Sunday, 18 January 2015

Lesson 2: Globalisation: a vulnerable process creating economic growth

Cf. pages 74 and 75 of your DNL textbook


The title describes globalization as “vulnerable”, meaning that it can be slowed down by events happening in the world (wars, terrorism, natural disasters, increasing costs of natural resources), and that it is facing increasing opposition.

Globalization creates economic growth with new products and new markets. But, the process has not, so far, got rid of poverty (some accuse it of actually causing the widening gap between rich and poor).

Globalization appears to offer more opportunities for the already wealthy MEDCs (more economically developed countries) than for the LEDCs (less economically developed countries) where it is seen as a threat to development.

Comments on document 1: Globalization, growth and poverty: building an inclusive world economy

This graph uses the following criteria: emigration to the USA, % of the world’s GDP that the export of merchandise represents, and Foreign Direct Investment in developing countries (i.e. how much capital rich countries invested in developing countries) to show that globalization since the 1870s has not progressed at an even pace since it is affected by factors such as world events, agreements on trade, and progress in the means of transport.

There have been three “waves” of globalization:

1870 to 1914: The first wave was the “golden age” of globalization, with increased international trade (due to falling costs of transport), free flow of capital (massive investments in colonies), mass emigration (mostly to the USA).

(1914 to 1939: globalization was halted during the First World War and the Great Depression: very little emigration, a down-turn in trade (there were high trade tariffs) and foreign investment.)

1945 to 1979: Second wave of globalization, due to liberalization of trade between North America, Europe and Japan. Most former colonies chose not to take part in it (preferring to produce their own goods rather than importing them). The shipping container and jet travel made transport much cheaper. Restrictions on immigrants were only slowly lifted. Capital flows between rich countries were restricted up until 1971, when the Bretton Woods system (which fixed exchange rates between major currencies) ended.

1980s to today: Third wave of globalization, with increased participation of developing countries (China open-up to the market economy in 1979 and India in 1991). China is today the “workshop of the world” and the biggest exporter. Thanks to Internet, services on a world scale have increased. Outsourcing and offshoring have become the norm. Increased immigration means that the percentage of foreign-born citizens in the USA is now about 13% of the total (the same as in 1913).

The “highs and lows” of globalization are determined by world events (such as the world wars), international agreements, progress in transport and communication, and by US hegemony since the start of the 20th century (its economy, foreign policy, immigration policies).

Comments on document 2: Worldwide business: the New York Stock Exchange

NYSE is the biggest stock exchange. All global cities have similar financial centres; it is one of the defining features of a megalopolis. The display panels show the Dow Jones index (i.e. of the value of the 30 biggest firms of the USA), the NASDAQ (National Association of Security Dealers Automated Quotations), an index which measures the strength (performance) of shares in businesses which are part of NASDAQ. Both the Dow Jones and NASDAQ measure the strength of the USA and world economy. Financial markets are more and more contested because some see them as part of the cause of the economic downturn which started in 2007 (cf. the Occupy Wall Street movement).

Comments on document 3: Anti-globalisation activists: “Africa is not for sale!”

Cancun is in Mexico. The WTO met there in 2003 for important trade talks. Poorer countries wanted to talk about increasing access to the world market in agricultural products for their products, and about the subsidies accorded farmers of the EU and the US by their governments. The talks failed.

“Africa is not for sale” is a slogan that was shouted by some African anti-globalization protesters during the talks (it is probably what the man in the photo is shouting). The meaning is: Africa is not just merchandise to be sold off by the powerful countries of the world to other wealthy countries of the world (i.e. Africa belongs to the Africans and it is where they live and work; the resources of Africa should belong to the Africans themselves). The banner (streamer) being held up by the man shaking his fist in anger says clearly that Africans should resist the WTO’s liberalization of the world’s economy. Note the slogan on the back of the Tee-shirt of the woman on the banner: “Our world is not for sale”; the meaning is: ordinary people should be able to access the world’s resources and not have them “stolen” by the wealthy (transnational corporations).

What is alter/anti-globalization?

It is a loosely-structured social movement that opposes the negative effects of economic globalization, and supports cooperation between the peoples of the world, environmental and climate protection, economic justice, labor protection, protection of indigenous cultures, human rights. According to anti-globalization activists, the victims of globalization are the poor in Latin America, Asia, and especially Africa. The WTO is to blame. The poor in developed countries (the “4th world”) suffer too from globalization.

A few alter/anti-globalization associations:
  • ATTAC (Association pour la Taxation des Transactions financière et l'Aide aux Citoyens), set up in 1998 in France, it is now an international association.
  • People’s Global Action, since 1998, international coordinating body for anti-capitalist actions.
  • Via Campesina, since 1999, international coalition of peasant organizations advocating sustainable agriculture.
  • Fairtrade International, set up in 2004 to promote partnerships between consumers and producers.
An aspect of the work of many other NGOs (Oxfam, CAFOD, etc.) is campaigning against globalization and promoting alternatives to it like Fair Trade (a market-based approach that promotes sustainability and better trading conditions for producers in developing countries).

Comments on document 4: The new division of labour and its repercussions

The “new international division of labour” means that low-qualified workers in developing countries will be used by transnational firms to make their goods cheaply (since the labour force is cheap and plentiful), while high-qualified workers and managers will remain in developed countries. Electrolux (which produces 25% of the world’s household electric appliances) is a typical multinational in that it needs “to move production to other countries to be competitive”, i.e. to Eastern Europe, Mexico and Asia where the workforce is cheaper. The consequence of this on low-qualified workers in wealthy countries is unemployment.

Globalization implies outsourcing (“délocalisation” in French) by companies (also described as offshoring), that is: the relocation by a company of an operational process, such as manufacturing, or supporting processes, such as accounting, to another country.

Offshoring fosters an imbalance in the division of the labour force: qualified personnel in the North, low-skilled workers in the South.

The “law of supply and demand” means in fact that people in the North want a product as cheaply as possible; in order to satisfy our demand for cheap goods, firms (which compete with each other) have to find the cheapest means of supplying these goods and they do so by offshoring to where the cost of production is lowest, i.e. in the South. This fosters an imbalance between North and South in that poor workers are in the South, and rich consumers in the North.

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