gegewe die global invloed van internasionale handel, gee jou opinie oor (die debat) of die regverdig,
billik en voordelig is vir ‘n land as owerhede van reg oor die wêreld inmeng in internas. handel d.m.v
tariewe, kwotas en nie-tarief hindernisse tot handel.
3. Dink u dat die mate waarin FDI toegeneem het oor die afgelope paar dekades MNCs in ‘n baie
sterker posisie geplaas het (hoe, hoekom)? En dink u dat hierdie tendens goed is vir die globale
ekonomie of net vir sekere lande – of glad nie goed is nie?
4. Gegewe die massiewe eskalasie van die gebruik van tegnologie, dink u dat die ‘Tegnologie revolusie’
die wêreld van meer probleme of meer oplossings voorsien – hoekom?
5. Gee ‘n deeglike verduideliking van hoe die drie dryfkragte van handel, investering en tegnologie
interverwant is aan mekaar; en hoe hul gekombineerde impak toenemende globalisering fasiliteer.
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Article 3
GLOBALISATION
~Key roleplayers~
1. Introduction
Globalisation is both affected and guided by specific roleplayers. Among many participants in the
process there are three categories that stand out: individuals, governments and multinational
corporations (MNCs). People around the world are starting to become aware of the fact that they are
part of a larger whole. In almost all spheres of life, the realisation that the world is a set of related
systems, is beginning to dawn upon the human race. Different aspects of modern society is
interconnected in a much higher degree than was the case 50 or 60 years ago. What we are
witnessing is a profound shift in the way individuals, governments and MNCs participate in the global
economy. As markets increase (globally) individuals are starting to make use of consumption-options
in foreign countries – for instance, the options provided by e-commerce. Governments are realising
that their ability to control/monitor the economic activities of their citizens have weakened as the scale
of cross-border transactions are increasing by the minute. MNCs increasingly make use of “global
opportunities” by both creating new markets in foreign countries and utilising cheaper resources
abroad in order to give them a competitive edge. How the roles of these players change over the next
decade or two will determine to what extent globalisation is connecting the world into a “global village”.
2. Individuals
We live in a world where the speed of almost everything is increasing – from mainstream production to
the collection and processing of data to millions of everyday electronic transactions, etc. The use of
technologies such as the Internet, cellphones, debit and credit cards, smart cards, digital satelite
connections, etc., are becoming as normal as breathing. The present-day world social order is
considered to be in a ‘transitory phase’ evolving towards a higher-level system of organisation and
structural complexity. The global technology revolution is seen as the primary driving force behind
these changes. When changes improves people’s quality of life, it is always good, but it also poses
positive and negative concerns in terms of what direction the world is heading and how it is affecting
the fabric of society (people’s quality of life). From an economic point of view this is very important
because it affects people’s spending patterns (the individual as a consumer) which then impacts on
production cycles. If one considers the impact of e-commerce for instance, you realise that markets
are rapidly expanding globally and that consumers will make use of any technology in order to meet
their needs – at the lowest price of course. Now more than ever: The CONSUMER is king!
A central question is therefore being raised: Are we seeing a ‘new social order’ emerging? With a
younger generation (the leaders of tomorrow) more “in tune” with the latest technology-applications,
this does seem to be the case. The question is just: What is the extent of this new social order that
seem to be emerging? Well, only time will tell. Although the individual is just one roleplayer in the
global economy, he is the pivot around which all other roleplayers such as governments and
companies operate. Of course, when one speak of individuals one must keep in mind that people
(individuals) from around the world is affected differently by global forces. In this case one can think
of the difference in living conditions between a person living in the USA and someone living in a poor
African country. While the American’s main concern is being able to buy online (luxury), the African’s
main concern might be getting a drink of water for the day (survival).
One change which is beginning to stand out in this “computer age” is the WAY people interact.
Whereas television has become entertainment for profit, the Internet as an electronic forum through
which public opinion can be regenerated as citizens engange in rational argument. Whenever
computer mediated communication (CMC) becomes available to people, virtual communities emerge,
reflecting ‘a hunger for community’ in the context of the demise of the public sphere in people’s lives.
The Internet allows open, interactive, access – as opposed to the one-to-many nature of broadcasting
systems. On the Net one can have truly global electronic communities, and new forms of participation,
community and democracy. The Internet can reduce travel, save time, and extend the geography of
human community as a substitute for face-to-face communication, or permit communication among
people who might never have an opportunity to meet face-to-face. It is expected that in 2020 the
majority of the world may be connected to the ‘planetary nervous system’, making cyberspace an
unprecedented medium for civilisation
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In Korea, for instance, Samsung is already starting to implement the use of a ‘fully digitilised house’.
With this technology all elements of the home electronic environment will be part of a network which is
linked up to the home PC. Entertainment and information is two areas where the potential of this new
technology will especially come to the fore. There is already a number of products which could, with
the help of wireless technology, ‘stream’ information from a home PC to the TV-set and MP3 or CD
player. With the new technology this content/data could be ‘streamed’ to a mobile device. And also,
as multimedia hand-devices develop with the growing high-resolution screens and advanced videofunctionality, this portable electronic devices will be able to use the advantages of high-speed 3Gdigital cordless networks. This includes technology such as CDMA2000 EV-DO and EV-DV which can
allow bandwiths of up to three megabite per second.
A further ‘application’ of the information provided by IT is its use in assisting to make good investment
decisions. Investment is certainly one of the primary decisions continually being made by individuals.
An astonishing trend the past 10 years is the growth in the scale and complexity of domestic and
specifically international investment. An integral part of making an investment decision is having
enough information available in terms of both quantity and quality. The Internet has brought a whole
new dimension in this regard – especially to the individual INVESTOR (the Information Age). On an
unprecedented scale, investors in these modern times have access to detailed analytical information
regarding companies, their stock-returns, their products and even their directors. With the Internet and
personal compunters (PCs) at any individual’s disposal, a person can inexpensively make use of
complex programs and investment tools which analyses stock-prices and –options, bond-prices and
also stock exchanges around the world on a 24 hour basis. An investor can, via the Internet, invest in
companies which he/she has never seen before and might be on the other side of the globe while
having information regarding each and every activity in that company.
Another primary economic function of most individuals is their participation in the WORKFORCE.
Companies and other working institutions are placing more and more emphasise on technology and
the global marketplace. In this era of globalisation it has become their primary focus in order to gain
a competitive edge over their competitors. Undoubtedly, the overall workforce already needs to
contribute and understand an increasingly interdisciplinary activity. Just as computer skills are
becoming more important today, a basic capability to work with or use new materials and processes
involving biology and micro/nanosystems will likely be required. Not only will new skills and tools be
needed, but already a fundamental paradigm shift in the way people work and live are starting to take
place because of the technology revolution. The requirements for participating in the generation of
products and services are changing. As technology becomes more interdisciplinary, education and
training must change to enable workers to participate. This is why education should emphasise a larger
component of breadth across disciplines to give at least a fundamental understanding of multiple
disciplines. Businesses will likely need to spend more resources on continued training across their
workforce.
