Evolution of Globalization - Term Paper Example

Introduction Recent decades have witnessed a tremendous expansion of global trade, premised largely on free trade associations such as the North American Free Trade Agreement and the World Trade Organization. These developments have brought about a global economy from whose cycles of expansion and recession no single country is completely insulated, whether it be Third World or fully developed. The process of economic globalization has arguably been an enormous boost to many of the advanced countries of the world. However, there is strong evidence that globalization and free trade has enabled the developed world to take advantage of the resources and markets of the developing world without providing the benefits of real economic development to those countries. Consequently, fair trade has not developed in Third World countries, such as those of Africa and Latin America. Evolution of Globalization Globalization is a post-World War II phenomenon that evolved based on the need to identify ways to promote economic progress among newly independent countries that used to be colonies. According to Piasecki and Wolnicki (2004), "After the second World War, there was widespread interest among economists in finding solutions to the poverty and underdevelopment left behind by the disintegrating colonial system" (par. 3). Experiments with planned economies in the 1950s and 1960s were met with only limited success, and frequent failure, in the developing world. "Until the 1980s, a score of developing nations experimented with non-market theories and concepts, but with rather limited success. Brazil, India experienced a few years of non-sustainable growth in the 1960s. Unfortunately, none of these countries could match the successes of those that chose the mixed economy and the market system in 1990s" (par. 8). By the 1980s, it became apparent that Third World development lagged and there was a need for a new approach. "By the 1980s, against many prominent economists' expectations, development had not materialized in the Third World - with the exception of the Gulf nations. Even in countries such as Qatar, Kuwait, and Saudi Arabia, where significant growth was observed, employment gains were generally unsatisfactory. Everywhere else in the developing world inequality and poverty grew. In addition, inflow of capital and Western consumption standards challenged traditional sectors and the existing power structures. As a result, tensions between modernizers and Islamic traditionalists heightened" (par. 9). In other parts of the world, the 1980s also brought a realization that economic development approaches had not been adequate. The 1980s came to be known as Latin America's "lost decade," in which there was "mounting debt, inflation, and negative growth" throughout much of the region (par. 15). A consensus began to grow around the idea that "a free market and open economy supported development far better than any form of protectionism and state interventionism." A new model of global capitalism, spearheaded by America, began to take hold in the 1990s in the hopes of reversing the economic stagnation in the Third World that had marked the decades since World War II. A theory began to take hold that opening up economies, spurring international investment, and knocking down trade barriers would produce a rising economic tide that would benefit both the developed and the developing world. It was hoped that multinational corporations let loose to pursue their profits across political boundaries would be the engine that spurred a new era of global economic growth. The new economic model was based on "tough fiscal and monetary policy, deregulation, foreign trade and capital flow liberalization, elimination of government subsidies, moderate taxation, liberalization of interest rates, maintenance of low inflation, and so forth. The proponents of these comprehensive liberal reforms strongly believed that the 'miracle of the market' would eventually solve the problems endemic to underdevelopment. A special role in this process was attributed to global corporations and the inflow of foreign direct investments to low-cost developing economies" (par. 16). The shortcomings of this approach became apparent in the late 1990s and largely contributed to the rise of the anti-globalization movement. Various financial and currency crises of the period, such as those that happened in Asia and Latin America, "showed that the combination of fixed exchange rate regimes and a large inflow of foreign investment could be very risky for macroeconomic stability" (par. 21). In addition, appropriate legal structures were not in place throughout much of the developing world to accommodate economic liberalization, leading to the kinds of corporate abuses that precipitated anti-globalization protests with which the world is still trying to grapple today, nearly a decade into the 21st Century. Anti-Globalization Movement Anti-globalization is a movement that developed in response to the negative impact of world trade and global capitalism. A strong perception exists, to a large extent based on reality, that multinational corporations have taken advantage of countries whose governments less than adequately protect their people from environmental, economic and other harm. The anti-globalization view, in other words, generally holds that the rich countries of the world, by way of their corporations, are getting richer by taking advantage of the poorest and most vulnerable. Free trade regimes have largely contributed to this phenomenon. Often times, global corporations will end up supporting corrupt and criminal regimes in order to advance their capitalist ambitions. Third World countries, the thinking goes, have thereby been further subjugated and made worse off in order to promote the economic progress of the developed world. Therefore, multinational corporations and the countries that support them are arguably not being responsible global citizens. Mathiason (2006) vividly describes the worst nightmare of global capitalism's