It gets its funds through government subscriptions and through borrowing, and voting power is proportional to subscription. That means the bank is effectively controlled by the rich countries. Chapter I – Globalization I – What is globalization? A – Definition of Globalization The GATT (1947) / WTO (1995) Pascal Lamy (French) is the actual President of the WTO. The General Agreement on Tariffs and Trade (GATT) was a UN Agency set up in 1947, encouraging arrangements between the states of the Free World (non communist) to abolish trade barriers. The World Trade Organization (WTO) replaced it in 1995. Its purposes are to implement free-trade with the reduction of barriers, and to remove subsidies. Within the WTO, the Dispute Settlement Body (DSB) solves trade disputes. As a sanction, the looser must pay compensation to the winner. For instance, in 1988, the European Union (EU) forbade the import of US hormone-fed beef and the USA denounced this decision. The DSB condemned the EU in 1998, as nothing had proven the noxiousness of hormone-fed beef: the sanction consisted in taxing European products on the American territory, among them the French Roquefort! Globalization is the increase of interactions between the different parts of the World, characterized by more intensive World-scale flows, allowed by two vectors: information and communication technologies (ICTs) and mass transport. Globalization is generally led by developed countries. Four kinds of globalized flows: - Trade (movement of goods from producers to consumers). - Financial flows, especially through the biggest World Stock Exchanges (NY, London, Paris, Amsterdam, Brussels, Tokyo…) with notably Foreign Direct Investments – FDIs (defined as the purchase of assets in a foreign country). - Movement of people (for instance, workers move from one country to another so as to find better employment opportunities). - Spread of knowledge, information and technology (with the Internet, know-how…). Still, many obstacles remain and hinder trade on a larger scale (like custom taxes/ tariffs and protectionism). 2 - TNCs (transnational corporations) B – The actors of Globalization 1 - The World Organizations which push Globalization forward… Definition TNCs are firms whose headquarters are generally located in a Northern country, while they relocate/outsource in the developing countries where the labour force is cheap (meaning lower production costs) through affiliates/branch or subcontracting factories. Conception remains in the USA/Western countries, while production goes to cheaper countries. The example of Nike Headquarters in Oregon, but factories located in 40 different countries (like China): sweatshops, exploited people paid less than $5 a day. Turnover of $20.9 billion in 2011. Some geographers consider globalization is not something natural, it is pushed forward by World-wide organizations like the WTO, the IMF or the World Bank. The International Monetary Fund (IMF), created in 1944 in Bretton Woods The actual Chairman is Christine Lagarde (French). Several purposes: - After WWII, it was to guarantee the stability of currencies and the monetary system decided in Bretton Woods, based on the preeminence of the Dollar (the Conference settled that each currency in the World establishes its equivalence with the Dollar), and limit inflation. - Today, it helps countries in financial difficulties by allowing aids. Each member country gives the IMF a certain amount of money proportional to its GNP. When a country is in dire straits, the IMF gives money but the country cannot make its own use of this financial aid: it must follow the directives of the IMF, i.e. the structural adjustment policy advised by the IMF. The IMF is not a bank. 3 – Global cities Global cities They are cities gathering a large population (demographic importance), having an economic (Stock Exchanges, headquarters), political (most of them are capital cities) and cultural influence over the rest of the World. They are connected together thanks to ICTs and an advanced transportation system: they form a World archipelago. They include loads of different nationalities: they are globalized because they gather the whole world, triggering increasing disparities. The example of New York - Its population: 8.3 million people in New York city, but more than 15 million in the built-up area. Attractiveness of the city, loads of immigration but no melting pot: we The World Bank (an Agency of the UN), created in 1944 in Bretton Woods The actual Chairman is Jim Yong Kim (American). It was created under the name of International Bank for Reconstruction and Development (IBRD), together with the IMF. Its purposes: - Originally, to aid post-war reconstruction in Europe with long-term loans. - Today, to aid the developing world. 1 - rather talk about a salad bowl where each community keeps its identity and do not melt with others. Connectivity: three airports for instance, international air gateway to the USA. Its influence: Economic with major headquarters (HBO channel; IBM – computing company; Goldman Sachs – bank; Calvin Klein – clothes; etc.), Financial like Wall Street shows. See the three main indicators: Dow Jones (eldest indicator, gathering 30 biggest companies of the USA), NASDAQ (gathering 3200 Internet and computing companies) and S&P 500 (Standard and Poor, gathering 500 average companies). Cultural: museums, universities like Columbia (part of the Ivy League). Political (UN headquarters). barriers, hence enlarging the market of these companies. This is a positive an unusual aspect of the WTO. 2 – ... but globalization can be dangerous for developed countries The fear of relocation and outsourcing Relocation threatens employment according to many Developed Countries. But who must be blamed? Workers will blame the strategy chosen by the CEOs who relocate in order to make profits, even if this triggers unemployment in the country of origin. TNCs will blame the consumers who are always looking for cheaper goods, therefore encouraging relocation if the TNCs want to remain competitive. Is relocation the ugly duckling of Globalization? China is the scapegoat: it is a very popular picture, in America, to blame China for everything, especially for unemployment (because of relocation) and for the economic difficulties the USA is witnessing. But it appears that relocation may not be the only responsible for the American problems: the USA is living beyond its means (trade balance in deficit and heavy debt), and mechanisation also triggers losses of jobs. II – The pros and cons of Economic Globalization Development (See les Indispensables) designates the ways used to relieve poverty, to increase incomes and improve the standard of living of a nation; the means by which a traditional, low-technology society is changed into a modern, high-technology society. There is no definitive definition of what development should be for each society. The indicators to measure development can be diversified: birth and death rates, fertility, life expectancy, urbanization, production, consumption, income, education, health, proportion of a country in the World trade, GDP, GNP, HDI… How is the USA coping with the “Chinese problem”? In 2001, China joined the WTO and in 2005, tariffs on Chinese garments were supposed to be banned. But the USA settled quotas on Chinese textile a couple of weeks later, shortly after they had been suppressed by the WTO. The USA argued that these Chinese massive imports were a threat to the American market. The USA exceeded the decisions of the WTO, illustrating the weakness of the Organisation in front of powerful countries. A – Is Globalization beneficial to developed countries? 1 – Yes, globalization benefits developed countries B – Is Globalization beneficial to the developing countries or not? 1 – Yes, Globalization benefits the emerging countries The domination of the Triad The World oligopoly/Triad dominates the rest of the World with intensive and massive flows between the three hubs/impulse centres: North America, Western Europe and Japan. The latter countries are closely connected, thus questioning and negating the physical distance which separates them. They form a world-wide network: the World somehow “becomes a village”. China / Brazil, an example of South-South cooperation Both are emerging countries (high economic growth), part of the BRICS, and they want to overthrow the USA’s leadership. Latin America has become a main supplier (raw materials) for China for instance. Globalization rises living standards : the example of India and China The Indian GDP per capita has increased a lot, notably since 2002: it reached $1240 per capita in 2010. This is due to the Green Revolution (better agricultural output allowed by a better productivity through the recourse to mechanization, irrigation, fertilizers…), due to the massive Cinema industry (fashionable Bollywood movies), due to outsourcing (computing industry or call centres…). Still, the Indian trade balance is in deficit: it is a sign of weakness. China highly benefits from relocation: many consuming goods are produced in China, even though China is often criticized for the oppression of Tibetan people, TNCs highly relocate there, triggering jobs, and wages. WTO’s role in the American economy, an example of beneficial Globalization The WTO is usually highly criticized. Indeed, it is considered responsible for the flaws of Globalization, such as relocation or subsidies. Subsidies are practiced by developed countries to make their goods, whose production costs a lot, cheaper on the World market, even if they are not profitable. For instance, the USA or the European Union (CAP) give aids to their local producers, even if this practice triggers an unfair competition. But the WTO promotes the interests of the American average firms, like SMEs (small and midsize enterprises) for instance: the WTO helps the reduction of trade 2 - The newly industrialized countries/economies (NICs/NIEs) again, comprising Taiwan, Singapore, South Korea (dragons), but also workshop countries such as Thailand or Indonesia. This category sometimes comprises China… The North-South divide is more blurred in American and English Geographies. The definition of the NIEs fort instance is wider and these countries can either be considered Developed Countries (three dragons) or Developing Countries (wider definition comprising other Asian countries). 