THE "GLOBALIZATION"
PHENOMENON and Africa
Arch Ritter
ECON 3510
June 10, 2010
Outline:
1.
2.
3.
4.
5.
6.
7.
DEFINITION AND CHARACTERISTICS
HISTORICAL PRECEDENTS?
CAUSAL FORCES UNDERLYING THE PROCESS
GENERAL CONSEQUENCES
POLICY RESPONSES TO GLOBALIZATION
THE FUTURE
GLOBALIZATION AND AFRICA
DEFINITION AND CHARACTERISTICS
- the increasing economic, social and
cultural integration of the peoples and
nations of the world?
II. HISTORICAL PRECEDENTS?
Earlier periods of integration have occurred
Early Empires: Alexander the Great;
Pax Romana?
Inca and Aztecs,
Chinese and Mogul Empires
British Empire; Spanish Empire; Napoleonic France;
Russian Empire? Spviet Empire?
1870 - 1914 economic integration of much of the
world?
Growing economic interaction from 1945 to 1995.
But the process more recently has
accelerated;
– New technological innovations have changed
the character of the process;
– New institutions are involved (MNEs, WTO,
Regional integration schemes, new NGOs, for
example)
– New rules and policy approaches are in place
– Old problems have intensified and some
newer ones have been generated.
3. CAUSAL FORCES UNDERLYING THE PROCESS
A. Technological Changes:
– declining international communication and
transportation costs;
– extreme reductions in information processing costs;
B. Intensified Global Economic Governance:
– establishment of WTO and role of IFIs
– Multilateral and regional Integration Agreements to
diminishing trade barriers of many sorts;
– diminishing barriers to international flows of capital
and enterprise;
– Increasing international migration despite
maintenance of barriers
C. Global Shift in Conventional Wisdom
towards economic “apertura” and
expanded role for market forces?
Disputed by anti-globalizers
Now debatable again with world recession
D. Consumer Sovereignty drives process
almost everywhere?
E. End of most of the “Cold War
and in consequence:
• rapid expansion of international trade globally, among
developing countries, and between developed and
developing countries;
• -even more rapid increases in international capital
movements, including equity, bank credit, currency
trading, and foreign direct investment;
• rapid learning and transfer of technology through trade in
capital goods, direct foreign investment, education and
research and development;
• continuing international migration flows, from developing
to developed countries but also among developing
countries;
4. GENERAL CONSEQUENCES
• Restructuring of the International Division
of Labour:
– migration of labour-intensive industries to
developing countries,
– the development of more advanced clusters
of export-oriented economic activities in
some developing countries
– Major job-loss in labour-intensive tradable
industries in DMEs
– Major job-creation in such industries in
developing countries, and upward pressure
on real wage and income levels, in time?
•
Greater Fluidity of International Capital
Flows: savings and investment patterns
become transnational
•
Accelerated International Migration
•
Greater Fluidity of International Movements
of Technology (Trade in machinery and
equipment; DFI)
•
Greater Power for Multinational Enterprise.
Possible Positive Developmental
Implications
Possible Positive Developmental Implications
1. Acceleration of economic growth;
2. Stimulation of employment generation in
successful manufactures-exporting
countries;
3. Productivity gains promote higher real
incomes;
4. Reductions of poverty with growing
economies;
5. Higher national incomes permit higher taxes,
higher social expenditures and improved
human development;
6. Higher income levels permit investments to
improve the environment??
7. Strengthened national economies may
permit stronger defences of national culture
and language????
Possible Negative Consequences
Possible Negative Consequences
1. Cosmopolitanization and simultaneous
homogenization of cultures in many
countries? “Westernization?” Commercial
Consumerism implanted everywhere?
2. Loss of indigenous cultures, languages and
ways of life?
3. Accumulation of economic power by large
corporations?
4. Reduced national capabilities for economic
policy-making? (monetary and exchange
rate policy?)
