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Saturday, April 20, 2013

What is globalization, what are the major forces (or drives) behind its rise? Critically analyze how each of those identified forces shapes the globalization process?

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1. Political Internet: State and Politics in the Age of Social Media,
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Biju P R
Author, Teacher and Blogger
Assistant Professor of Political Science
Government Brennen College
Kerala, India

An accurate definition of globalization is elusive, but it is widely accepted that the world is becoming increasingly interconnected in terms of its economic, political and cultural life and that information technology (IT) is deeply implicated in the change process altogether.[1]  But the ongoing process of globalization is exceedingly economic and the economic content of globalizations set the agenda for political action. This economic globalisation is managed by neo-liberal ideas, the pale shadow of Keynesian Economics – World Bank (WB), International Monetary Fund (IMF) and World Trade Organization (WTO), multinational corporations and “Davos Citizens”. (Those who are participating in the annual meeting of G-8 Groups).  Nowadays, we live in a global society. It is not a unitary society, nor is it an ideological community or state, but it is a single power network- says Mann (1993). Globalization' is both an historical fact and a political football says Toulmin (1999). Globalisation is a fairly broad term that describes the phenomena of the ‘local’ turning into the ‘global’, or the coming together of different aspects of the world into a single and identifiable state. David Held (1999) says globalization can be thought of as a process (or set of processes) which embodies a transformation in the spatial organisation of social relations and transactions - assessed in terms of their extensity, intensity, velocity and impact - generating transcontinental or interregional flows, and networks of activity, interaction, and the exercise of power .Albrow says globalization refers to all those processes by which the peoples of the world are incorporated into a single world society, global society. International Monetary Fund  -defines globalization as the growing economic interdependence of countries worldwide through increasing volume and variety of cross-border transactions in goods and services, free international capital flows, and more rapid and widespread diffusion of technology.
The Forces behind Globalization
The spread of globalization has been fed by many factors.  One of the most important has undoubtedly been the ever compliant pro-globalization decisions made by the world’s governments. Another important one has been institutions created by the economic globalization.  Also of crucial importance has been the technology that allowed globalization to happen.  Last but not least engine of globalization was global market.[2]
Transnational Corporations
Transnational corporations (TNCs) operate across borders based in several countries at once. The reduced trade and investment barriers of economic globalization created vast new markets and almost limitless expansion possibilities for these companies.  In the 1970s there were about 7000 TNCs in the world.  By 1997 the United Nations Conference on Trade and Development (UNCTAD) estimated 53000 of them with 448000 foreign affiliates.[3] The area where TNCs wield some of the greatest influence is trade.  Today the largest 500 TNCs control nearly 70 percent of global trade.[4] About a third of world trade is conducted between different arms of the same TNCs.[5]  Seven TNCs control 85 percent of the world’s trade in grain, eight controls up to 60 percent of worlds trade in coffee seven account for 90 per cent of world trade in cocoa and three control 80 percent of the global trade in bananas.[6]   Despite the substantial global benefits from such trade, the adjustment pressures created on importing countries could provoke a protectionist backlash.[7] Large TNC finance and software companies were involved in getting devastating side deal of the Uruguay round on the General Agreement on Trade in Services (GATS)[8].
This relentless influence of the TNCs was most responsible for the collapse of World Trade Organization (WTO) talks at Cancun, Mexico in September 2003.[9]  The trade Related Aspects of Intellectual Property Rights (TRIPS) agreement, which award global TNCs patent control over broad range of strategic goods and services sold around the world.  Agitation for the TRIPS agreement followed lobbying of the Reagan administration by a number of large American software and pharmaceutical companies during that time.[10] Like economic globalization, in general, the TNCs can be both negative and positive for domestic economy.  If it brings in new technology, new employment and a significant level of foreign exchange, it can be a positive influence.  If it crowds out existing business in a country, transfers little technology or know-how and ends up having an insignificant net influence on country’s foreign earnings, it can have a negative influence.[11]
The World Trade Organization (WTO)
Just as powerful as TNCs in influence over the global economy are three international financial ‘sister’ institutions.  The International Monetary Fund (IMF), the World Bank (WB), and the World Trade Organization.  All have their origins in international economic talks held at the end of the Second World War.[12]  Since the Second World War, there have been eleven round of world trade negotiations, of the first eight rounds, the last three have been particularly influential in shaping world trade. The Uruguay Round, negotiated between 1986 and 1993 ended up having a massive influence on the pace of economic globalization.  After Uruguay Round, the WTO stands for ‘rules based’ international trade where all countries are supposedly equal.[13] The Uruguay Round of International trade negotiations embraced many new areas that hadn’t been touched by earlier rounds.  Consequently the WTO overseas and enforces new global trade rules in areas previously unaffected by Uruguay Round were agriculture, textiles, patent rights services and trade related investments.[14]
Another area that the Uruguay Round pushed into economic globalization was services.  The new services trade rules were enshrined in an agreement called the General Agreement on Trade in Services (GATS).  The GATS agreement was aimed at a progressive liberalization of the global trade in services, starting in February 2000.[15]  There remain loopholes that can be taken to the advantage of big countries.  The Market Access Commitments of WTO Members as well as the provision of ‘Listed Services’ are still unclear and unsound.[16] This attempt also ventures to unfold the implication of trade in service clauses with respect to global offshoring of services. 
The Bretton Woods Twins: World Bank (WB) and International Monetary Fund (IMF)
Created in 1945, immediately after the Second World War, the Bretton woods institutions have pursued specific economic and development concerns, growth, poverty reduction, and trade and finance.  The creation of Bretton Woods institutions should be seen in the context of the depression of the 1930s.  Deep and persistent slumps erupted – trade barriers, the collapse of the international monetary system and termination of international lending.[17] Like the WTO, the IMF and WB are also catalysing the ongoing expansion of the world economy.  The IMF is concerned with the short – term stabilization of countries experiencing balance of payment difficulties while WB is concerned itself with the long-term development through specific project loans.[18]
The IMF is seen as a pale shadow of Keynes original vision, while the WB was for the expansion of global growth and employment rather than for deflationary policies.[19]  The start of Third World debt crisis in 1982 kicked off new roles to IMF and WB.  It began to increase lending.  By this time IMF ceased to be a short – term currency crisis lender.  It began to start extending conditional long-term loans with titles like Extended Fund Facility.  The WB similarly began to operate beyond its original narrow ambit of project based lending that the variability of its loans were necessarily connected to the long-term economic health of its poor – country debtors.[20]
The IMF/WB standard formula brought on even lower growth just when higher economic growth was needed.  It prescribed huge cutbacks in government spending higher interest rates and continuing over valued currencies.  As a result of the dented reputations of the two institutions some changes have taken place.  Both institutions even admitted to some minor failings during the Asian melt down. The big body blow to the IMF and WB have been growing agreement between the left and the right of politics, particularly in the United States, that the policies of neither institution are working.  The net result of their dubious policies and ever diminishing support is that both became unpopular now.[21] Underpinning the influence of the WTO, IMF, WB and TNCs is what is known as the “Washington Consensus” or the ‘Wall Street Treasury Complex’. These are the labels for the common free market ideology.  Several factors reinforce the influence of the Washington consensus.  Historically it perpetuates an Anglo Saxon free market view.  Much of the current economic liberalization ideology pursued by the Washington consensus was originally drawn from the philosophies of a high profile free market economist, Milton Friedman.  He in turn was inspired by free market contemporary John Keynes and Austrian economist Friedrich Von Hayek. Their philosophies were championed by Margaret Thatcher and Ronald Reagan.  These influences are reinforced by the decision-making structures of the IMF, the WB and the WTO.[22]
The Technological Engines of Globalization
It was the technological change that allowed economic globalization to happen in the first place.  Politicians facilitated economic development to happen, but technology has given it the means.  Technological change, especially since the Second World War, has massively shrunk the world, making it more able than ever before to converge into one giant world supermarket and bank.  In 1956, it was possible for only eighty nine simultaneous telephone conversations to occur via the cable that linked Europe to North America, today it is possible to have up to a million simultaneous conversations taking place through the satellite and fibreoptic communications link that now exist between two continents.[23] Computers have similarly shrunk the world.  In 1993 there were only about one million Internet hosts around the world, within just six years the number had increased twenty fold to about forty two million.[24] An equivalent revolution has taken place in transport technology.  According to the Boeing aircraft corporation, world air traffic cargo trebled between 1985 and 1997 and is predicted to treble again by 2015.[25] All these technological changes mean that both money and goods can be moved anywhere around the world less expensively than ever before.  There has been no shortage of business people eager to exploit the new opportunities this had created.
Free Trade and Global Market: Supreme Institutions of Globalization
In the contemporary phase of globalization which began around 1980, a group of developing economies stopped being on lookers from the sidelines and began to participate in the global economy.  They harnessed their abundant human resources, produced labour intensive manufactured goods and services in which they had comparative advantage and exported them. This worldwide movement of global interaction, which enabled developing economies to participate intensively, was free trade and global market.[26]
Global Market
Global market is another powerful engine of globalization.  It is the venerable innovation of the new global transnational economic order.  In the global village, the market takes up all the space.  It encompasses everything and tends to dominate all other institutions, particularly governments and the United Nations.[27] The global market is totally dominated by transnational corporations. Global market is also private market. This market has predominance over all other social or political institutions. It has a permanent ambition to convert everything in to commodities including currencies, culture, information, education, health, services, water and air.  It integrates all countries into a single homogenized model of development and trade.[28] In the global market financial capital dominates all other sectors of the economy.  This is the result of the predominant influence of banks, insurance companies, institutional sectors, hedge funds on the distribution of capital, mergers, acquisition and competition.  Financial markets have become the judge and jury of all economic policies.[29] The so-called free trade is done on this global market.  It cannot be touched, smelled, sighted or percepted but all forms of transaction, from pharmaceuticals to even outsourcing contracts are done on this. 
Free - Trade
Free trade is another catalyst of economic globalization.  In simple terms, trade that is the buying and selling or the exchange of goods initially came about when certain resources and commodities could not be acquired locally or within specific societies.  As societies grew and came into close contact with one another, barter and trade became a fundamental form of economic interaction.[30] Trade is the most obvious manifestation of a globalizing economy.  This international trade came about when essential raw materials were not available or it was not economically efficient to manufacture goods domestically.  At the end of the Second World War, interest, enthusiasm and commitment to trade liberalization was exceedingly high among the         major trading countries.  This had persuaded more developing countries to integrate in to world economy, attracted by the possibilities of global market.[31] The general decline in trade barriers, such as tariffs and import quotas, help further explosion in international commerce.  The economic opening of countries that have traditionally been minor players in the world economy such as China and Mexico was another reason for intense international trade.  But one force behind the import-export boom has passed all but unnoticed - the rapidly falling cost of getting goods to market.[32]
With the rise of globalization steered by neo-liberal ideologies, pro-globalisation decisions of world’s governments, MNCs, TNCs, WTO, WB, IMF, Technology, World Trade and free Market; now the world has come to a peculiar situation where no one can escape globalisation because it is like a gravitational pull.

