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Is Globalization Bad?

Globalization

Definition:

The tendency of investment funds and businesses to move beyond domestic and national markets to other markets around the globe, thereby increasing the interconnectedness of different markets.
-Dictionary.com

The Beginning

One of the best parts about going to such a large and well known school is that you have access to a lot of information. However, when you find out that there are companies who are still doing business in countries like Darfur, then you just want to scream. If you don’t what is so important about Darfur, then you should scream, or browse the provided Wikipedia link.

Where to begin?

Globalization is a difficult phenomenon to discuss because there are so many issues involved, from government, to business, to labor, to nongovernmental organizations, to international institutions, to the people who are affected but not directly involved in the spread of global ideas, institutions, products, etc. However, I believe that I shall begin with the question, and hopefully end with an answer. (Note that I am saying an answer, which may not necessarily be the only answer.) I must also note that I am for globalization, but I am not supportive of the way that it has evolved.

Is globalization bad?

Once again, this is a difficult question, but I think that a good way to discuss is to consider the positives and negatives involved in globalization. First and foremost, I have to say that none of the bad, nor any of the good can all be attributed to one source. In today’s global society, everything is interconnected. People are affected by hidden sources, and it is not possible to extract a single cause for any of the destruction or development that has occurred. Globalization is truly a global issue.

The good: Ideas

There are many good consequences to globalization. If you want to criticize it, you must acknowledge that despite the problems that it has led to, it has also brought great benefits. Looking on a large scale, globalization involves a flow of ideas. If you look at many authoritarian regimes, you can find reform and protest groups rising up against their governments. Yes, it can be a bloody battle, and oftentimes they are unsuccessful. But, the transmission of liberal, humanistic, and/or democratic ideas has influenced the way that these people, and their governments respond. This is not to say that liberalism and/or democracy are the best ideologies, but one must admit they do lend to equality, whereas communism and authoritarianism do not. (Yes, you can say I am biased, but I have also lived my whole life in the United States of America.)

Products

Globalization also leads to the exportation/importation of products worldwide. There are two specific issues that I want to discuss. Firstly, because of the global market and the ability to outsource production to other countries, it costs less to make various products. Despite competition–or perhaps because of it–companies are able to provide their products to the customer for cheaper prices. Cheaper prices to the consumer in time means an increase in GDP, and the country overall–through various economic caveats that I won’t discuss here–is richer. The government can focus there efforts on other things; e.g., trying to increase the living stands of all, blah blah. Anyway, cheap goods mean more spending. Cheaper goods also benefits third world countries. They are able to import goods for less, and people can actually eat. Governments like the US offer subsidies to farmers, making it possible to sell their goods cheaply, and yes, third world countries, developing countries can benefit from this. Think about the issue of telephone lines. It costs developing countries too much to build telephone lines, but with the advent of cell phones, even tiny villages in Africa can have access to the outside world. From a very recent (10/14/06) article (bear in mind that I wrote this about 2 weeks prior):

Rural areas in emerging economies where most new mobile phone subscribers come from are often not connected to the electricity grid, which means that the base stations to connect mobile phone users to the network are powered by generators.

In Nigeria, 75 percent of the country is not grid-connected.

Fuel consumption by these base stations can be significant. Ericsson estimates 25,000 litres of fuel are needed every year to power a base station. The same amount would power close to 20 cars, each driving 20,000 kilometres, for a year.
-Lucas van Grinsven

One question that one can ask is: if farming is important in these third countries, why would they want US products to be cheaper? Well, more and more countries are seeing that industrialization is the key to becoming wealthy. They want to focus less on farming, and build their industrial sectors so that they are no longer beholden to countries like the US.
(Also bear in mind that a lot of these points will be addressed from the other side of the debate below.)

Developing Countries

In a point related to the spreading of ideas, globalization helps developing countries… well, develop. It gives them access, for example via the internet, or through the IMF, UN, WTO, and other international institutions, to key information that helps them learn how to build their country into successful nations. Even communist countries like China are still employing many of their people, and their standards of living, although not great, are increasing with interactions with multinational corporations, international institutions. However, China is an anomaly in it’s ability to have both communism and a capitalist economy.