For the individual, his role as consumer, investor and worker is under pressure to adapt to a new
environment in which rapid changes are at the order of the day. This is the case not just for people
living in First World countries but also for those living in the Third World. Because if they don’t change
and adapt, they will be part of the growing gap between them and the advanced economies. They will
stagnate (economically) and be left behind. Managing change in both people’s personal lives and
their professional lives has become the crucial factor in determining how successful people adjust to
the pace of change in this world of “turbo-capitalism”.
3. Governments
Globalisation undoubtedly has some serious implications for governments. But interestingly enough,
the role of governments in this process is kind of contradicting in the sense that they both ‘lead’ and
‘pay the price’ for globalisation. In first looking at how they ‘pay the price’, the central issue is the
impact of globalisation on the sovereignty and autonomy of nation-states. The sovereign power and
autonomy of national governments is being redefined; the sovereignty and autonomy of governments
is locked into a multilayered system of governance. In this system, states no longer use sovereignty
simply as a legal claim to supreme power but, rather, as a resource to be drawn upon in negotiations
with transnational and international agencies and forces. States deploy their sovereignty and
autonomy as ‘bargaining chips’ in multilateral and transnational negotiations, as they collaborate and
co-ordinate actions in shifting regional and global networks (shared governance). The right of most
states to rule within circumscribed territories – their sovereignty – is not on the edge of collapse;
however, the practical nature of this entitlement – the actual capacity of states to rule – is changing its
shape and form. What we are witnessing is a form of asymmetry of geographic scope that is emerging
as economic units (markets) expand in space well beyond the limits of political units (national
territories governed by nation-states).
17
In this account, globalisation involves a historic shift in power away from national governments and
national electorates toward more complex systems of regional and global governance. As a result,
political and economic decision-making (through policies) as becoming more transnational and global;
and the regional and global deployment of political power is becoming a routine feature of a more
uncertain and unruly world. Clearly, the role, power, authority and function of the national government
is being transformed by globalisation. A power shift is underway as political authority and power are
diffused above, below and alongside the state. A NEW kind of state is slowly emerging and, with it, a
new public philosophy of governance which recognises the changed global context of political and
economic action. The command and control state of the past is being displaced by the reflexive or
network state. The reflexive state seeks to reconstitute its power (in terms of strategic co-ordination
of resources and networks of power) at the intersection of global, regional, transnational and local
systems of rule and governance. In this context, it makes more sense to speak about the
transformation or reconfiguration of state power than its erosion.
In this sense, the government can (in this globalising world) be viewed as a “space of flows”. The
internationalisation of government activity and the transnationalisation of societies imply that power
(political and economic) and politics flow through, across and around territorial boundaries. Economic
and political activity and the ‘business of governing’ have become stretched across frontiers such that
a distinctive form of global politics is emerging. In the ‘global neighbourhood’ all politics, understood as
the pursuit of power and justice, is ultimately global politics. The same applies to economics where
economic policy-making is becoming increasingly global in focus and more regional by implication.
However, it must still be remembered that, at a minimum, states will still be responsible for any number
of critical functions: for the welfare of their citizens, for basic social and physical infrastructure, and for
insuring economic viability, albeit in a very different context.
When one briefly considers, in the second instance, government’s role in ‘leading’ the globalisation
process, it becomes clear that it’s almost like a two edged sword as the leader always pays the highest
price. As the most generally accepted ‘authoritative body’ in the global environment, it makes sense
that if globalisation was something most countries wanted to achieve for the “common good” of all,
then governments was (and is) the most equipped ‘entity’ to initiate the process. They are arguably the
main GLOBALISERS. Although there are very powerful multilateral intitutions (like the IMF, Worldbank
and WTO) and very strong MNCs operating around the world, it is nation-states that holds the key for
the world to become truly global. It is they that must take the lead for global cooperation and
integration, and allow their economies to be opened up for international economic and political activity.
If they decide to ‘close’ their economies or not to take part in multilateral negotiations, no-one can stop
them from doing so – they make their own decisions. At least this was the case before so many
international agreements were established. However, especially with the growing importance of
capitalism and democracy, the world is now structured in such a way that this ‘closed’ approach
would be very detrimental to a country because they will pay the price for being excluded from the rest
of the world. Clearly, no country is an (isolated) island anymore.
4. Multinational companies (MNCs)
Among the 100 largest economies in the world, 52 of them are companies. Despite the limited nature
of corporate globalisation, MNCs and FDI are very important features of the global economy. The
increasing importance of MNCs has profoundly altered the structure and functioning of the global
economy. These giant firms and their global strategies have become major determinants of trade flows
and of the location of industries and other economic activities around the world. Most of their
investment is in capital-intensive and technology-intensive sectors. These firms have become central
in the expansion of technology flows to both industrialised and industrialising economies. As a
consequence, multinational firms have become extremely important in determining the economic,
political, and social welfare of many nations. Controlling much of the world's investment capital,
technology, and access to global markets, such firms have become major players NOT ONLY in
international economics, but in political affairs as well.
An important question to ask is: Why do firms expend the effort required to invest abroad, rather than
staying home and producing for export and/or licensing their technology to foreign companies?
Researchers have examined this issue for almost 40 years. There is now a degree of consensus that
an MNC typically is the outcome of three interacting circumstances. FIRST, the firm owns assets that
can be profitably exploited on a comparatively large scale, including intellectual property (such as
technology and brand names), organisational and managerial skills, and marketing networks. The
‘technology-asset’, especially, can be seen as a driving agent for the internationalisation of the
operations of such firms. The technology may center on products or on processes. However, the real
advantage possessed by certain firms may not be a given technology, but rather the capacity to
consistently innovate such technologies. SECOND, it is more profitable for the production to take
place in different countries than to produce in and export from the home country exclusively. The
18
rationale behind this is that in order to be competitive in foreign markets, the service provider must
have a physical presence in those markets. Indeed, the fact is that most cross-border trade in services
has been propelled by FDI. Whereas with manufactured goods, FDI often follows trade, in services it is
more often the other way around. THIRD, the potential profits from "internalising" the exploitation of
the assets are greater than from licensing the assets to foreign firms and are sufficient to make it
worthwhile for the firm to incur the added costs of managing a large, geographically dispersed
organisation.
What really has happened in the world in the last twenty years is that the core of production of goods
and services in every sector has been internationalised through transnational networks of production,
distribution and management – the result of MNC-activities in the global economy. MNCs and their
ancillary networks only employ a fraction of the global labour force but they account for 30% of global
GDP and ⅔ of international trade, of which, about half is trade within the same corporation and its
ancillary networks. In other words, what we consider to be internationalisation of the economy through
trade is in fact the consequence of the internationalisation of the production process through
networking. If one includes FDI, the picture becomes even clearer. There are mainly two forms of FDI
when discussing MNCs. Firstly, vertical FDI. This is where a firm locates different stages of production
in different countries. These types of investment are typically seen as the result of differences across
countries in input costs. An MNC involved in an extractive industry, where the endowment of natural
resources is concentrated in certain countries, is an obvious example. Another is the case in which a
firm locates a certain labour-intensive stage of its production chain in a country with low labour costs,
while at the same time locating production stages requiring substantial amounts of “human capital” in a
nation where highly skilled workers are in relatively abundant supply. In other words, the firm, in an
effort to minimise production costs, establishes production sites in a number of nations, and uses trade
as a means of supplying demand for particular products - including inputs - in particular markets.
The other main category of advantages from multinational operations gives rise to horizontal FDI,
where similar types of production activities take place in different countries. Motivations behind this
type of FDI are, for instance, that transport costs for products with high weight/value ratios may render
local production more profitable; that certain products need to be produced in proximity to consumers
(e.g. McDonald’s burgers); that local production makes it easier to adjust to local product standards;
and that local production yields better information about local competitors. The FDI may also be driven
by trade barriers, either existing measures – “tariff-jumping” FDI – or with the intention of reducing the
probability of future protectionist measures, the so-called "quid pro quo" FDI. When people talk about
MNCs, they usually refer to a small number of usual suspects, ten, twelve corporations. Well, in fact,
at the moment there are 53 000 MNCs with 415 000 subsidiaries, so it’s a much wider network than is
commonly believed. A network which, in addition, is completely networked within itself. So there are
MNCs, highly decentralised in terms of their departments and markets, but these units of MNCs are
connected with each other. Then you have small and medium business networks that work together,
cooperate together, export and also link to multinational corporations. And in addition, this system is
often linked to the informal sector in developing countries. So you have a layer and network structure
that goes from the heart of the corporate centres to the shanty towns of those processing paper and
debris for the paper mills, for example in Kali, Colombia.
Many FEAR that MNCs have too much power in that they are in “control” of most of the driving forces
of globalisation: trade, investment and technology. Although specific companies can never be in
actual control of the process of globalisation, it may be granted that MNCs, to some degree, do “steer”
the direction the world is going as they are able to boast about being involved in the largest number of
activities related to global trade, investment and technology. A fear that might deserve more merit is
the possibility that MNCs might “manipulate” governments by promising them investment in exchange
for “more accomodating” policies. This imply that if countries want MNCs to invest in their economies,
then they need to change certain policies that could restrict these companies from making ‘optimal
profit’. These fears and others have led to a strong backlash from both civil society and governments
on the way these companies operate. It is uncertain whether this (fear) has helped to curb the
dominance of these companies in the global economy as most countries is in desperate need of their
investment and job-creation. The irony about the the current situation in the world economy is that it
has created a “free” capitalist society which is vulnerable to “manipulation” by profit-seekers.
19
QUESTIONS
1. Give your opinion on the following statement: “How the roles of these roleplayers (individuals,
MNCs, governments) change over the next decade or two will determine to what extent
globalisation is connecting the world into a ‘global village’”.
2. Given the impact of globalisation on individuals, do you really think that, generally, people’s
economic behaviour (spending patterns & mechanisms, investment, etc.) and life styles are adjusting
to the opportunities and threats presented by the new global economy, or do you think it’s a mith?
3. Explain this notion that ‘the role of governments in the globalisation process is kind of
contradicting’. – How can this be and in what way? Do you agree with the rationale behind this?
4. It is said that the ‘global dominance’ of MNCs is becoming an increasing threat to the equal
distribution of resources around the world. Do you think that MNCs are more harmful to the
global economy or more benefitial, or does it strike a balance of pro’s and con’s?
5. In terms of future expectations, do you think that the 3 roleplayers mentioned in this article will
cause globalisation to become more widespread (‘global’) or to become more centralised within the
rich countries? -(You can treat the roleplayers either seperately or interlinked in your answer.)
VRAE
1. Gee jou opinie oor die volgende stelling: “Hoe die rolle van hierdie rolspelers (individue, MNCs,
owerhede) verander oor die volgende dekade of twee sal bepaal tot watter mate globalisering die
wêreld saamvoeg in ‘n ‘global village’”.
2. Gegewe die impak van globalisering op individue, dink jou regtig dat, in die algemeen, mense se
ekonomiese gedrag (bestedingspatrone & meganismes, investering, ens.) en lewenstyle aanpas by die
geleenthede en bedreigings wat gebied word deur die nuwe globale ekonomie, of dink jou dis ‘n
mite?
3. Verduidelik die aanname dat ‘die role van owerhede in die globaliseringsproses is soort van
teenstrydend’. – Hoe kan dit wees en op watter wyse? Stem u saam met die rasionaal hieragter?
4. Daar word gesê dat die ‘globale dominansie’ van MNCs ‘n toenemende bedryging word vir die
gelyke verdeling van hulpbronne reg oor die wêreld. Dink jou dat MNCs meer skadelik tot die
globale ekonomie is of meer voordelig, of is daar ‘n balans tussen die voor- en nadele?
5.
In terme van toekomsverwagtinge, dink jou dat die 3 rolspelers wat in die artikel genoem is sal
veroorsaak dat globalisering meer wydverspreid (‘globaal’) raak of dat dit meer gesentraliseerd raak
binne die ryk lande? -(Jou kan die rolespelers hetsy apart of gesamentlik (interlinked) in jou
antwoord gebruik.)
20
Article 4
GLOBALISATION
~Specific results~
1. Introduction
The results/outcomes generated by globalisation in the world economy can also be considered as the
factors that “react” in a reciprocal way to the forces of globalisation by reinforcing the original results,
namely: greater interaction, cooperation and integration. Before going into the detail of these
“results”, a very important distinction needs to be made: the difference between an international world
economy and a global economy. The former is constructed through the mutual interconnection or
crossborder integration of national economic spaces, while the latter is an economy with the capacity
to work as a unit in real time on a planetary basis. An international economy links distinct national
markets; a global economy fuses national markets into a coherent whole. This is where the meaning
of globalisation takes further shape: globalisation is the process of development where the world
progress from a ‘condition’ of international world economy to a ‘condition’ of global economy.
A further important aspect to consider when talking about greater interaction, cooperation and
integration in the world economy, is that the GAP is not so much between the ‘rich’ and the ‘poor’
countries anymore, but rather between those ‘included’ and those ‘excluded’. Thus, rather than living
in a world divided between rich and poor (an old feature of human societies), we are entering a NEW
world characterised by a cleavage between those who are ‘in’ and those who are ‘out’ of the new
system of wealth and power. As one of the drawbacks of capitalism, finding a solution for this gap is
st
one of the most pressing challenges of the 21 century and will be the deciding factor in terms of
guiding the world toward a better place for ALL.
2. Global interaction, cooperation and integration
The current wave of globalisation coincides strongly with the transnationalisation of economic and
political activity. Transnationalisation refers to “the growth of contacts, networks and organisations
which link people, businesses and communities across national boundaries.”
Through the
liberalisation of policies and regulations, governments are paying more attention to greater cooperation
– especially on the international scene. The corporate world is also much more focussed on creating
global networks and alliances through cooperation than in the past. As everyone is starting to
recognise the benefits of creating and utilising the global market place, a (global) environment that is
‘open’ to greater interaction and cooperation is starting to EMERGE.
The stretching of social relations seems to be associated with an intensification of flows and networks
of interaction and interconnectedness that transcend geographic boundaries. The increased density
of interaction across the globe implies that the impacts of events are felt more strongly than before.