2 – The drawbacks of Globalization for Developing Countries The forgotten Least Developed Countries FDIs do not reach the Least Developed Countries, i.e. 50 countries of the World. TNCs and developed countries do not want to invest there because of the lack of infrastructure, political instability or even civil war, lack of education of the population, epidemics, etc. Most of these countries are Sub-Saharan countries. The local scale: poverty in urban landscapes Inside these LDCs, poverty is particularly blatant at a local scale, in slums consisting in packed huts made of salvaged materials including corrugated iron, with no urban pattern. These pockets of poverty are excluded from Globalization. III – A Globalized culture: threat or mutual enrichment? Culture is the way a group of people has organised itself and transformed Nature in order to live together, thus creating rules and habits (language, religion, eating habits, housing habits…), that future generations can or have to obey, to follow. We shall wonder whether these rules are modified and/or threatened by Globalization. Globalization encourages international aid but it entails dependence Help differs from investment: - Help has a short-term vision, its action is immediate and the needy country is dependent on the others. - On the contrary, investment implies a long-term vision and its purpose is to generate economic growth. Ex: giving girls the chance of education, building the infrastructure needed to attract FDIs, etc. Investment means autonomy while help means dependence. More, the benefit generated by outsourcing is not always profitable because of the leakage effect: the benefits made in developing countries are taken away, back to the investing countries, i.e. developed countries. A – Globalized culture is synonymous with cultural “imperialism” 1 – Can we talk about an Americanization of the World? The exportation of American Culture through consuming goods Cultural imperialism means the deliberate and somehow aggressive way some countries export their way of life to others. It applies to Western way of life and mostly to the USA. Here are some examples: Movies and serials (Friends, Star Wars, Titanic…); Music; Clothing (Levi Strauss & Co selling in more than 110 countries); Food (McDonald’s and its 30,000 restaurants, gathering half a million employees in the World)… These are emblems of American success and overwhelming culture and way of life. Globalization is often considered to be synonymous with Americanisation. These consuming good convey a vision: - The idea of American superiority (ex: loads of movies where American heroes save the World like in Independence Day, 1996, R. Emmerich). - A certain image of happiness like in McDonald’s advertisements for instance (picturing a perfect family, everybody is smiling, great moment in McDo restaurant), giving the perverse feeling that happiness is reached through consumption. C – Summary: Map of the North / South divide Globalization favours development but it is not progressing evenly. Globalization is considered responsible for increasing inequalities between the countries: between Northern and Southern countries, but also between the emerging countries and the least developed countries, i.e. South-South inequalities. We can divide the World into two parts: Developed countries / Advanced countries / Industrialized countries comprise : - Triad or World Oligopoly, also called the More Economically Developed Countries (MEDCs) – North America, Western Europe, Japan. - The CEEC (Central and Eastern European Countries), former communist countries. - The newly industrialized countries/economies (NICs/NIEs) - Taiwan, Singapore, South Korea (three dragons) American hard and soft powers: the American supremacy Developing countries / less (economically) developed country (LEDCs) consisting in: - The least developed countries – mostly Sub-Saharan countries. - The emerging countries (China, India, Mexico, Brazil and sometimes South Africa…). The acronym BRICS is also used: Brazil, Russia, India, China, South Africa. - The oil-producing countries (Arabic Peninsula…) 3 hand, its creation shows the will of Muslims to assert their identity (the name is evocative), cope with the loss of identity and emancipate from the American domination, but on the other hand, this product copies Coca-Cola (same can, same colours…), because America is