I can’t really think of anymore interesting benefits right now, but I may add more later.

The bad: Institutions

Despite the “praises” that I gave to institutions above, I am not a fan of them (e.g., the IMF, UN, WTO). The problem is that they are trying to force developing countries to follow their “one best rule.”

Let me start with the IMF

Firstly, its’ recommended policies feature market fundamentalism, which assumes that pushing towards open markets is the best way to help economic situations. They tell a country that in order for them to help them (by loaning them money) they must have open markets, free trade, and exports. And this all forces a country to restructure their markets. They say that the country must get rid of capitalist controls, which will encourage an investor based in countries like the U.S. to invest in the poorer developing countries.

In return, the IMF loans money to support currency and to help repay investors. In cases where an investment goes bad, or something like that, a investor can pull out, and is given “bail out money” (money to compensate for their losses).

The Problem

Well, actually there are quite a few problems, but I will only list 3 of them. First problem: the bail out option. This is probably one of the biggest problems. It encourages speculation and gives investors essentially a free pass to pull out of a country if something goes wrong. There are little to any consequences when it comes to investing because there will always be a way out. I’m sorry, but I always thought that an investment was to involve some kind of risk, if things go bad, you should take the hit for it. More importantly, this breaks the economy in the poor country. When investors pull out, and there is nothing there to stabilize the market, everything collapses. The market should just be allowed to do what it has to do.

The second problem: the IMF is reducing the role of government when it dictates to a poor country what needs to be done and when. A developing country needs a strong government to keep everything, especially the economy stable. The budget cuts (made to decrease fiscal spending) weaken the society. People who need the money do not get it, and subsequently there are more people who are poor. How do they expect the citizens in these countries to spend money if they have no disposable income? This addresses the concept of cheaper prices discussed above because if one has no money to spend, it does not matter how cheap it is, he/she still cannot buy it.

The third problem: the general assumption that open markets and free trade will work for a developing country… because they say so. They assume (yes, this is an ass/you/me situation) that because rich countries like the United States benefit, that a developing country will also benefit and become rich. However, they must forget that none of the original rich countries like Great Britain, France, the United States became rich with open markets. It was actually quite the opposite. For the bulk of their existences, their policy was one of high tariffs, greater exports and fewer imports, mercantilism, etc. Protectionism was the policy: protect the government, protect the economy, protect the people. Free trade was never the answer.

The WTO and the UN

Much of my criticisms for these institutions is similar to that of the IMF, so I won’t bore you by repeating myself. However, I will say that each institution favors free trade over things like social objectives or environmental concerns, and development. The fact of the matter is you cannot have it both ways, so all three decide to advocate one.

Interests

My final point of objection would be the interests that are served. The people who run the IMF, UN, WTO, the members of the G-7 and G-8, etc. do want the world “to be a better place.” I do not deny that. I would freely agree that that they want poorer countries to do better so that the people in them no longer have to suffer. The problem is that these are not the only interests that they want to serve. Their personal interests come first. They would not advocate policies that would be better for developing countries and bad for them. They are first and foremost self-interested.

Is that completely wrong? No. It would be impractical and suicidal for a country to put everyone else’s needs ahead of their own. However, it is irresponsible for them to advocate the policies that they do when they do not work, and they know that they do not work. Yes, my friends, the leaders in the IMF and other institutions have actually admitted that they know that the policies are not working. They claim that they are willing to have reform, but they will not abandon their central features (free markets, fiscal and monetary austerity), even though these are also the central problems.

My thoughts

Do I believe that globalization is bad? No. I think it is both necessary and beneficial. However, I do despise the leaders who are influencing its developmet. The self-interest and arrogance is ruining the blessings that globalization brings, and in turn ruining countries. There are too many countries on the brink of disaster because they are being exploited by the only alternatives they have: us, or should I say our governments and our corporations.

I’m not against big business. I’m just against the big mess that it leaves behind.

Shout Outs

To Milton Friedman, Joseph Stigltiz, and my Professor for teaching me stuff. (How eloquent I know.)