So, for example, physical distance no longer works quite so effectively to dull the sensation when
events like famines, wars or economic breakdowns happen on the other side of the world. The
increasing extent and intensity of global interactions is changing the geography of the relationship
between the local and the global. As social relations stretch there is an increasing interpenetration of
economic and social practices, bringing apparently distant cultures and societies face to face with each
other at LOCAL level, as well as on the GLOBAL stage. While Coca-Cola, McDonald’s or Hollywood
movies are obvious examples of the ways in which one culture’s expressions (the US) are exported to
other countries, the process works the other way too. What is happening is apparently distant cultures
and societies that come face to face with each other at local level, creating increased diversity.
If you focus on the government-level (of international relations), what is emerging is a form of “complex
interdependence” among countries, regions and various economic and political partnerships. Complex
interdependence has three main CHARACTERISTICS which include:
Multiple channels connect societies, including: inflormal ties between governmental elites as
well as formal foreign office arrangements; informal ties among non-governmental elites (face
to face and through telecommunications);
and transnational organisations (such as
multinational banks or MNCs). These channels can be summarised as interstate, transgovernmental, and transnational relations. These actors are important not only because of
their activities in pursuit of their own interests, but also because they act as transmission
belts, making government policies in various countries more sensitive to one another. As the
scope of governments’ domestic activities has broadened, and as corporations, banks, and
trade unions have made decisions that transcend national boundaries, the domestic policies of
21
different countries impinge on one another more and more. Transnational communication
reinforce these effects and so does parallel developments in global issues – from
environmental regulation to control over technology.
The agenda of interstate relationships consists of multiple issues that are not arranged in a
clear or consistent hierarchy or order of importance. This absence of hierarchy among
issues means, among other things, that military security does not consistently dominate the
distinction between domestic and foreign issues as it is becoming more and more BLURRED.
Issues on energy, resources, environment, population, the uses of space and the seas
become of similar importance. Inadequate policy coordination on these issues involves
significant costs. Different issues generate different coalitions, both within governments and
across them, and involve different degrees of conflict. For instance, when there are multiple
issues on the agenda, many of which threaten the interests of domestic groups but do not
clearly threaten the nation as a whole, the problems of formulating a coherent and consistent
foreign policy increase.
Military force is not used by governments toward other governments within a region, or on the
issues, when complex interdependence prevails (minor role of military force). It may,
however, be important in these governments’ relations with governments outside that region or
on other issues. Military force could, for instance, be irrelevant to resolving disagreements on
economic issues among members of an alliance, yet at the same time be quite important for
that alliance’s political and military relations with a rival regional bloc. Moreover, force is often
not an appropriate way of achieving other goals (such as economic and ecological welfare)
that are becoming more important. Even in many (minor) situations of conflict which still
exists around the world, the recourse to military force seems less likely now than at most times
during the century before 1945. The limited usefulness of conventional force to control socially
mobilised populations has been shown by the United States’ failure in Vietnam as well as by
the rapid decline of colonialism in Africa. It is clear that the global priority of ‘keeping peace’
have become much more important for most countries over the last decades as they believe
that ‘peace’ will lead to ‘prosperity’.
When considering the global scenario, world economic integration entails policy convergence in a
wide variety of fields. It is not only private-sector production that needs to be internationally
competitive, but also public-sector production. In fact governance itself is increasingly subject to global
standards of best practice. Economic globalisation has hightlighted the need for effective transnational
policy coordination. In fields such as the environment, human rights, financial-market regulations,
trade policies, and taxation, national policies are no longer sufficient and efficient instruments for
achieving optimal outcome. In effect, in a world of integrated economies, national policies can have
substantial negative externalities. A clear division of roles and responsibilities among the global,
national, and sub-national spheres of government is needed to ensure optimal outcome.
Worldwide economic integration has highlighted glaring shortcomings in global public policy
coordination. In effect, transnational and national governments have shown an inability to cope with
the rapidity and requirements of global integration. Clearly, there is a need for a fundamental
intellectual paradigm shift towards governance of a global society, accompanied by appropriate
institutional restructuring.
The structure of the global economy is characterised by the combination of an enduring architecture
and a variable geometry. The architecture of the global economy features an asymmetrically
interdependent world, organised around three major economic regions (known as the TRIAD) and
increasingly polarised along an axis of opposition between productive, information-rich, affluent areas,
and impoverished areas, economically devalued and socially excluded. Between the three dominant
regions, Europe, North America, and the Asian Pacific, the latter appears to be the most dynamic yet
the most vulnerable because of its dependence upon the openness of the markets of other regions.
However, the intertwining of economic processes between the three regions makes them practically
inseparable in their fate. Around each region an economic hinterland has been created, with some
countries being gradually incorporated into the global economy, usually through the dominant regions
that are their geographic neighbours: North America for Latin America; the European Union for
Eastern Europe, Russia, and the South Mediterranean; Japan and the Asian Pacific for the rest of
Asia, as well as for Australia and New Zealand, and maybe for the Russian Pacific, Eastern Siberia
and Kazakhstan; Africa, while still dependent on ex-colonial economic networks, seems to be
increasingly marginalised in the global economy; the Middle East is, by and large, integrated into the
global networks of finance and energy supply, although highly dependent on the avatars of the world’s
geopolitics.
22
As indicated by Table 1 below, there are within all these regions, various forms of regional
integration, called regional groupings, that join forces on policy coordination, and increased trade and
capital flows, etc. The table provide examples of regions that interact with each other and in the
process, become more inderdependent.
Table 1: Major regional groupings
Region
Acronym
Date of formation
European Union
(from Treaty of Rome in 1957 to Maastricht Treaty in 1993)
EU
Association for Southeast Asian Nations
ASEAN
1967
Organisation of East Caribbean States
OECS
1981
Economic Community of West African States
ECOWAS
1983
Arab Maghreb Union
AMU
1989
Asia-Pacific Economic Cooperation
APEC
1989
South African Development Community
SADC
1992
Common Market for East and Southern Africa
COMESA
1993
North American Free Trade Agreement
NAFTA
1994
Economic and Monetary Community of Central Africa
CEMAC
1994
South American Common Market
MERCOSUR
1995
African Union
AU
2002
1957-1993
As a special application, the example of AFRICA and more specifically, the African Union (AU), can
be taken to indicate the activities and processes inherent in regional integration. This will highlight the
importance of regional integration as an intermediate step toward the integration of developing
countries into the world economy. After the inaugural Summit of the African Union in July 2002 in
Durban, the world started to take note of a new future for Africa – lead by the New Partnership for
Africa's Development (NEPAD) initiative. As it replaced the Organisation for African Unity (OAU), the
AU was loosely modelled on the European Union (EU). In short, its objectives include achieving
African unity, encouraging international cooperation and achieving a better life for the peoples of Africa.
While the African Union seeks to broaden African cooperation through the development of an
economic community and an African Court of Justice, the NEPAD offers a PLAN to deepen this
cooperation through the promotion of shared values and standards. Hence, the African Union aims to
realise economic and political integration on the African continent.
With closer economic integration, each African country has an interest in ensuring that appropriate
policies are followed in its partner countries. This could be achieved by increased coordination of
national policies within a regional context. Throughout the continent, African governments are coming
together to coordinate their policies, and virtually all countries are now members of regional
organisations – including the AU. Efficient regional cooperation allows the economies of Africa to
OVERCOME the disadvantage of their relative small size and, by providing access to larger markets,
to realise economies of scale.