fashionable. This is a love-hate relationship. Hard Power Designates the recourse to coercitive means, generally military or economic means, to influence other countries, force them to do something… These means consists in war for instance (the USA is the first military power in the World), or in economic sanctions (the USA remains the first economic power in the World)… Soft Power Concept coined by Professor Joseph Nye in his 1990 book entitled Bound to Lead. He argues that even if the hard power of the USA is decreasing because of new challenges (especially the raise of China), the USA remains the leader of the World because of its soft power. Designates the non-coercitive means (i.e. without force) which can influence and persuade other countries. This soft power consists for instance in prestige, positive reputation, exemplarity, history… Ex: the scientific and technological advance and fame of the USA, the American interventions in the two World Wars… The USA is admired, which contributes to its soft power. Sum of both : smart power 4 – Huntington’s Clash of Civilisations Samuel Huntington, Harvard’s professor, who published a book in 1996 entitled The Clash of Civilizations. He defends the very idea that conflicts are no longer motivated by territory (WWI) or ideologies (WWII and CW), but are due to opposed cultures and civilizations :”(…) the principal conflicts of global politics will occur between nations and groups of different civilizations. The clash of civilizations will dominate global politics. The fault lines between civilizations will be the battle lines of the future.” Very controversial theory because it is difficult to define what a civilization is. Simplistic vision to express an incompatibility between the Western and the Muslim civilizations. B – A globalized culture, a synonym of mutual enrichment Wal-Mart in Mexico: Anti-American reactions to this American “invasion” The US culture spreads all around the World thanks to mass communication means. It infiltrates every part of the World thanks to American corporations which settle there or at least export in foreign countries. This raises fear that this global culture may become too Americanized, destroying local and specific cultural, economic, and religious traditions. Wal-Mart, the largest supermarket company in the United States (2 million employees throughout the World!), settles affiliates in other countries like Mexico. The new facilities, a big concrete building to house the huge supermarket, are built near ancient Aztec ruins, in a historically very valuable site. This establishment is denounced as a “new conquest” of the territory, as an aggression that threatens both Mexicans’ Cultural heritage and their economy (it threatens local and small businesses). This supermarket raises hostility, indignation, lack of understanding. It is perceived as a kind of “imperialism”, it is assimilated to a loss of identity. Globalization also promotes cultural enrichment. Considering Globalization synonymous with Americanization is an easy and popular prejudice. Globalization transforms American culture America is fashionable and tends to be copied or to spread its overwhelming way of life over the rest of the World as we saw, but this leads to a transformation of the American culture itself. Indeed, if America is a popular country on the one hand, then it is also highly criticized as it is in a central position on the World stage: famous and therefore criticized. American culture is changed by its “imperialism” and by Globalization. Indeed, people put pressure on the USA by criticizing the country. For instance, American environment negligence is denounced throughout the World. Globalization reinforces diversity Globalization and the revolution of communication means allow the people of the World to know more about the others. And this reinforces cultural diversity. For instance, French cheese is today advertised via the Internet, allowing it to have dispersed customers around the World who get to know about it through websites. In China, cheese imports flourish and increasing rapidly: the Chinese got to know cheese through big brands such as McDo… But their consumption is evolving: Chinese are starting to discover more “delicate” kinds of cheese! Therefore, Globalization may strengthen, rather than weaken, local cultures. 2 – Globalization is not Americanization The example of the Bollywood movie industry illustrates the fact that Globalization is not always synonymous with Globalization. This industry is very dynamic (twice as many movies as in Hollywood are released every year) and spreads Indian culture in other Asian and even African countries. 3 – How to cope with this threatening Americanisation of the World? The example of Mecca-Cola Resistance to Americanization exists, mostly in developing countries. Mecca-Cola is a sparkling soda led by a Franco-Tunisian chairman. This product is paradoxical: on the one 4