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WHAT IS GLOBALISATION?

 Globalisation is the rapid increase in cross-border economic, social, technological exchange under
conditions of capitalism.
 The sociologist, Anthony Giddens, defines globalisation as a decoupling of space and time,
emphasising that with instantaneous communications, knowledge and culture can be shared around
the world simultaneously.
 Ruud Lubbers, defines it as a process in which geographic distance becomes a factor of diminishing
importance in the establishment and maintenance of cross border economic, political and socio-
cultural relations
 Left critics of globalisation define the word quite differently, presenting it as worldwide drive toward
a globalised economic system dominated by supranational corporate trade and banking institutions
that are not accountable to democratic processes or national governments.
 Globalisation is an undeniably capitalist process. It has taken off as a concept in the wake of the
collapse of the Soviet Union and of socialism as a viable alternate form of economic organisation.

WHEN DID GLOBALISATION BEGIN?

 The first great expansion of European capitalism took place in the 16th century, following the first
circumnavigation of the earth in 1519 to 1521.
 There was a big expansion in world trade and investment in the late nineteenth century. This was
brought to a halt by the First World War and the bout of anti-free trade protectionism that led to the
Great Depression in 1930.
 The end of the Second World War brought another great expansion of capitalism with the development
of multinational companies interested in producing and selling in the domestic markets of nations
around the world.
 The emancipation of colonies created a new world order. Air travel and the development of
international communications enhanced the progress of international business.
 The fall of the Berlin Wall and the collapse of the Soviet Union ended the cold war between the forces
of capitalism and socialism with capitalism triumphant.
 The development of the internet made possible the organisation of business on a global scale with
greater facility than ever before.

FORCES LEADING TO GLOBALISATION

1. TECHNOLOGICAL FORCES

 Industrialization
 Transport revolution
 Information and communication revolution

2. ECONOMIC FORCES

 Increasing incomes
 World trade

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 World financial markets

 Market forces
 World competition

3. POLITICAL FACTORS

 Reduce trade barriers

 Intellectual property rights
 Privatization
 Development of trade blocs
 Technical standards

4. SOCIAL FORCES

 Consumerism
 Convergence in customer taste
 Education and skills

THE PLAYERS OF GLOBALISATION

1. THE WORLD TRADE ORGANIZATION (WTO)

 It was established in 1995 to administer the rules of international trade

 The key difference between the WTO and the General Agreement on Tariffs and Trade (GATT), which
it replaced, is that the WTO is a permanent organisation with the judicial powers to rule on
international trade disputes. The WTO also covers trade in services, whereas GATT only covered trade
in goods.
 The WTO’s rules make it hard for a country to favour their own industry over imports from other
countries.
 Also, the WTO rules do not allow a country to favour the imports of one country over those from
another.
 The WTO argues that the growth of trade between countries increases the wealth of everyone.
 Trade allows the production of goods and services by those who are most efficient, thus maximising
their availability at the best price.
 The growth of trade is helped by the lowering of barriers, such as tariffs and import quotas, which is
the object of WTO agreements.

2. THE INTERNATIONAL MONETARY FUND (IMF)

 It was established in the wake of the World War II in 1946 to:

 promote international cooperation on finance,
 encourage stability in exchange rates and orderly systems for exchanging money between countries
 providing temporary assistance for countries suffering balance of payments problems
 The IMF frequently seeks institutional reform in the countries to which it provides temporary financial
assistance

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 The IMF believes that world prosperity is enhanced by greater exchange between nations and that this
is made possible by everyone agreeing to abide by rules.

3. THE WORLD BANK

 It provides loans to poor countries for development projects such as water and sanitation, natural
resource management education and health.
 It also lends for what it calls adjustment projects, which are to support governments undertaking
policy reforms, such as improved public sector management.

4. THE UNITED NATIONS

 It argues that individual states have a dual role with responsibilities to both their own citizens and to
the world society as a whole.

5. THE ORGANISATION FOR ECONOMIC COOPERATION AND DEVELOPMENT (OECD)

 Develops economic and social policy for its members

 It provides economic arguments for globalisation, such as data demonstrating the positive contribution
made by multinational corporations to economic development.

6. UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT (UNCTAD)

 It aims to maximize the trade investment and development opportunities of developing economies and
to assist their efforts to integrate into the world economy

7. THE INTERNET AND TELECOMMUNICATIONS INDUSTRY

 One of the driving forces of globalisation is the advance of telecommunications in general and the
internet in particular.

THE COSTS AND THE BENEFITS OF FREE TRADE

BENEFITS OF FREE TRADE

 International trade and investment have been the engines of world growth over the past 50 years. The
tonnes of goods traded around the world have grown by 16 times since 1950, reflecting the lowering
of tariff barriers. The growth of trade in services is even greater.
 The benefits of that growth have been shared. The countries that are getting poorer are those that are
not open to world trade, notably many nations in Africa.
 China’s opening to world trade has brought it growth in income from $1460 a head in 1980 to $4120
by 1999.
 In 1980, American’s earned 12.5 times as much as the Chinese, per capita. By 1999, they were only
earning 7.4 times as much.
 The gap between rich and poor is also shrinking with most nations in Asia and Latin America.

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 Many people believe that exports create jobs, and imports cost jobs and that it therefore makes sense
to have barriers against imports. This thinking led to the Great Depression in 1930, because so many
countries had erected barriers against imports that global trade fell with catastrophic consequences.
 Most exports also use some imports. To take a simple example, a country might export packaged
sugar, but import the packets. Lowering import barriers makes export industries even more efficient
and competitive in world markets.
 Countries that lower trade barriers concentrate their national energies in industries they are good at,
where they have an international advantage.
 Import barriers encourage countries to focus efforts in industries where they do not have any
advantage. It leads to wasteful and lazy investment.
 Companies of all sizes are involved in world trade – the benefits do not just flow to large multi-
nationals. In most trading nations, raging from Thailand to France, small firms employing less than
200 people account for between 10 and 25% of exports.

COST OF FREE TRADE

 The World Trade Organisation agreements on free trade have functioned principally to prise open
markets for the benefit of transnational corporations at the expense of national economies; workers,
farmers and other people; and the environment.
 The WTO should not solely focus on opening markets but also allow trade to be restricted to support
human rights, labour rights and environmental objectives in other countries.
 The freeing of financial markets has brought global instability, as evidenced in financial crises in Asia
and Latin America and the continuing marginalisation of sub-Saharan Africa.

THE ROLE OF THE INTERNET AND COMMUNICATIONS TECHNOLOGY IN

GLOBALISATION

 It provides an opportunity to gain access to knowledge and services from around the world in a way
that would have been unimaginable previously.
 Internet kiosks, mostly facilitating email with overseas relatives, for example, are springing up in
many parts of Africa.
 The internet may also facilitate opportunities for economic development in industries such as tourism.
 The internet and technologies such as mobile telephony allow developing countries to leapfrog steps
in their development of infrastructure.
 Globalization has drastically improved access of technological latecomers to advanced technologies
and, to the extent that technological upgrading is important for development, it provides a unique
opportunity for low-income countries to raise per capita income.
 Although the internet started off as a communal medium for sharing information, principally among
academics, it is increasingly becoming the tool of transnational corporations to market their
information products around the world.
 Because it is rich countries generating most of the content on the internet, it becomes a form of
cultural imperialism, in which western values dominate. English is the language of the internet.

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 The internet is also creating new gaps between the rich and the poor. Rich countries have much greater
access to the internet and communications services generally.
 We are moving from an industrial age, in which wealth was created by manufacturing, to an
information age in which wealth is created by the development of information goods and services,
ranging from media, to education and software.
 Poor countries are not taking part in this information revolution and are falling further behind.

GLOBALISATION AND CULTURE

 The spread of globalisation will undoubtedly bring changes to the countries it reaches, but change is
an essential part of life. It does not mean the abolition of traditional values. Indeed, new global media,
such as the internet, have proven a powerful means of projecting traditional culture
 It is argued that one of the consequences of globalisation will be the end of cultural diversity, and the
triumph of a uni-polar culture serving the needs of transnational corporations. Hence the world drinks
Coca-Cola, watches American movies and eats American junk food.
 American culture is seen to be dominated by monetary relationships and commercial values replacing
traditional social relationships and family values.

GLOBALISATION AND LABOUR

PRO GLOBALISATION

 The growth in trade between nations has contributed to lifting 3 billion people out of poverty over the
past 50 years.
 Reducing tariff barriers, which makes it easier for nations to trade with each other, lifts the wealth of
all nations by allowing them to concentrate on those where they have greatest expertise.
 Poor countries that have lowered their tariff barriers have gained increases in employment and
national income because labour and capital shifts from import-competing industries to expanding,
newly competitive export industries.
 In addition to providing jobs, companies moving to developing countries often export higher wages
and working conditions compared with those in domestic companies operating in the country.

ANTI-GLOBALISATION

 Globalisation results in the exploitation of millions of workers in countries that do not give workers
rights to organise.
 For example, a woman who sows a $200 Liz Claiborne jacket sown in El Salvador is paid just 74
cents – less than half of one per cent. In the US, the labour cost to sew a garment is typically 10 per
cent of the retail price.
 Workers in poor countries may have to work 12 hours a day, seven days a week with few protections
for health and safety. In some countries, globalisation leads the exploitation of child, and prison
labour.
 The WTO is interested in defending intellectual property and investors’ rights, but not those of
workers.