The obligations of membership in some of these organisations also make it easier for each individual
country to achieve further progress in regulatory and judicial reform (especially with regards to the
protection of human rights and stopping armed conflicts), to rationalise payments facilities and to relax
restriction on capital transaction and investment flows, and to develop a mutual economic infrastructure
(as in SADC). Enhancing trade links among African countries naturally also strengthens their ability to
participate in global trade and could lead toward further progress toward nondiscriminatory multilateral
trade liberalisation. It is essential that these efforts feature the coherent implementation of appropriate
structural and macroeconomic policies designed to improve economic efficiency and create the
conditions for greater integration into the world economy. Such policies can justify the optimistic view
of what is now being called the beginning of an “African renaissance.”
23
While it is true that the slow pace of their integration into the world economy has sheltered most
African economies from the most violent effects of the financial crises of the 1990s, the reverse of the
coin is that Africa is NOT able to reap the full benefits of globalisation – a process that could increase
the resources available for the productive investment that Africa needs so badly. The success of the
European Union since the 1950s attests to the advantages of regional integration. It is essential that
developing countries realise that they cannot escape globalisation, and therefore should not try to
avoid it. Poverty is persistent in many countries (especially African) but in some major countries such
as China and India it has been reduced substantially in the last 10 years. For most of the past three
decades, East Asia has demonstrated the advantages of an outward-looking, liberalised economy.
However, the Asian crisis has shown that economic oppennes is NOT ENOUGH. Sound macroeconomic policies, unfailing transparency, a stable and rational regulatory and incentive
framework, tariff reduction and harmonisation, labour market reform, investment incentive and
tax system harmonisation, robust financial systems accompanied by effective supervision
mechanisms, and good governance in the public and private sectors are also required to TAKE
full advantage of globalisation and to PREVENT further economic marginalisation.
Regional cooperation can serve as a vehicle for nondiscriminatory liberalisation of multilateral trade
and integration into the globalised economy. If properly conceived, regional integration offers many
advantages for developing countries. Three of them are:
Closer trading links between partner countries that would strengthen their capacity to
participate in world trade. A regional approach in key structural areas enables participating
countries to pool their resources and avail themselves of regional institutional and human
resources in order to attain a level of technical and administrative competence that would not
be possible on an individual basis. The regional approach also allows countries to assert their
interests from a STRONGER and more confident position in the international arena.
The conditions and obligations associated with participation in an ambitious reform program
within a regional organisation also facilitate the work of the domestic authorities in implementing politically difficult measures, such as lowering tariffs or instituting wide-ranging reforms of
the regulatory and judicial systems.
Regional surveillance and the dialogue between the various partners help reduce the risks of
macroeconomic slippage, resulting in a more stable, predictable environment – clearly an
essential factor for the private sector to flourish and the attraction of more investment.
The challenge of the future will be to ensure that regional organisations are perceived as effective
vehicles for the integration of African countries into the world economy, providing mutual support to
their members in their reform efforts. Such organisations should not be considered as defensive
mechanisms, intended to ward off the “negative” aspects of globalisation. Common regional objectives
should seek to push through reforms in the areas of legal and regulatory frameworks, financial sector
restructuring, labour and investment code reform, and exchange and trade liberalisation that seek to
attain international standards as quickly as possible. The pace of progress should be what is feasible,
not what is comfortable for the slowest member.
The QUESTION for Africa is: “What is needed to achieve these objectives?” In brief, the answers
seem to be:
1. Enough political will to adhere to regional integration objectives and to give them priority over
domestic considerations.
2. A resolute effort made to achieve greater intitutional and economic policy convergence. This
implies ambitious, but feasible, timetables for instituting reforms.
3. Strong, efficient regional institutions are required. They should be authorised to develop
appropriate policies independent of national interests without, however, losing sight of each
member’s particular situation.
The move to the market by nearly all countries around the world is beyond doubt a truly global
phenomenon. It draws on a stock of ideas and recent experience shared around the world. The
processes of change – particularly privatisation, deregulation, and capital and trade liberalisation – are
largely common ones, refined over time to a professional craft by their political champions and expert
practitioners. As countries anchor themselves in a world of open and connected markets, they are to a
24
significant degree transferring control of the commanding heights from the traditional state
apparatus to the dispersed intelligence of the market. And the extraordinarily fast flow of information,
made possible by the rapid diffusion of accessible technologies, has helped reinforce the sense of
common momentum. Yet that feeling should not be overstated. For despite the common features,
each country and region is executing its move to the market according to its own political and
economic history and perception of the national interest.
In the postreform world that is now emerging, each major region faces specific challenges in
reconciling the increasingly complex demands of global participation with the realities of its OWN
history, politics, economics, and culture – all the things that make up the experience and living memory
of individuals and nations. Each area, then, will grapple in this world after reform with its own agenda
for the new century. As the withdrawal of the state from the commanding heights opens new
perspectives and opportunities, it also conditions success on understanding the regional dynamics.
Indeed, the growing connection of markets means that these regional agendas will feed back ever
more directly into the workings of the world economy. The future of the postreform world, and certainly
the future health and credibility of markets, will thus be SHAPED not only by technology and other
global forces but also by how different regions come to grips with their particular challenges.
QUESTIONS
1. Firstly, explain the difference between an ‘international world economy’ and a ‘global economy’,
and secondly, explain where globalisation fits into all this.
2. What exactly is this ‘gap’ they are referring to (pg. 18) and why is it important to close the gap?
3. How is global interaction, cooperation and integration stimulated in the world economy, what is
driving it, and how is it put into practice?
4. Discuss the structure of the world economy and identify the main characteristics.
5. The African Union (AU) was established in 2002. What was the motives behind this, and was it
really necessary when there are numorous other regional groupings (SADC, ECOWAS, COMESA)
already in operation?
VRAE
1. Verduidelik eerstens die verskil tussen ‘n ‘internasional wêreld ekonomie’ en ‘n ‘globale ekonomie’,
en tweedens, verduidelik waar globalisering in al hierdie goed inpas.
2. Wat presies is hierdie ‘gaping’ waarna verwys word (bl. 18) en hoekom is dit so belangrik om hierdie
gaping toe te maak?
3. Hoe word globale interaksie, samewerking en integrasie gestimuleer in die wêreld ekonomie, wat
dryf dit en hoe word dit in die praktyk toegepas?
4. Bespreek die struktuur van die globale ekonomie en identifiseer die belangrikste eienskappe.
5.
Die Afrika Unie (AU) is gestig in 2002. Wat was die motiewe hieragter, en was dit regtig nodig
wanneer daar verskeie ander regionale groeperinge (SADC, ECOWAS, COMESA) is?
25
Article 5
GLOBALISATION
~Impacts and special applications~
1. Globalisation and Africa
Current global economic and political shifts, with their contradictory tendencies, pose a great challenge
to the African continent. Africa is ill-prepared to adjust itself simultaneously to complex global
dynamics, new opportunities, and the management of internal and external threats. The global
economic boom of the past decade and a half has completely bypassed Africa, and the continent has
the lowest human development index of any region in the world. This situation is in stark contrast to
that of the industrialised countries, which have benefited enormously from globalisation, and to a lesser
extent, parts of East Asia and Latin America as well. Although these countries have shared most of
the benefits, Africa’s exclusion also poses a serious threat to global stability in the form of possible
extremist activities that might flow out of the wars and poverty that continue to plague the continent.
