• Posted: Mon, Jun 1 2009.

10:42 PM IST

The world is being shaped by the pulls and pushes of two forces

often in opposition—globalization and localization. The benefits of

globalization have been celebrated in recent years by many

economists and business people—the “Davos crowd”, as the media

often calls them. Now they are concerned that the world may be

“deglobalizing”, with governments struggling to manage the effects

of the global economic crisis on voters in their countries. Global

trade has reduced in the past few months, as have cross-border

capital flows. The votaries of globalization are urging leaders of

governments to stay committed to the cause and to resist demands

for protectionism. Globalization produces many benefits, no doubt,

by stimulating growth of economies and businesses.

Illustration: Jayachandran /

Mint

However, localization is not

only inevitable, but it can also

provide solutions to several enormous problems that need to be

addressed globally—such as inclusion in economic growth, care for

the environment, food security, and empowerment of women.

Four drivers of change coming together make localization inevitable:

human rights, democracy, entrepreneurship and innovation. The

ideas of human rights and democracy have spread across the world

in the latter part of the last century. They induce political

localization. At the same time, the drives for entrepreneurship and

innovation—two of the hottest topics in business in recent times—

are fostering localization of businesses.

Political localization is manifest in the great Indian election bazaar.

Parties representing regional interests and particular castes are on

the rise. While one national party, the Congress, has increased the

number of seats it won in the recent general election, overall the

two national parties got fewer votes than they did five years ago.

Because communities that feel their cause is not well represented

are organizing themselves to be counted and heard. In Andhra

Pradesh, first came the Kammas; now, the Kapus. In Bihar, after the

Yadavs, it is the turn of the Kurmis. If the Shiv Sena is losing its

fangs, the Maharashtra Navnirman Sena (MNS) will take up the

cause of the local manoos. The communal flare-up within the Sikh

community in Punjab is another reminder that economic growth is

not enough to overcome old divisions and oppressions. People will

rise to be respected and fight for their rights.

Globally, too, the trend is for countries to break up into smaller

components along regional, religious and linguistic lines rather than

to combine into larger countries. In the 20th century, colonial

empires broke up, Pakistan separated from India, then Bangladesh

from Pakistan, and Indo-China, Yugoslavia, and the Soviet Union

were broken apart. And in the 21st, Scottish nationalism is chafing

within Britain while (less seriously) Texans are threatening to break

away from the US.

The necessity for business localization is known to all business

leaders. “Think global, act local” is a common slogan in

multinational corporations. A study of European multinationals in

India—to understand why some companies made high profits while

others, performing poorly, complained about the difficulties of doing

business in India—showed that those who localized products and

management grew both their revenues and profits. They delivered

to local customers’ requirements, took advantage of local

capabilities, and enabled innovations to emerge in many places,

whereas their competitors with more centralized and standardized

approaches were slow to hit the mark.

Local action is an effective approach to solve social and

environmental problems too. Last year, the World Economic Forum

(WEF) brought together experts from around the world in its global

agenda council for food security. They concluded that new

approaches are needed. “While a global model is needed, solutions

are ultimately local and should engage the community as the

central driver of the solution,” they said, adding: “Agricultural

production interventions must necessarily address the needs of

small farmers and invest in women producers who grow and

process the majority of food supply in many regions.” These experts

are not Gandhian village lovers. They are renowned agricultural

scientists and executives of large Western corporations engaged in

the production and distribution of food.

The theme of smaller, local solutions ran through the insights of

other WEF global agenda councils concerning water conservation,

renewable energy and economic inclusion. The global agenda

councils’ summit concluded in November with the warning that “we

cannot reboot the old economy” to get out of the global crisis. The

old software—the old ways of thinking and organizing—cannot

provide the solutions required. Indeed, they have caused many

problems. Therefore, new software is required.

There are many inspiring examples of local solutions—from South

Asia, Africa and South America—to interrelated problems of income

generation, education, empowerment, health and environmental

care. The challenge is to “scale up” to rapidly multiply such

successes across the world. In the old way of thinking and

organizing, “scaling up” would require a large organization under a

central authority. Invariably, large bureaucracies creep in with this

way of organizing—in governments, multilateral organizations and

large corporations. This is the way of “buffalos wallowing” and

smothering local initiatives.

Instead, localization gives power to more people. It also brings out

more ideas. But those who already have power do not like sharing

it. The Group of Eight, or G-8, resists enlarging to the Group of

Twenty, or G-20. The UN Security Council does not want to include

others. The global superpower does not want to subscribe to

universal rules.

Following the sunshine of many years of growth, the world is going

through a tunnel of darkness. New ideas are necessary to come out

of the dark. The 21st century challenge for leaders of governments,

political parties, NGOs and business enterprises is to create an

effective “local-global” governance architecture which distributes

power and generates more local leaders and initiatives. Because

more such “fireflies arising” will turn gloom to light, and improve

the world for everyone.

Arun Maira is former chairman, Boston Consulting Group India, and

author of Remaking India: One Country, One Destiny (2005).

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