impact on Africa and elsewhere. "Oil giants foment gang warfare in developing countries; their negligence causes catastrophic environmental disasters. Ruthless mining firms stop at nothing to secure lucrative concessions, bribing officials and even toppling democratically elected governments. Big Pharma obstructs access to vital life-saving medicines for the world's poorest. Consumer titans douse their unhealthy wares with sugar and salt while simultaneously buying up burgeoning ethical brands to own and control the nascent competition. Rich world agribusinesses suck on the teat of state subsidies while demanding poor nations give them access to their markets." (par. 1). Certainly this description is alarmist to some extent. After all, multinational businesses are simply doing what they should naturally be expected to do within the confines of the legal constraints that are placed on them - that is to try and make as much profit as possible. As idealistic as we hope corporate leaders would be regarding the need to be good stewards of their host countries, they are not in the business of being saints but of making profits. All of the great successful capitalist countries of the world have developed thriving economies only because legal requirements have kept the worst bi-products of capitalism in check. Consumer, environmental, labor and other protections have been enshrined within the law of developed countries in a way that is often not the case for Third World countries. For this reason, anti-globalization activists have largely misdirected their ire, which often targets the "evil" multinationals. To achieve their objectives, their efforts would be better directed toward pushing for international treaties that impose the same kinds of consumer, environmental, labor and other protections on multinational corporations that exist as a matter of course in developed countries. Thus, whether or not a specific host country has in place the regulatory standards to protect people, and whether or not its regime is corrupt, international law would bind these businesses to pursue their profits in a responsible way, thus ensuring fair trade for the Third World. Inequality of global wealth is another point of consternation for anti-globalization activists. Brittan (2002) has maintained that "the total income of the richest 25m Americans is equal to the income of almost 2bn of the poorest people" (par. 11). Activists attribute this growing income disparity to the effects of globalization, asserting that the efforts of multinational corporations to enrich themselves at the expense of the poorest people in the world have caused the gap to grow. Brittan goes on to argue that the income disparity between rich and poor countries "should make western citizens feel guilty only if it can be plausibly shown that the plight of the poor is in some sense due to their own comparative wealth. And they are only helpful for policy purposes if there were a government-to-government way of transferring incomes from the richer to the poor countries that actually made the poor better off instead of disappearing into prestige projects, inflated arms expenditure and Swiss bank accounts." Anti-globalization protesters have developed a reputation for raucous demonstrations that have often turned violent. Meetings of the G8 group of industrialized nations, as well as the World Trade Organization, have seen particularly fierce protests by anti-globalization activists. Nevertheless, the post-9/11 era and American "War on Terror" has seemed to have caused a decline in the volume and volatility of anti-globalization protests. This is perhaps because of heightened security measures that keep these demonstrations far away and isolated from the summit meetings. Indeed, some have gone so far as to declare the demise of the anti-globalization movement. Canada's International Trade Minister, Pierre Pettigrew, has asserted that the movement has "completely disappeared" ("Anti-globalization movement" 2003, par. 2). He has claimed that "Protesters stress alternative forms of globalization rather than attacking the entire concept, as they did a few years ago" (par. 5). He further asserted that "The anti-globalization movement has realized that globalization could help everyone, in the south and poorer people in all societies" (par. 6). Arguably, this pronouncement is overly optimistic on the part of globalization supporters. The G8 summit that took place near the same time Pettigrew expressed these observations "drew up to 50,000 protesters and included several violent incidents" (par. 3). Anti-globalization activists continue to turn out in force and rarely fail to usurp the attention of the global media. As long as the developed world continues to look toward the developing world as an opportunity for growth, the ghosts of colonialism will continue to raise their ugly heads and color perceptions global inequality. The Scramble for Africa As the world's poorest continent, Africa provides a good case in point for this study. To be sure, free trade has not produced fair trade for the Third World countries of Africa. The trend toward globalization has produced a new "Scramble for Africa" in which multinational companies have been seeking to capitalize on the natural resources and investment potential of the world's poorest continent. Similar to the undertaking of Europe's great colonial powers to carve up Africa into colonies in a bid to exploit its resources, corporations have been jockeying to strike deals with corrupt regimes to exploit those resources in the name of profit, often to the detriment of the local populations. "A 'scramble for Africa' took place in the late 19th century, when Britain, France and Germany competed to carve Africa into colonies. Today corporations from the U.S., France, Britain and China are competing to profit from the rulers of often chaotic and corrupt regimes" (Leigh & Pallister 2005, par. 5). The impact of globalization on Africa has illustrated its dangers. Just as capitalism needed to be regulated in the United States and other market