Although a much-debated issue, Africa has in no unreal terms, felt the effects of being marginalised
from the global economy. Africa’s position in the new global economy is unique, for while being
integrated into that the global economy, it is marginalised at the same time. This raise the question of
HOW Africa is integrated – not very efficiently. Africa’s marginal position in the new global hierarchy,
however, provides a compelling stimulus to reorganise its political systems and economies, to defend
Africa’s sovereignty, and to strengthen the continent’s capacity to become more assertive in
international affairs. To complain about the negative effects of global forces without taking the necessary counter-measures at national and regional levels, will do little to ease the pain of marginalisation.
As Africa entered the twenty-first century, it faced mounting challenges. Widespread poverty, rapid
population growth, ecological degradation, large-scale unemployment, fragile political institutions and
weak public administration still hamper the continent’s quest for economic and social transformation.
The process of economic globalisation further compounds these problems. It is, however, essential to
make it clear that it is not globalisation as such which is causing the gap between Africa and the
developed nations. Most of the problems Africa are currently facing existed even before the economic
integration of the world economy found momentum through increased trade and investment and
technological breakthroughs. However, the difference, due to this momentum, the past decade or two
has been of such a nature that the conditions in the world economy is in fact working against Africa as
a result of the problems it is experiencing. Thus, maybe worsening them but not causing them.☜☜☜
While the global economy has been extraordinarily productive and, on average, has increased
standards of living measured by all kinds of indicators in the last twenty years, in the world at large, this
process is extraordinarily uneven. This is why African uneasiness about globalisation is not without
justification. The continent is no stranger to globalisation and its deleterious effects. The present
globalisation process, much like nineteenth-century globalisation under colonialism, could again end up
leaving the continent permanently marginalised unless African governments redirect their efforts to
manage it successfully to their own advantage. For Africa, this is an absolute necessity if the
continent wants to avoid a repeat of the degrading and inhumane treatment its peoples received from
the colonial state and capitalist forces. The globalisation of the twentieth and twenty-first centuries
should not be allowed to leave behind the same terrible economic, political and social legacies. The
continued marginalisation of Africa from the globalisation process is not only morally reprehensible and
a serious threat to global stability, but is ultimately to the disadvantage of developed states. For
globalisation to be compatible with the recovery of Africa’s economy, the regulatory procedures and
policies governing world trade have to be restructured to end the blatantly discriminatory practices
which damage Africa and her peoples. Globalisation has the POTENTIAL to support and stimulate
Africa’s economic recovery. But for that potential to be achieved, the conditions under which Africa
participates need to be fundamentally changed.
Having said that, African countries must, on the other hand, be prepared to manage globalisation to
their own advantage. This should be realised through the adoption of key reforms at national and
regional levels. The challenge for African policy-makers is to go beyond the simple approach to Africa’s
development: namely, should it be state-led or market-driven. There certainly is no simple solution to
Africa’s economic and social crises. By implication, both state and market approaches are relevant,
providing they take into account the particular circumstances of each African country. What is needed
in Africa today are more ‘common sense’ approaches that open up NEW avenues for increased
productivity, by laying the conditions for development through improved governance, increased
26
investment in education and infrastructure, and improved access of the poor to productive assets
and information. A ‘common sense’ approach to eradicating poverty will require political stability and
rule-based political order mediated by an impartial and independent judiciary, with particular emphasis
on transparency, accountability, and greater citizen participation in decision-making. Dogmatic faith in
either planning or markets will simply NOT do.
With regards to closing the ‘gap’, most African countries start off with challenging handicaps in vital
areas: inadequate productive and entrepreneurial skills base, inadequate science and technology
infrastructure, and weak government institutions. Building the state’s capacity is, however, only one
aspect of capacity-building which needs serious attention in Africa. Capacity-building at all levels is
the heart of a strong developmental progress. In order for the African continent to move forward on the
road to prosperity, the centre of attention should be state capacity building (e.g. improving their ability
to make, monitor and manage policies) as well as strengthening the judiciary and also capacities in the
private sector (e.g. better research and development initiatives). Even at local level, education and
training should be of paramount importance to EQUIP people to become more productive. Therefore,
within the context of capacity-building, ways should be explored to reverse Africa’s marginalisation and
to examine key areas of reform that must be undertaken quickly as a precondition for Africa’s
successful inclusion into the global economy. These broad-based political and sector-based reforms
should serve as the building blocks for Africa’s ‘renaissance’.
However, the ability of Africans to successfully manage Africa’s integration into the global economy will
depend, among others, on three primary changes in attitudes and thinking patterns:
Decolonising the African mindset: This aspect is two-fold. On the one hand, Africans
should stop thinking that the West owes them something because of the continent’s colonial
past. On the other hand, the ‘beggar mentality’ should cease. The first mark of an
independent Africa is political leadership which finds its expression in taking responsibility for
its own actions or inactions. Quality leadership in each African country should mean that
Africans stand up and take credit when things are done right AND also accept responsibility for
any wrongdoings.
Becoming ‘tech-wise’: Although most of the technological forces driving globalisation have
bypassed Africa, the way forward is NOT by asking for preferential treatment. The way
forward is through investing in education, and in basic research and development. Thereby
building necessary capacities.
Becoming assertive in international negotiations: What Africans must do now is to STOP
complaining about how unjust the international system is and instead become more assertive
in future negotiations and fundamentally reform the current international rules that perpetuate
uneven development. This will also require African leadership in the G77 and in other forums,
in order to set out a solid Third World position in major areas of international negotiation.
Although it may sound like harsh words, Africa must realise that “drastic action is needed for a drastic
situation”. The fact is; the world is not listening to us (on our terms) anymore. We need to start proving
that we can find “African solutions for African problems”. Globalisation is a process that rewards the
adaptable and productive countries and punishes those who are inadaptable and unproductive – no
matter what the reasons are or whether they deserve merit or not. As a process that both connects
and stimulates awareness of connection, globalisation dissolves the autonomy of actors and practices
in contemporary world order. In this process of relativisation, all units engaged in globalisation are
constrained to assume a position and define an identity relative to the emerging global whole.
In the end, a guided embrace of globalisation with a commitment to a fair degree of resistance through
pre-emptive national or regional development strategies and economic policy coordination, is what is
NEEDED. This will mean fully exploiting investment and trade opportunities made available by
economic globalisation while taking the necessary measures, such as capital controls and expanded
South-South trade, to shield Africa’s economies from the negative effects of market shifts.
In the final analysis, the SOLUTIONS to Africa’s economic and political crises can only be found within
Africa. Although it is true that a joint effort from both Africa and the rest of the world is necessary for an
African recovery, Africa cannot determine what the developed nations can do about its situation.
However, what it can determine is what it can do for itself. African countries must be prepared to
develop alternative formulations and conditions under which to engage themselves in beneficial global
economic exchanges. Africa can and must compete in a rapidly changing global environment. To get
to this stage, African governments must work hard to OVERCOME the obstacles it is challenged with.