[1]       Andrew Heywood, Political Theory: An Introduction, New York: Palgrave Macmillan, 2005, pp. 106-110.
[2]       Greg Buckman, op. cit., no. 11, p. 35.
[3]       Robert Went, Globalization: No-liberal challenge, Radical Responses, London: Pluto Press, 2000, p. 18.
[4]       Colin Hines, Localization: A Global Manifesto: A History of Developing Consciousness, London: Zed Books, 2003, p. 198.
[5]       John Madley, Hungry for Trade: How the poor Pay for Free Trade, London:             Zed Books, 2003, p. 91. 
[6]       John Madley, Food for All: The Need for New Agriculture, London: Zed Books, 2002, p. 122.
[7]       Matoo and Wunsch, op. cit., no. 1, p. 2.
[8]       Ann Capling: Australia and the Global Trade System: From Havana to Seattle, Cambridge: Cambridge University Press, 2001, p. 149.
[9]       Greg Buckman, op. cit., no. 11, p. 40.
[10]     Vandana Shiva, Protect or Plunder? Understanding Intellectual Property Rights, London: Zed Books, 2001, p. 19.
[11]     Kevin Watkins, Rigged Rules and Double Standards: Trade, Globalization and the fight against Global Poverty, Washington DC: Oxfarm International, 2002, p. 190.
[12]     Greg Buckman, op. cit., no. 11, p. 43.
[13]     Ibid., p. 44.
[14]     Ibid., p. 48.
[15]     Greg Buckman, op. cit., no. 11, pp. 49-50.
[16]     Mattoo and Wunsch, op. cit., no. 1, p. 2
[17]     Walden Bello, Deglobalization: Ideas for a new World Economy, London: Zed Books, 2002, p. 38.
[18]     Carol Sherman, A look Inside the World Bank, Sydney: Envirobook, 1990, p. 4.
[19]     Sumit Roy, op. cit., no. 12, p. 39.
[20]     Greg Buckman, op. cit., no. 11, pp. 52-53.
[21]     Anna Willard, “World Bank Poll Finds Bank Arrogant Tied to Us”, Published by        Deb Foskeg via WTO watch email list, (debt@webone.com.a4), 19 June 2003, p. 1.
[22]     Bello, op. cit., no. 32, pp. 59-60.
[23]     Robert Went, Globalization: Neo – liberal Challenge, Radical Response, London: Pluto Press, 2000, p. 18.
[24]     World Bank, World Development Report, 1999/2000, New York: Oxford University Press, 2000, p. 4.
[25]     Wayne Ellwood, The No Non Sense Guide to Globalization, Oxford: New Internationalist Publications, 2001, p. 18.
[26]     Dilip K Das, The Economic Dimensions of Globalization, New York: Palgrave Macmillan, 2004, p. 54.
[27]     Gelinas, op. cit., no. 3, p. 26.
[28]     Ibid., p. 30.
[29]     The Economist, 7 October 1995.
[30]     Spyros Economides and Peter Wilson, the Economic Factor in International Relations, London: I.B. Tauris, 2001, p. 85.
[31]     Diana Tussie and Nagaire Woods, “Trade Regionalism and the Threat to Multi Culturalism: in Negaire woods, the Political Economy of Globalization, London: Macmillan, 2000, p. 54. 
[32]     The Economist, Globalization: Making Sense of an Integrating World, London: Profile Books, 2001, p. 79.

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