economies in the industrial age to protect people from the abuse of companies in the name of profit, a worldwide effort arguably needs to be made to protect the most vulnerable people in the world from corporate abuse when their own governments will not do so. According to Simon Taylor, director of Global Witness, a globalization watchdog, G8 countries need to take the lead in preventing this kind of abuse, as their companies are the most likely to be benefiting from it. He asserts, "Western companies and banks have colluded in stripping Africa's resources. We need to track revenues from oil, mining and logging into national budgets to make sure that the money isn't siphoned off by corrupt officials" (par. 4). The potential for Africa to produce huge profits for foreign investors is undeniable. The continent is shaping up to be the highest potential investment area in the world. "Sub-Saharan Africa may be the poorest region in the world but it is also its most profitable investment destination. According to the World Bank's 2003 global development finance report, the continent offers 'the highest returns on foreign direct investment of any region in the world'" (Wright 2005, par. 7). It is only a matter of time before this fact will influence the behavior of foreign companies. "At the moment only around 1% of the private capital that is sloshing around the globe finds its way into sub-Saharan Africa. But there is an increasing band of intrepid international companies that are initiating a new scramble for Africa. Like the colonial pioneers before them, they have found that the strategy can be risky but the potential rewards are enormous" (par. 8). The African continent's wealth of oil and diamonds is the primary target of this latest "scramble." Oil in particular has led developed nations to eye Africa, particularly given the recent escalation of prices. "Spurred by rising global oil prices and depleting reservoirs nearer home, the world's biggest energy-consuming countries have re-discovered Africa. Oil production across that least-developed continent is set to double by the end of the decade, with the US alone importing more than a quarter of its requirements from there. Africa is expected to supply one-fifth of global output by 2010" ("Oil exploration" 2005, par. 2). Competition for this African resource is fierce, and threatens to inflict serious injury on local populations. "As the world's oil becomes depleted, the energy-intensive developed countries face each other in mounting competition for the remaining resources. This trend could have major economic, political, social and environmental implications for regions such as Africa" (par. 1). Unfettered by the kind of government regulation constraining huge multinational oil companies in developed countries, there is a grave risk that they could fail to implement environmental and other safeguards, thereby risking the health and safety of the local populations. Further, an environmental disaster such as an oil spill or refinery explosion could have tremendous economic consequences for the region's tourism industry and other economic assets. The "scramble for Africa" represents the potential for globalization to become a victim of its own success. As companies continue to harvest the abundant resources of that continent, their activities could lead to severe social and political unrest. History has taught the local populations will often ultimately resist being taken advantage of and subjugated. Already, there have been civil wars in Africa that have been sparked by real or perceived corruption on the part of the incumbent regime. "Fresh research has identified profits generated through the quick exploitation of natural resources as a potent cause of civil war" (par. 7). This potential for violence and unrest creates a much less pleasant investment climate. Clearly, sustainable business practices are essential if multinational companies can hope to achieve success in Africa over the long haul. It would be in their interest to invest in local people and infrastructure, and to generally endear themselves to the locals by trying to improve their lives rather than simply ignoring them or blatantly taking advantage of them. Shortsighted profiteering may produce growth that looks good to corporate shareholders today, but those same shareholders will quickly bolt when political or social upheaval begins to threaten a company's operations and growth potential in a particular area. To be sure, companies seeking to invest in African operations would be much better served from a long term perspective if they approached the cultivation of resources in a way that is likely to maintain the viability of resources over the long run. Conclusion Fair trade has not developed for Third World Countries. On the contrary, globalization has largely victimized Third World countries. The "Scramble for Africa" and the Mexican Peso crisis in the early 1990s were both strong indictors of the failure of free trade to produce fair trade for the developing world. Globalization, while premised on the intention of promoting development in the Third World, instead evolved into a system of global capitalism in which the strongest, most advanced countries profited while poorer and weaker countries provided the raw material for that profit. Works Cited 'Anti-globalization movement has petered out', 2003, The Record, 30 June, p. A5. Brittan, S. 2002, 'The best path to prosperity', Financial Times, 14 February, p. 19. Leigh, D. & Pallister, D. 2005, 'New scramble for Africa', The Hindu, 2 June, p. 1. Mathiason, P. 2006, 'Coming to terms with the forces of anti-globalisation', The Observer, 18 June, p. 5. 'Oil exploration: The scramble for Africa', 2005, Energy Economist, July, no. 285, p. 25. Piasecki, R. & Wolnicki, M. 2004, 'The evolution of development economic and globalization', International Journal of Social Economics, vol. 31, no. 3-4, p. 300. Wright, B. 2005, 'Scramble for Africa: The new investment drive that points to a revival of the continent's fortunes', Sunday Business, 19 June, p. 1. Read More