Adressing its internal problems in a timely fashion is an absolute necessity if the dream of the ‘African
27
Renaissance’ is to become a reality, and if Africa is to become a serious and respected participant
in the global economy.
Africa’s experience with globalisation is actually part of the bigger (global) debate about inequality and
globalisation’s exclusionary effects. Because globalisation is in fact a very uneven process which
benefits the rich countries more, poorer countries pay the price for missing out on export revenues and
becoming integrated with rich countries. A very important QUESTION is whether this situation is
sustainable? Can the world afford to have such unfairness and unevenness over the long run. The
argument is made by the rich countries that the Third World might benefit via the ‘trickle-down’ effect
and in the meantime, charity should smooth the transition to the new world. But is this really the
solution? The notion that the current system can proceed forever, while excluding ⅔ of mankind, is
simply naïve. Let’s say that the ‘trickle-down’ theory works (which is highly unlikely), the whole matter
here is the TIME frame. If it works in 5 years, all right, but if it works in 20 or 30 years the fight against
social exclusion will make the system not only economically and technologically unsustainable, but
socially and politically untenable (shaky).
2. The role of networks and alliances
The new global economy is a very different system which replaces the old notions of North and South,
developed and developing or under-developed, with the notion of networks – global networks. These
global networks articulate and disarticulate so that at the same time we have a world made of global
networks and local societies which certainly are relatively independent of these networks, but at the
same time they all suffer or enjoy the consequences of these global networks. In other words
globalisation does not integrate everybody. In fact, it currently excludes most people on the planet but
at the same time, affects everybody.
The new economy is organised in networks throughout the world. Networks could be described as
“social units with relatively stable patterns of relationships over time.” MNCs, IGOs, NGOs and many
institutions/organisations (e.g. civil groups) using the Internet as their operational base are all mutually
inclusively and/or exclusively examples of networks around the globe. These networks which have a
technological and organisational basis have ONE particular quality: most of them search for everything
that is valued or can be valued according to the criteria of the networks, in most cases money-making,
to integrate into these networks, and discard from these networks everything that has no value from
the point of view of these networks. So it’s a very lean, efficient system of including and excluding at
the same time and it works for firms, it works for labour, for management, for regions, for cities, for just
about everything. Relationships are increasingly networked rather than hierarchical with both
individuals and organisations enmeshed in complex, polygamous worldwide webs. Multiple and
competing loyalties result.
Increasingly, network metaphors are used to describe the emerging world economy: a SHIFT from
standardised mass production to flexible production, from vertically integrated, large-scale
organisations to disaggregation of the value chain and horizontally networked economic units.
Hierarchical enterprises are being replaced by alliance capitalism. Networks are a manifestation of the
blurring of the boundary between the factory and the marketplace. The information revolution is a
critical factor in the emergence of networks as a mode of organisation of the world economy. Global
networks are both real and virtual; in fact, many combine elements of both. It is argued that
international networks of firms and subunits of firms are the basic organisational form of the
“informational/global” economy, and that the actual operating unit becomes the business project,
enacted by a network.
Ford, General Motors, and Chrysler have announced an agreement to move virtually all their
purchasing activity to the Internet. Covisint is an online business-to-business electronic commerce
network which will handle US$ 80 billion in annual purchasing with more than 30 000 suppliers and,
eventually, a US$ 300 billion extended supply chain. As with other business-to-business networks,
users will be able to create marketplaces, take part in auctions, and complete purchases “with the click
of a mouse.” By mid-2001 Covisint had grown to manage transactions which amounted to 13% of the
“Big Three’s” annual procurement. It is clear that the Internet is the primary medium for facilitating the
formation of networks. While global networks such as Covisint are revolutionary, they are but hybrid
interim steps TOWARD true informational networks. As products are digitalised – for example
software, electronic books, and music – global networks will involve exchanges of information for
information, services for various versions of electronic cash that take place entirely in cyberspace. It
is important to understand the networked world economy in terms of a complex web of transactions
rather than a series of dyadic or triadic cooperative arrangements between firms. A large MNC may
well be involved in tens if not hundreds of alliances linking various parts of its organisation with others.
These webs could be characterised as multilateral rather than bilateral, and polygamous rather than
monogamous.
28
Networks have a number of CHARACTERISTICS that affect the nature of international integration
and interdependence. More specifically;
they are a form of “collective action” involving cooperative relationships, in which the actors
implicitly agree to forgo the right to pursue their own interests at the expense of others.
Network relationships are inherently or “implicitly” interdependent.
networks cause formal boundaries to disintegrate; vertical, horizontal, and spatial. It becomes
difficult if not impossible to define organisational boundaries, to establish where one firm stops
and another begins.
networks are relational: individual attributes are less important than position in determining
organisational power and outcomes. Thus, power is a function of position in the network. And
as a corollary, networks have no center.
The emergence of global networks signals the replacement of integrated transnational hierarchies by a
cooperative and reciprocal organisation of economic transactions. The basic unit and venue of
production become ambiguous. The most important flows across transnational networks are intangible:
knowledge and information. Given the emergence of electronic global networks, neither territoriality
nor mutually exclusive geographic organisation retain relevance. Thus, by implication, the transition to
electronic networks and to cyberspace signals a major alteration in the structure of the world economy.
In the same way and in combination with global networks, strategic alliances are shaping a whole new
world. There has already been a SHIFT in the global economy: from capitalism to ‘alliance capitalism’.
Strategic alliances are relevant for two reasons. First, in many instances they are an indicator that the
scale of technology – the cost, risk, and complexity of research and development – has grown to the
point where it is beyond the reach of even the largest and most global firms. Second, alliances are a
manifestation of the emergence of a networked global economy; they represent a change in the mode
of organisation of international economic transactions. It is reported that alliance-generated sales
among the Fortune 1000 grew from less than 2% in 1980 to 19% by 1996 and a further 35% by 2002.
This reveals a dramatic growth over the last two decades.
The vast majority of alliances are TRIAD-based; most studies find that over 90% of all agreements are
between firms from North America, Europe, and Japan. Alliances also tend to be concentrated in a
limited number of industries: typically automobiles and high-tech sectors such as pharmaceuticals,
biotechnology, aerospace, IT, and new materials. A single firm in these industries often enters into
very large numbers of alliances: in the last half of the 1990s, IBM formed about 800 alliances, AT&T
400, and Hewlett Packard 300. The motivations for strategic alliances are complex and varied. One
motivation is clearly global market access; the need to compete simultaneously in all major markets,
or at least in all the legs of the TRIAD.
However, the most important motivation for alliance formation is the increasing cost, risk, and
complexity of technology. Even the world’s largest and most international firms can no longer “bet the
company” on the next generation of semiconductors or jumbo jets; in many industries the cost of a
competitive R&D budget has risen to the point where it is no longer possible to “go it alone”. And, in
addition, technologies have become so complex and rapidly changing that even industry leaders
cannot master them internally. The need for cooperation, therefore, has to be understood in the light
of attempts made by companies to cope with the complexity and the interrelatedness of different fields
of technology and their efforts to gain time and reduce uncertainty. Alliances represent a
transformation of the mode of organisation of international economic transactions from hierarchically
structured MNCs to networks.
