Updated January 2013
Globalisation can be defined in many ways but is generally thought to mean the increased movement of people, goods, capital and ideas that occur due to increased economic integration. According to the Organisation for Economic Cooperation and Development (OECD) globalisation is defined as:
an increasing internationalisation of markets for goods and services, the means of production, financial systems, competition, corporations, technology and industries.
Amongst other things this gives rise to increased mobility of capital, faster propagation of technological innovations and an increasing interdependency and uniformity of national markets.
Barack Obama provides a good introduction to the issues involved:
The KOF Index of Globalisation measures the economic, social and political dimensions of globalisation and calculates an index that indicates the extent of globalisation for individual countries. Each year they release rankings of countries and an overall index of globalisation worldwide.
The index website allows you to do your own calculations on their data. They also calculate the index based on regions. The following chart shows the gap that exists between rich and poor countries and traces that gap since 1980.
We can see here that the globalisation gap has remained relatively constant throughout this period.
What is the role of technology in globalisation?
Information technology was necessary to enable globalisation and this technology emerged from developed countries. It changed the economic relationship between countries because it made knowledge an increasingly important component in the production of goods and services. Knowledge and high tech industries are the fastest growing in the world today and for countries to compete in these sectors they need to invest substantially in education and training. This is easier for some countries than others.
The following video presents a debate on the pros and cons of globalisation:
Technology has typically been introduced to developing countries by large multi-national companies doing business there and so the technology used has originated in developed countries, where most of these companies’ research and development takes place. Many argue that this is increasing the power of the MNCs in international markets and weakening the bargaining power of developing countries.
Technology has also enabled the world to become more interconnected, beyond the economic sphere, with greater access to information and communication which is having a profound impact on societies. The International Labour Organisation has the following view:
“The industrialized countries were the source of the technological revolution that facilitated globalization but that revolution has also had ripple effects on the rest of the global economy. At one level, the new technology changed international comparative advantage by making knowledge an important factor of production. The knowledge-intensive and high-tech industries are the fastest growing sectors in the global economy and successful economic development will eventually require that countries become able to enter and compete in these sectors. This implies that they will have to emphasize investments in education, training and the diffusion of knowledge.”
International Labour Organisation
Globalisation and Culture
Globalisation is also viewed from a cultural perspective and has impacted culture in most parts of the world. Views on whether the overall impact is positive or negative are divided. This video presents a positive view of the experience of African students in the Netherlands:
Others express concern about the dominance of western culture:
The next video presents an anthropological understanding of cultural globalisation:
The globalisation debate:
Perceptions of globalisation are divided in most countries as the following study from the BBC in December 2007 shows. Here we can see significant division within countries on the pace of globalisation and also between countries themselves. This was reflected in the anger of the protesters at the G8 and G20 summits in Toronto:
Arguments in favour of globalisation include:
1. That the economies of countries that are more engaged with the global economy have consistently grown much faster than those that have maintained closed economies – on average by about 2.5 percent.
2. Faster economic growth usually leads to increases in peoples’ living standards.
3. Improved wealth leads to better health care and cleaner water, increasing peoples’ life expectancy.
4. Increased foreign direct investment in countries due to the reduction in investment barriers has also fuelled growth.
5. Globalisation has resulted in improved environmental awareness as the internet has increased access to information.
6. Increased trade integration has reduced the threat of war and promoted peace.
7. Improved technology has reduced costs and changed the way the world communicates – adult illiteracy rates are falling in developing countries.
8. Modern communications and the global spread of information have led to the toppling of undemocratic regimes.
9. Multinational companies have adopted improved standards for workplaces and wages – usually payng more than local companies in developing countries.
10. International migration has led to greater recognition of diversity and respect for cultural identities, which is improving democracy and access to human rights.
The following video presents a case for globalisation and its benefits:
Arguments against globalisation include:
1. There are social and economic costs of globalisation – uncompetitive companies are more exposed and this causes people to suffer hardship.
2. Countries unable to take advantage of globalisation fall further behind.
3. Increased trade and travel have increased the spread of human, animal and plant diseases, like AIDS.
4. Increased interdependence of countries has greater vulnerability to economic problems – like the recent global recession.
5. The environment has been harmed as industries have exploited inadequate environmental codes in developing countries.
6. Major economic powers control the international economic bodies which can mean decisions made there are not in the interests of the developing world. The level of agricultural protection by rich countries has been estimated to be five times what they provide in aid to developing countries.
7. Trade liberalisation and technological improvements change economies and can lead to unemployment.
8. Modern communications have spread an awareness of the differences between countries and increased demand for migration to richer countries. Barriers to migration have been increased in richer countries leading to more people smuggling.
9. Globalised competition can cause countries to compete for investment with lower pay and worse working conditions. It can also cause a brain drain to richer countries.
10. Indigenous and national culture and languages can be eroded by the modern globalised cultured.
The following video illustrates some of the negative aspects of globalisation:
In 2004 the United Nations’ International Labor Organisation released a document that argued for reform of globalisation. It is a detailed document that describes globalisation’s impact in some detail and also details measures that they believe are necessary to tackle the problems that they identify. The commission that authored the document was headed by the presidents of Finland and Tanzania – you can access video interviews with them by clicking on their countries.
Emerging Market Corporate Powers
The final area of globalisation that we will consider is the growth of companies from “emerging markets”. The countries that they come from are often undemocratic and the activities of the companies help the countries gain political power. The larger emerging market countries are known as the BRIC (Brazil, Russia, India and China). Their activities include the acquisi tion of developed countries’ businesses and brands and the impact of this activity is of concern to some observers. Their presence has been growing in recent years as these statistics from The Economist magazinbe show:
The activities of Gazprom, with the participation of the Russian government illustrate this issue:
While in Canada Vale have had a controversial presence in the mining sector:
The implications of these developments are unclear thus far. There is concern that jobs may move from developed to developing countries, that it may represent a new, bad form of capitalism that is oligarchic and state led.
The final video for this week features a presentation by Ian Goldin on what the globalised future might mean: