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Thomas L. Friedman "examines the impact of the 'flattening' of the globe", and argues
that globalized trade, outsourcing, supply-chaining, and political forces have changed the
world permanently, for both better and worse. He also argues that the pace of
globalization is quickening and will continue to have a growing impact on business
organization and practice.[4]
Noam Chomsky argues that the word globalization is also used, in a doctrinal sense, to
describe the neoliberal form of economic globalization.[5]
Herman E. Daly argues that sometimes the terms internationalization and globalization
are used interchangeably but there is a slight formal difference. The term
"internationalization" refers to the importance of international trade, relations, treaties etc.
International means between or among nations.
Contents [hide]
1 History
2 Modern globalization
3 Measuring globalization
4 Effects of globalization
5 Pro-globalization (globalism)
6 Anti-globalization
6.1 International Social Forums
7 See also
8 References
9 Further reading
10 External links
10.1 Multimedia
[edit] History
The term "globalization" has been used by economists since the 1980s although it was
used in social sciences in the 1960s; however, its concepts did not become popular until
the latter half of the 1980s and 1990s. The earliest written theoretical concepts of
globalization were penned by an American entrepreneur-turned-minister Charles Taze
Russell who coined the term 'corporate giants' in 1897.[6] Globalization is viewed as a
centuries long process, tracking the expansion of human population and the growth of
civilization, that has accelerated dramatically in the past 50 years. Early forms of
globalization existed during the Roman Empire, the Parthian empire, and the Han
Dynasty, when the Silk Road started in China, reached the boundaries of the Parthian
empire, and continued onwards towards Rome. The Islamic Golden Age is also an
example, when Muslim traders and explorers established an early global economy across
the Old World resulting in a globalization of crops, trade, knowledge and technology; and
later during the Mongol Empire, when there was greater integration along the Silk Road.
Globalization in a wider context began shortly before the turn of the 16th century, with
two Kingdoms of the Iberian Peninsula - the Kingdom of Portugal and the Kingdom of
Castile. Portugal's global explorations in the 16th century, especially, linked continents,
economies and cultures to a massive extent. Portugal's exploration and trade with most of
the coast of Africa, Eastern South America, and Southern and Eastern Asia, was the first
major trade based form of globalization. A wave of global trade, colonization, and
enculturation reached all corners of the world. Global integration continued through the
expansion of European trade in the 16th and 17th centuries, when the Portuguese and
Spanish Empires colonized the Americas, followed eventually by France and Britain.
Globalization has had a tremendous impact on cultures, particularly indigenous cultures,
around the world. In the 15th century, Portugal's Company of Guinea was one of the first
chartered commercial companies established by Europeans in other continent during the
Age of Discovery, whose task was to deal with the spices and to fix the prices of the
goods. In the 17th century, globalization became a business phenomenon when the
British East India Company (founded in 1600), which is often described as the first
multinational corporation, was established, as well as the Dutch East India Company
(founded in 1602) and the Portuguese East India Company (founded in 1628). Because of
the high risks involved with international trade, the British East India Company became
the first company in the world to share risk and enable joint ownership of companies
through the issuance of shares of stock: an important driver for globalization.
Globalization was achieved by the British Empire (the largest empire in history) due to its
sheer size and power. British ideals and culture were imposed on other nations during this
period.
The 19th century is sometimes called "The First Era of Globalization." It was a period
characterized by rapid growth in international trade and investment between the
European imperial powers, their colonies, and, later, the United States. It was in this
period that areas of sub-saharan Africa and the Island Pacific were incorporated into the
world system. The "First Era of Globalization" began to break down at the beginning of
the 20th century with the first World War. Said John Maynard Keynes[7],
“ The inhabitant of London could order by telephone, sipping his morning tea, the various
products of the whole earth, and reasonably expect their early delivery upon his doorstep.
Militarism and imperialism of racial and cultural rivalries were little more than the
amusements of his daily newspaper. What an extraordinary episode in the economic
progress of man was that age which came to an end in August 1914. ”
The "First Era of Globalization" later collapsed during the gold standard crisis in the late
1920s and early 1930s.
These institutions include the International Bank for Reconstruction and Development
(the World Bank), and the International Monetary Fund. Globalization has been
facilitated by advances in technology which have reduced the costs of trade, and trade
negotiation rounds, originally under the auspices of the General Agreement on Tariffs
and Trade (GATT), which led to a series of agreements to remove restrictions on free
trade.
Since World War II, barriers to international trade have been considerably lowered
through international agreements - GATT. Particular initiatives carried out as a result of
GATT and the World Trade Organization (WTO), for which GATT is the foundation,
have included:
The Uruguay Round (1984 to 1995) led to a treaty to create the WTO to mediate trade
disputes and set up a uniform platform of trading. Other bilateral and multilateral trade
agreements, including sections of Europe's Maastricht Treaty and the North American
Free Trade Agreement (NAFTA) have also been signed in pursuit of the goal of reducing
tariffs and barriers to trade.
Global conflicts, such as the 9/11 terrorist attacks on the United States of America, is
interrelated with globalization because it was primary source of the "war on terror",
which had started the steady increase of the prices of oil and gas, due to the fact that most
OPEC member countries were in the Arabian Peninsula.[9]
World exports rose from 8.5% of gross world product in 1970 to 16.1% of gross world
product in 2001. [6]
Goods and services, e.g. exports plus imports as a proportion of national income or per
capita of population
Labor/people, e.g. net migration rates; inward or outward migration flows, weighted by
population
Capital, e.g. inward or outward direct investment as a proportion of national income or
per head of population
Technology, e.g. international research & development flows; proportion of populations
(and rates of change thereof) using particular inventions (especially 'factor-neutral'
technological advances such as the telephone, motorcar, broadband)
As globalization is not only an economic phenomenon, a multivariate approach to
measuring globalization is the recent index calculated by the Swiss think tank KOF. The
index measures the three main dimensions of globalization: economic, social, and
political. In addition to three indices measuring these dimensions, an overall index of
globalization and sub-indices referring to actual economic flows, economic restrictions,
data on personal contact, data on information flows, and data on cultural proximity is
calculated. Data is available on a yearly basis for 122 countries, as detailed in Dreher,
Gaston and Martens (2008).[10] According to the index, the world's most globalized
country is Belgium, followed by Austria, Sweden, the United Kingdom and the
Netherlands. The least globalized countries according to the KOF-index are Haiti,
Myanmar the Central African Republic and Burundi.[11]
A.T. Kearney and Foreign Policy Magazine jointly publish another Globalization Index.
According to the 2006 index, Singapore, Ireland, Switzerland, the U.S., the Netherlands,
Canada and Denmark are the most globalized, while Indonesia, India and Iran are the
least globalized among countries listed.
Globalization – the growing integration of economies and societies around the world –
has been one of the most hotly-debated topics in international economics over the past
few years. Rapid growth and poverty reduction in China, India, and other countries that
were poor 20 years ago, has been a positive aspect of globalization. But globalization has
also generated significant international opposition over concerns that it has increased
inequality and environmental degradation [17]
Business
Trends such as outsourcing and offshoring are a direct offshoot of globalization and have
created a work environment in which cultural diversity can be problematic. A U.S.
company where punctuality is important and meetings always start on time faces
adjustments if it opens an office in South America or France, where being 10 to 15
minutes late to a meeting is considered acceptable: being on time is called 'British
Time'[18]
Sweatshops
It can be said that globalization is the door that opens up an otherwise resource poor
country to the international market. Where a country or nation has little material or
physical product harvested or mined from its own soil, an opportunity is seen by large
corporations to take advantage of the “export poverty” of such a nation. Where the
majority of the earliest occurrences of economic globalization are recorded as being the
expansion of businesses and corporate growth, in many poorer nations globalization is
actually the result of the foreign businesses investing in the country to take advantage of
the lower wage rate: even though investing, by increasing the Capital Stock of the
country, increases their wage rate.
Specifically, these core standards include no child labor, no forced labor, freedom of
association, right to organize and bargain collectively, as well as the right to decent
working conditions. [20]
Tiziana Terranova has stated that globalization has brought a culture of "free labour". In a
digital sense, it is where the individuals (contributing capital) exploits and eventually
"exhausts the means through which labour can sustain itself". For example, in the area of
digital media (animations, hosting chat rooms, designing games), where it is often less
glamourous than it may sound. In the gaming industry, a Chinese Gold Market has been
established. [21]
Culture
One powerful source has blown down cultural boundaries around the entire world. What
is this influential tool? It is the Internet and its endless margin of discovery. With the
Internet people can easily access someone half way across the world. They could
converse with someone living a completely different lifestyle yet still have something in
common, the Internet. If language is a barrier then a website like Flickr, a photo sharing
site, lets people from Singapore and Germany alike communicate without words. The
Internet in essence makes the world a smaller place. Someone in America can be eating
Japanese noodles for lunch while someone in Sydney Australia is eating classic Italian
meatballs. One classic culture aspect is food. India is known for their curry and exotic
spices. Paris is known for its smelly cheeses. America is known for its burgers and fries.
McDonalds was once an American favorite with its cheery mascot, Ronald, red and
yellow theme, and greasy fast food. Now it is a global enterprise with 31,000 locations
worldwide with locations in Kuwait, Egypt, and Malta. This restaurant is just one
example of food going big on the global scale. Meditation has been a sacred practice for
centuries in Indian culture. It calms the body and helps one connect to their inner being
while shying away from their conditioned self. Before globalization Americans did not
meditate or crunch their bodies into knots on a yoga mat. After globalization this is a
common practice, it is even considered a chic way to keep your body in shape. Some
people are even traveling to India to get the full experience themselves. Another common
practice brought about by globalization would be Chinese symbol tattoos. These specific
tattoos are a huge hit with today’s younger generation and are quickly becoming the
norm. With the melding of cultures using another countries language in ones body art is
now considered normal. Culture is defined as patterns of human activity and the symbols
that give these activities significance. Culture is what people eat, how they dress, beliefs
they hold, and activities they practice. Globalization has joined different cultures and
made it into something different. As Erla Zwingle, from the National Geographic article
titled “Globalization” states, “When cultures receive outside influences, they ignore some
and adopt others, and then almost immediately start to transform them.” [22]
Globalization advocates such as Jeffrey Sachs point to the above average drop in poverty
rates in countries, such as China, where globalization has taken a strong foothold,
compared to areas less affected by globalization, such as Sub-Saharan Africa, where
poverty rates have remained stagnant.[23]Supporters of free trade claim that it increases
economic prosperity as well as opportunity, especially among developing nations,
enhances civil liberties and leads to a more efficient allocation of resources. Economic
theories of comparative advantage suggest that free trade leads to a more efficient
allocation of resources, with all countries involved in the trade benefiting. In general, this
leads to lower prices, more employment, higher output and a higher standard of living for
those in developing countries.[23][24]
One of the ironies of the recent success of India and China is the fear that... success in
these two countries comes at the expense of the United States. These fears are
fundamentally wrong and, even worse, dangerous. They are wrong because the world is
not a zero-sum struggle... but rather is a positive-sum opportunity in which improving
technologies and skills can raise living standards around the world.
Some, such as former Canadian Senator Douglas Roche, O.C., simply view globalization
as inevitable and advocate creating institutions such as a directly-elected United Nations
Parliamentary Assembly to exercise oversight over unelected international bodies.
Income inequality for the world as a whole is diminishing.[27] Due to definitional issues
and data availability, there is disagreement with regards to the pace of the decline in
extreme poverty. As noted below, there are others disputing this. The economist Xavier
Sala-i-Martin in a 2007 analysis argues that this is incorrect, income inequality for the
world as a whole has diminished. [7]. Regardless of who is right about the past trend in
income inequality, it has been argued that improving absolute poverty is more important
than relative inequality. [8]
Life expectancy has almost doubled in the developing world since World War II and is
starting to close the gap between itself and the developed world where the improvement
has been smaller. Even in Sub-Saharan Africa, the least developed region, life expectancy
increased from 30 years before World War II to about a peak of about 50 years before the
AIDS pandemic and other diseases started to force it down to the current level of 47
years. Infant mortality has decreased in every developing region of the world.[28]
Democracy has increased dramatically from there being almost no nations with universal
suffrage in 1900 to 62.5% of all nations having it in 2000.[29]
Feminism has made advances in areas such as Bangladesh through providing women
with jobs and economic safety.[23]
The proportion of the world's population living in countries where per-capita food
supplies are less than 2,200 calories (9,200 kilojoules) per day decreased from 56% in the
mid-1960s to below 10% by the 1990s.[30]
Between 1950 and 1999, global literacy increased from 52% to 81% of the world.
Women made up much of the gap: female literacy as a percentage of male literacy has
increased from 59% in 1970 to 80% in 2000.[31]
The percentage of children in the labor force has fallen from 24% in 1960 to 10% in
2000.[32]
There are increasing trends in the use of electric power, cars, radios, and telephones per
capita, as well as a growing proportion of the population with access to clean water.[33]
The book The Improving State of the World also finds evidence for that these, and other,
measures of human well-being has improved and that globalization is part of the
explanation. It also responds to arguments that environmental impact will limit the
progress.
Although critics of globalization complain of Westernization, a 2005 UNESCO
report[34] showed that cultural exchange is becoming mutual. In 2002, China was the
third largest exporter of cultural goods, after the UK and US. Between 1994 and 2002,
both North America's and the European Union's shares of cultural exports declined, while
Asia's cultural exports grew to surpass North America.
[edit] Anti-globalization
Main article: Anti-globalization
Anti-globalization is a term used to describe the political stance of people and groups
who oppose the neoliberal version of globalization.
"Anti-globalization" may also involve the process or actions taken by a state in order to
demonstrate its sovereignty and practice democratic decision-making. Anti-globalization
may occur in order to maintain barriers to the international transfer of people, goods and
beliefs, particularly free market degregulation, encouraged by organizations such as the
IMF or the WTO. Moreover, as Naomi Klein argues in her book No Logo anti-globalism
can denote either a single social movement or an umbrella term that encompasses a
number of separate social movements [35] such as Nationalists and socialists. In either
case, participants stand in opposition to the unregulated political power of large, multi-
national corporations, as the corporations exercise power through leveraging trade
agreements which in some instances damage the democratic rights of citizens[citation
needed], the environment particularly air quality index and rain forests[citation needed],
as well as national government's sovereignty to determine labor rights,[citation needed]
including the right to form a union, and health and safety legislation, or laws as they may
otherwise infringe on cultural practices and traditions of developing countries.[citation
needed]
Some people who are labeled "anti-globalist" or "sceptics" (Hirst and Thompson)
[36]consider the term to be too vague and inaccurate [37][38]. Podobnik states that "the
vast majority of groups that participate in these protests draw on international networks
of support, and they generally call for forms of globalization that enhance democratic
representation, human rights, and egalitarianism."
Some members aligned with this viewpoint prefer instead to describe themselves as the
Global Justice Movement, the Anti-Corporate-Globalization Movement, the Movement
of Movements (a popular term in Italy), the "Alter-globalization" movement (popular in
France), the "Counter-Globalization" movement, and a number of other terms.
Critiques of the current wave of economic globalization typically look at both the damage
to the planet, in terms of the perceived unsustainable harm done to the biosphere, as well
as the perceived human costs, such as poverty, inequality, miscegenation, injustice and
the erosion of traditional culture which, the critics contend, all occur as a result of the
economic transformations related to globalization. They challenge directly the metrics,
such as GDP, used to measure progress promulgated by institutions such as the World
Bank, and look to other measures, such as the Happy Planet Index,[40] created by the
New Economics Foundation[41]. They point to a "multitude of interconnected fatal
consequences--social disintegration, a breakdown of democracy, more rapid and
extensive deterioration of the environment, the spread of new diseases, increasing
poverty and alienation"[42] which they claim are the unintended but very real
consequences of globalization.
The terms globalization and anti-globalization are used in various ways. Noam Chomsky
believes that[43][44]
“ The term "globalization" has been appropriated by the powerful to refer to a specific
form of international economic integration, one based on investor rights, with the
interests of people incidental. That is why the business press, in its more honest moments,
refers to the "free trade agreements" as "free investment agreements" (Wall St. Journal).
Accordingly, advocates of other forms of globalization are described as "anti-
globalization"; and some, unfortunately, even accept this term, though it is a term of
propaganda that should be dismissed with ridicule. No sane person is opposed to
globalization, that is, international integration. Surely not the left and the workers
movements, which were founded on the principle of international solidarity - that is,
globalization in a form that attends to the rights of people, not private power systems. ”
“ "The dominant propaganda systems have appropriated the term "globalization" to refer
to the specific version of international economic integration that they favor, which
privileges the rights of investors and lenders, those of people being incidental. In accord
with this usage, those who favor a different form of international integration, which
privileges the rights of human beings, become "anti-globalist." This is simply vulgar
propaganda, like the term "anti-Soviet" used by the most disgusting commissars to refer
to dissidents. It is not only vulgar, but idiotic. Take the World Social Forum, called "anti-
globalization" in the propaganda system -- which happens to include the media, the
educated classes, etc., with rare exceptions. The WSF is a paradigm example of
globalization. It is a gathering of huge numbers of people from all over the world, from
just about every corner of life one can think of, apart from the extremely narrow highly
privileged elites who meet at the competing World Economic Forum, and are called "pro-
globalization" by the propaganda system. An observer watching this farce from Mars
would collapse in hysterical laughter at the antics of the educated classes." ”
One of the key points made by critics of recent economic globalization is that income
inequality, both between and within nations, is increasing as a result of these processes.
One article from 2001 found that significantly, in 7 out of 8 metrics, income inequality
has increased in the twenty years ending 2001. Also, "incomes in the lower deciles of
world income distribution have probably fallen absolutely since the 1980s". Furthermore,
the World Bank's figures on absolute poverty were challenged. The article was skeptical
of the World Bank's claim that the number of people living on less than $1 a day has held
steady at 1.2 billion from 1987 to 1998, because of biased methodology.[50]
A chart that gave the inequality a very visible and comprehensible form, the so-called
'champagne glass' effect,[51] was contained in the 1992 United Nations Development
Program Report, which showed the distribution of global income to be very uneven, with
the richest 20% of the world's population controlling 82.7% of the world's income.[52]
Economic arguments by fair trade theorists claim that unrestricted free trade benefits
those with more financial leverage (i.e. the rich) at the expense of the poor.[54]
The first WSF in 2001 was an initiative of the administration of Porto Alegre in Brazil.
The slogan of the World Social Forum was "Another World Is Possible". It was here that
the WSF's Charter of Principles was adopted to provide a framework for the forums.
The WSF became a periodic meeting: in 2002 and 2003 it was held again in Porto Alegre
and became a rallying point for worldwide protest against the American invasion of Iraq.
In 2004 it was moved to Mumbai (formerly known as Bombay, in India), to make it more
accessible to the populations of Asia and Africa. This last appointment saw the
participation of 75,000 delegates.
In the meantime, regional forums took place following the example of the WSF, adopting
its Charter of Principles. The first European Social Forum (ESF) was held in November
2002 in Florence. The slogan was "Against the war, against racism and against neo-
liberalism". It saw the participation of 60,000 delegates and ended with a huge
demonstration against the war (1,000,000 people according to the organizers). The other
two ESFs took place in Paris and London, in 2003 and 2004 respectively.
Recently there has been some discussion behind the movement about the role of the
social forums. Some see them as a "popular university", an occasion to make many
people aware of the problems of globalization. Others would prefer that delegates
concentrate their efforts on the coordination and organization of the movement and on the
planning of new campaigns. However it has often been argued that in the dominated
countries (most of the world) the WSF is little more than an 'NGO fair' driven by
Northern NGOs and donors most of which are hostile to popular movements of the poor.
[58]
12: Localisation Vs Globalisation:
Clarifying the Terms
Colin Hines
CORPORATE GLOBALIZATION
as part of the nation state, although it can be the nation state itself or
occasionally a regional grouping of nation states.
The policies bringing about localization are ones which increase control
of the economy by communities and nation states. The result should
be an increase in community cohesion, a reduction in poverty and
inequality and an improvement in livelihoods, social infrastructure and
environmental protection, and hence an increase in the all-important
sense of security.
• localising money, such that the majority stays within its place of
origin;
• reorientation of the end goals of aid and trade rules such that they
contribute to the rebuilding of local economies and local control.
government does not mean the elimination of the welfare state, but could
change its role. The welfare state of the past contributed significantly to
economic and social development even though it produced inefficient use of
resources and large national debts.
CHALLENGES FACING GOVERNMENT
Globalization and privatization significantly weakened the ability of the
state to exercise its influence on social and economic development as well as the
ability of the government to be the major provider of essential goods and services
such as health, education, utilities, etc. But the state continues to be needed to
provide necessary infrastructure and services so the economy can compete
internationally. The above weakness did not reduce or eliminate the roles of the
state but changed its emphasis in the era of globalization. The state=s new roles
are intended to create economic incentives, a favorable political environment,
and social attitudes conducive to economic expansion of the private sector,
efficient use of resources, and increased productivity. The state=s new roles are
designed to improve human capital for employment (the main asset of the poor is
labor), increase the openness of the economy to stimulate foreign investment,
and provide a costly social safety net to alleviate poverty, especially for the
poorest segment of the population.
According to Bertucci and Alberti (2003) there are four areas of the public
sector that need to be reformed for economic, political, and social development.
These four areas are institutional reform, information technology, human
resources, and financial management.
Institutional Reform
Democratic reform at the national and local level where elected members
of parliaments, legislatures, or councils will be informed, independent, and
accountable can play the main forum for solving major problems. Reforming the
judicial system where the individual and the minority rights are preserved, an
impartial judicial system can be an effective instrument for reducing corruption
and the abuse of public office. The executive branch needs to be reformed to
deal more effectively with new challenges of globalization. Governments need to
promote partnerships with both civil society and the private sector while pursuing
development. Also, government needs to create policies that are helpful for
investment, helpful for the adoption of new technology, and collect accurate data
for policy makers.
Information technology (IT)
Information technology provides adequate, accurate, relevant and timely
data for policy makers and the public. Therefore, information technology is
capable of improving services, accountability, and wider participation by
The extent of the 2008 economic collapse surprised and shocked the conventional
wisdom in Washington and on Wall Street. But in hindsight, a good case can be made
that the massive globalization of labor and financial markets, coupled with "free markets
uber alles" policies, formed a toxic mixture that made the collapse inevitable. Here's why:
1). The globalization of labor markets -- and especially the outsourcing of once high
paying jobs to low-wage economies - drove down incomes in the United States and
western Europe. That effect might have been tempered by the growth of unions and by
trade agreements that protected labor rights. But the right wing assault on unions in the
United States--and the passage of trade deals that protected the rights of capital and did
nothing to protect the incomes of average workers--allowed real incomes for most
Americans to drop, especially in the last eight years. In fact, all of the economic growth
of the last eight years went to the wealthiest 2% of the population.
Stagnating incomes led the Central Banks in Europe and the U.S. to encourage
massive increases in consumer credit to fuel the economy. Without all that new
consumer debt, the economy would have tanked years ago. Long-term economic growth
requires that there are more and more people who have more and more money to buy
products and services. Otherwise, businesses won't invest in new plants and equipment
and hire new workers, since no one will have the money to buy their products.
The terrible consequences of shrinking incomes were also staved off by rising home
prices. This allowed average people to borrow more and more against the rising equity of
their homes.
But all of this new consumer and home equity debt created a giant "house of cards." It
masked the underlying sickness of the economy for a while. As long as the economy
continued to grow enough to create a net increase in jobs - and as long as housing prices
rose - things were rickety but continued to hang together. But as soon as the economy
began to contract, and housing prices fell, the whole construction came tumbling down in
a heap.
By themselves, stagnant average incomes lead to stagnant economic growth. But stagnant
average incomes, coupled with large amounts of consumer and home equity debt, lead to
precipitous collapse. Homeowners went into foreclosure, lenders failed, credit markets
seized and the massive bubble in asset values burst.
2) The globalization of financial markets removed most sources of capital and credit
from the regulated national environment and placed them into the deregulated
international environment.
One lesson of the Great Depression was the need to assure that banks were no longer free
to make investments so risky that they threatened the savings of average investors and the
stability of the financial system. Banks were required to buy insurance from the FDIC
that protected depositors, and they were subjected to oversight and regulation to assure
their solvency.