At a deeper level, the material foundations of society, space and time are being transformed, organised
around the space of flows and timeless time. Beyond the metaphorical value of these expressions a
major hypothesis is put forward: dominant functions are organised in networks pertaining to a space of
flows that links them up around the world. These networks converge into meta-networks. A networkbased social structure is a highly dynamic, open system, susceptible to innovating without threatening
its balance. Networks are appropriate instruments for a capitalist economy based on innovation,
GLOBALISATION, and decentralised concentration; for work, workers, and firms based on flexibility,
and adaptability; for culture of endless deconstruction and reconstruction; for a polity geared towards
the instant processing of new values and public moods; and for a social organisation aiming at the
suppression of space and the annihilation of time. However, the social construction of new dominant
forms of space and time develops a meta-network that switches off nonessential functions, subordinate
social groups, and devalued territories. By so-doing, infinite social distance is created between this
meta-network and most individuals, activities, and locales around the world. Not that people, locales,
29
or activities disappear. But their structural meaning does, subsumed in the unseen logic of the
meta-network where value is produced, cultural codes are created, and power is decided. The new
social order, the network society, increasingly appears to most people as a meta-social disorder.
Namely, as an automated, random sequence of events, derived from the uncontrollable logic of
markets, technology, geopolitical order, or biological determination.
3. Toward the future
Although nobody knows exactly what the future has in store, it is clear that the same rule will apply as
st
was always the case: “The only constant is change”. The difference in this 21 century, however, is
that the ‘pace’ is faster than ever – and increasing. If the period of 1914 to 1991, including two World
Wars and a Cold War, was considered to be the “age of extremes”, the technology-driven world of this
new century could be called the “age of shocks or miracles” – depending on how you interpret it. The
innovations and changes facilitated by all forms of technology is bound to reshape not only the world
we live in, but also our thought-‘paradigms’ – the way people see the world. In this new globally
interconnected world, old ways of thinking and mindsets will have to make way for new ones as
technological breakthroughs and the growing awareness of “global interconnectivity” will cause people
to replace their old “lenses of understanding” with new ones. They will look at the world differently. As
more and more activities (e.g. business, social interaction, sport and political decision-making) will take
place on a planetary scale, people will start realising how interdependent the world has become.
Technology will play a crucial part in this.
A new reality is emerging. The term globalisation, which describes a process, has largely been
overtaken by a conditon – a globality, a world economy in which the traditional and familiar boundaries
are being surmounted or made irrelevant. Globalisation, therefore, entails the technologically driven
expansion of the scope of markets well beyond the limits of even the largest national territories, the
replacement of markets and hierarchies by relational networks as the mode of organisation of
international economic transactions, and the migration of markets to cyberspace. Globalisation
signifies the emergence of a post-modern world economy that is not consistent with a modern,
territorially defined, international political system. Because of this asymmetry, a singular, territorially
based authority is increasingly becoming problematic. States are no longer the sole sources of
legitimate authority; in fact we face a world of overlapping and ambiguous “authorities” which may
shift as the context changes. MNCs and markets are one source of authority in the international
system and NGOs and other civil society groups another. The prospect is that this trend will continue,
defining the way people and organisations (of both the private and public sector) participate in the new
global economy, and reconstructing people’s ideologies about who they are, what they are capable of
and where they fit in.
The structure of the global system is evidently changing. As geographic borders become irrelevant,
global integration takes shape in the form of a transnational global economy, and more and more
global networks are created via technology, a very serious question is surfacing and will, in future,
become a most debated “hot topic”. It will have profound impact on a cultural/social-level as well as on
2
a political and economic level. The Big Question is: Are we moving towards one world, with
ultimately one government, one political and economic system and a global social identity – e.g. global
citizens in the global village? If not, then what else, and why?
[Class discussion]
The emergence of an electronically networked global economy may herald an analogous transition to a
post-modern political-economic system. A system which is characterised by vastly different worlds for
different people. Those included and those excluded, those who enjoy the benefits and those who pay
the price for being unproductive and unadaptable, and those going forward and those being left behind.
It already is a strange, strange world we live in (Master Jack)... On the one hand we have statistical
evidence of the simultaneous development of an extraordinary, creative, innovative, productive
economy at the heart of the planet, not just in the North but in networks between North and South.
And on the other hand, discarded from these productive networks, the notion of the increase in the
social exclusion of a large proportion of the people on the planet – an increase in polarisation. Well,
correlation doesn’t mean causality, so it’s not necessarily clear who or what is responsible. Perhaps
the attention should move to finding more solutions in terms of social inclusion, instead of only trying to
find the source of the (exclusion-)problem. This may in future be the crucial “paradigm shift” that
paves the way for greater global equality and could prevent the problems associated with social
exclusion from erupting into full scale global structural imbalances.
As a new world, a new society, a new tomorrow is dawning upon the people of the world, ‘uncertainty’
is strangely intertwined with ‘exitement’. In this globalising world people are exited about the prospects
of technological advance and new opportunities being created, BUT they are also uncertain about how
2
This question should be the chief end of our concern about the future of the world.
30
they will fit into that picture. Will they have work, what will be required of them, what will happen to
their children? All these issues place the emphasis once more on the one key that people have for the
future: awareness. Being aware of change. It means understanding the nature of the changes that
are taking place, reading the trends and being prepared for whatever the future may bring. Few people
are really aware of the profound changes in the global environment and how it will impact on them.
Being aware of change will beyond doubt provide the much needed ‘edge’ for the future.
QUESTIONS:
1. Summarise and give your opinion on the debate about ‘Globalisation and Africa’. And, what can
Africa learn out of current and past experiences?
2. Given this situation, what would be your recommendation for Africa?
3. Networks and alliances have become a primary feature of the current global economy. By
discussing their impact, also indicate to what extent they might be able to manipulate economic
activities around the world, or might not (if you disagree)?
4. In terms of future expectations, what do you think the world would look like in 20 years’ time and
what would be the primary features of the global economy by then?
5. Summarise what you have learned with regards to the ‘big picture’, including: globalisation, global
economic interdependence, and the ‘global village’.
VRAE:
1. Som op en gee jou opinie oor die debate rakende ‘Globalisering en Afrika’. En, wat kan Afrika leer
uit huidige en vorige ondervindige?
2. Gegewe hierdie situasie, wat sal jou aanbevelings vir Afrika wees?
3. Netwerke en alliansies het ‘n integrale deel van die huidige global ekonomie geword. Deur hul
impak te bespreek, dui ook aan to watter mate hulle in staat kan wees om ekonomiese aktiwiteite te
manipuleer reg oor die wêreld, of dalk nie (as jy nie saamstem nie)?
4. In terme van toekomsverwagtinge, hoe dink u sal die wêreld lyk oor 20 jaar en wat sal dan die
primêre eienskappe van die globale ekonomie wees?
5. Som dit op wat jy geleer het van die ‘big picture’, insluitend: globalisering, globale ekonomiese
interafhanklikheid, en die ‘global village’.
Die einde3
3
Note that this document (including all five articles) was written in popular writing style and emphasis were
given in the text as a way to guide the student and to keep it exciting for the reader. A full list of references is
provided at the end of this document.
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31
4
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4
Note that this list is not in alphabetical order (although it should be).
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