5. Widening International Income Disparities?
6. Greater macroeconomic and employment
insecurity and instability due to of contagion
and financial volatility?
7. Accelerated international transmission of
human, plant and animal disease?
8. Possible intensification of some
environmental problems e.g. natural
resource stripping for exportation
POLICY RESPONSES TO GLOBALIZATION
1.Promote Human Development
2.Improve management of international economic
destabilization and volatility
3. Stronger action supporting security (re crime,
environment, natural disaster, and disease.)
4. Reverse the marginalization of small poor countries
5. Promote technological innovation and diffusion in
support of poor people and countries
6. Improve and democratize global governance.
6. THE FUTURE?
The Nation State:
delegation upwards and downwards of functions, to
regional and global governments.
Where does that leave the nation state?
Communications:
the 500-channel universe + video/camcorder =
computer technology: cultural and linguistic
homogenization or renewed diversity?
Global "factor price equalization" and
"convergence" of living standards throughout
the world ??
Ultimately, with rising energy prices and rising
transport costs, will renewed localization of
economic activity be stimulated ??
But when ??
7.
Africa’s Participation in the
Globalization Phenomenon
Africa has been part of the globalization process
historically (recall Class #1)
• In Post WWII period, not as intensely as other
regions (Asia, EU, N. America, BRIC)
• In 2000-2010, Intensifying integration in
international system
Implications of participating in the process:
– Increased trade, capital flows, migration, DFI
With Positive effects, and Problematic effects
Africa’s Interaction with
International System:
1. Trade
2. Technological transfer
3. Capital flows and Direct foreign
investment
4. Migration and Remittances
5. Information and Communications
Technology
1. Trade
2. Technological Transfer
How is Technology “Transferred”?
– Trade in capital and consumer goods that
embody technologies of various sorts
– Direct Foreign Investment
– Licensing arrangements
– Education abroad and return
– Books, communications media
3. Capital Flows and DFI
Significant capital flows in 2000s
All categories: Direct Foreign Investment (DFI),
Loans, Portfolio investment
Concentrated in resource rich countries
Debt burden has been declining due to writeoffs, increases in exports and GDP, lower
interest rates
Banking system remained independent and
relatively insulated
“Outsourcing's Third Wave“:
Land Acquisitions
4. Migration and Remittances
5. Information and Communications Technology
Implications of participating in
Globalization Process
Positive effects:
What are they?
Implications of participating in
Globalization Process
Positive effects:
Intensified technological transfer
Capital goods and consumer goods
Promotion of economic growth.
Rising incomes overall,
reversing 25 years of economic contraction
but still lagging
Some reductions of poverty but not
enough
» “A rising tide lifts all boats?”
Implications of participating in
Globalization Process, cont’d
Positive effects:
Increased tax revenues accompanying
economic growth and thence …..
Increased public expenditures in health,
education, water, infrastructure
Intensified learning from international
sources
General improvements in many socioeconomic indicators, despite AIDS - but
not enough
Implications of Participating in
Globalization Process, cont’d
Negative or Problematic effects?
Implications of Participating in
Globalization Process
Negative or Problematic effects:
1. Vulnerability to world economic downswings, via
export volumes and prices
• But perhaps no more than previously
• Note insulation of banking system from
contagion
2. Loss of sovereignty to international institutions
(IMF, WB, WTO)?
• But economic strengthening also improves the
capabilities of governments, domestically and
internationally
3. Countries become more vulnerable to
actions of high income trading partners
• But protectionism has been falling
• WTO-sponsored trade liberalization would
obstruct attempts at protectionism
4. Do increased trade and foreign
investment simply exploit African
workers?
•
•
Common claim from the left
Counter-arguments are powerful
5. African countries lack negotiating skills and
experience to defend their interests in the
WB, IMF, WTO.
• Improve capabilities
• Collaborate with neighbours and African
Regional institutions in negotiating
• Not a good argument against
participating in the international system