The stock market was regulated - with margin requirements and strict disclosures.
Back then, banks were the major sources of capital and credit. The stock market was
mainly domestic. Nowadays, most capital and credit is provided through investment
banks and hedge funds that are barely regulated in U.S. and operate in international
markets with virtually no regulation at all.
It was inevitable that in that context, the "market" would once again repeat the mistakes
of the 1930's. Hedge funds became heavily overleveraged. Some were simply Ponzi
schemes. Risk was sliced and diced into "derivatives" over and over so that investors no
longer had a clue about the underlying value of their assets. International currency
speculators operated with no oversight.
The bottom line was simple. Globalization created a context where market forces had
more and more freedom to call the economic shots. They were free of "non market"
forces like unions and the government regulation that been created precisely to control
the natural tendency of private markets to self-destruct. Modern economic history -
capped by the Great Depression - had made one thing clear: if left to their own devices,
financial institutions and companies act in their own short term economic interest - but
not necessarily in the interest of the whole economy. Financial institutions take more and
more risk, and take on more and more debt, to make more and more money - even if
doing so creates speculative bubbles that will one day burst. Individual companies
continually seek cheaper sources of labor, even if cumulatively they end up choking off
the very consumer demand they all need to sell their products.
Barack Obama has proposed a jobs and economic recovery program that is
desperately needed. Right now, government investment is the only source of demand
available to jumpstart the economy.
* Stronger unions. Congress must pass the Employee Free Choice Act (EFCA) that will
dramatically increase the percentage of the workforce with union representation. Wages
and benefits are 30% higher for union jobs than non-union jobs. To generate long-term
consumer demand in our economy, average people have to make good wages.
* Rewrite trade deals. NAFTA and the WTO must be revised to protect labor rights and
assure that the world economy is integrated by bringing the bottom up - not the top down.
Economic integration in Europe proved that you can maintain high wages in the most
prosperous countries while you simultaneously increase standards of living in poorer
countries. That is not what's happening the in the world today.
* The U.S. must support the rights of unions to organize around the world. The
unionization of workers worldwide is critical to the protection of American wages.
* Re-regulate credit markets. That requires tougher regulation in the U.S. and new
regulatory structures on the international scale. The U.S. needs to lead in the creation of a
new international system to regulate credit and financial markets - one that applies the
lessons of the New Deal to the new reality of a global economy.
In the end, if we want our kids to have more prosperous and fulfilling lives, we have to
abandon the right-wing economic conventional wisdom of the last thirty years. We must
create a high-wage economy where the fruits of increased productivity are widely shared
and everyday people have money to buy goods and services. That won't happen without
stronger financial regulation and a growing labor movement.
"In addition, we also are hearing protectionist voices, as previous notions about
globalisation bringing in all-round benefits are being questioned," Mukherjee said,
delivering a lecture on India's security challenges at the National Defence College in New
Delhi.
India had adopted economic liberalisation since early 1990s under the Congress
government led by PV Narasimha Rao, under whom current Prime Minister Manmohan
Singh served as the Finance Minister and the architect of the country's globalisation
policy.
"The most obvious is the unprecedented linkages between economic stability and
security policy. We have in recent weeks seen countries seeking international financial
assistance to stave off financial and economic collapse; elsewhere, falling oil prices have
dampened political confidence and muted foreign policy and security orientations,"
Mukherjee said, referring to nations on the verge of going bankrupt as a result of giants
in the financial sector going bust.
Mukherjee said the manner in which the present events reshaped the structural contours
of the world could be difficult to predict.
"We can, however, conclude with some certainty that we will be required to address new
challenges in the coming years, the biggest of which would be management of global
inter-dependence," he said, in an obvious reference to the ripple effect the financial crisis
that hit US companies have had on economies worldwide.
From India's perspective, he said, the country needed to see how best it could manage
the crisis, while positioning itself to play a role in any future global financial or political
structure.
"The immediate challenge will be to continue with economic reforms, striking a balance
between financial stability, price stability and maintaining growth rates.
"The long-term challenge will be to fashion a set of policies encompassing both security
and foreign dimension in such a manner that we can ensure an external environment
conducive to India's transformation and continued development," he added.