Apr 13, 2010

The Opportunities and Dangers of Globalization

The global climate at the end of the twentieth century has been marked by a move away from national sovereignty and toward globalization. More and more, in the areas of industry, environmental law, trade and finance, the world is looking to global policies, networks and solutions, rather than individual state controls. This integration of national economies has both opportunities and dangers for the industrialized and the developing nations of the world. The opportunities explain why and how the move toward globalization began, and the dangers describe the newest challenges to modern politicians, economists, environmentalists, and sociologists.

The first, and primary, opportunity of globalization is free trade and the resultant effect on the global economy. Freer trade means more trade, which results in increased financial flows. As trade and financial flows increase, capital redistributes laterally and, in theory, that redistributed capital can pull impoverish countries up from the bottom. The idea of free trade is based on the writings of eighteenth century economist Adam Smith. Smith spoke of “laissez-faire” economics in his book The Wealth of Nations, and taught that privatized business and trade promotes more economic activity than state controlled business and thus could provide even more money from the state through the collection of income taxes (Ferraro, 294, 1998).

Adam Smith was speaking, for the most part, on a national or continental level of free trade, but many have applied these same concepts to global trade. In his article, "Making it Work" (1998), Jeffery Sachs describes the importance of free trade to the development of non-industrialized countries, declaring “[g]lobal capitalism genuinely is the best chance for the developing world to gain a foothold on the economic-growth ladder…” (3). He, and others, feels that abolishing trade barriers is the surest way of offering every nation equal opportunity for advancement.

A second opportunity of globalization is the creation of transnational regulatory frameworks (TRF’s). As nations have less and less control over their individual economies and industries, and the global network assumes more control, the global network must also assume more responsibility for the welfare of both the individual nations and the global community. Therefore, a sort of global socialism develops. For instance, as developing countries of Latin America became more and more indebted during the 1980’s, the institution known as the International Monetary Fund (IMF) emerged as a lender of last resort, willing to bail those drowning countries out of debt in exchange for acceptance of stringent economic structural adjustments. More recently, the IMF is now supplying about 20 African nations with $3 billion in loans, intended to aid in debt relief and industrial developments. Money must flow into struggling nations, such as Africa and Latin America, if they are ever to pull themselves out of debt. Loans of such size would not likely be funded by any one individual country but are made possible through the networking effects of globalization (Lawrence, 2, 1998)

A cynic may wonder why industrialized nations care enough to create organizations for the sole purpose of salvaging the credit of developing and highly indebted nations. As may be suspected, their intentions are not wholly altruistic. Because of globalization, finances of a developing country are directly tied to the finances of a fully developed country, such as the U.S. In fact, the lesser developed countries owe their loans to banks in the U.S. and Europe. If the LDC’s defaulted, the financial markets of the developed world would be hit very hard, if not collapse. Also, corporations in the U.S. and Europe, such as clothing manufacturers, know that they can build factories in LDC’s and have significantly less overhead and labor costs, increasing their desire to protect the economies, and their opportunities, in developing nations. It is not surprising, then, that corporate America is in favor of even further IMF-style aid to Africa, and are heavily supportive of the African Growth and Opportunity Act ("Corporation," 1, 1998). Hence, another advantage of globalization is that it requires the developed and developing countries to be intertwined, ensuring that the former can not simply “write off” the latter.

A last opportunity of globalization is the institution of intellectual property rights. Since the global community is becoming so much closer and integrated, it is no longer adequate to simply honor copyrights within a nationstate. Therefore, intellectual property rights have been instituted to protect copyrights worldwide. While the ability to apply such protections is a clear advantage of globalization, the need for such protections is a disadvantage of globalization. Also, while intellectual property rights are an opportunity for industrialized nations, they are a hindrance to developing countries. Those nations that developed in the years following Britain’s industrial revolution adopted Britain’s technologies at will, facilitating their own development. With today’s intellectual property rights, however, currently developing countries will no longer be afforded such help and will instead need to develop their own technologies.

The dangers of globalization are often tied into the opportunities of globalization; we often find that one policy that benefits one nation or social group harms another. For instance, while free trade is an opportunity for consumers to buy the best goods at the best prices, it also endangers the non-symbolic analysts (NSA’s) of the nations with the highest standards of living, and hence, the highest wages and production costs. Symbolic analysts, those persons who have the ability to translate the technological languages, are often the members of industrialized society with the most vocational and economic freedom. They can work and live anywhere they wish and are unaffected by physical location of industry because they are linked by the world wide web. They are an elite minority, about one-fifth of the population here in the United States, but they have the most political clout because they possess the majority of the country’s wealth. So then, what symbolic analysts want, symbolic analysts get (Reich, 290, 1991).

What the symbolic analysts want is inexpensive service of the highest quality. What symbolic analysts know is that foreign workers are often more qualified, and almost always more affordable, than American workers. The disparity between the wage demands of the American NSA’s and the compensation offered by the symbolic analysts creates what has been termed a “labor shortage.” In reality, however, there is no labor shortage at all. As Robert Reich explains in his article, "The Politics of Secession" (1991), there are plenty of American workers who would be happy to work for a decent wage but cannot support families on the wages that immigrants will accept. Symbolic analysts prefer to hire the immigrants, who are often well trained, and, in doing so, abandon the NSA’s of our country. The situation is further complicated by the fact that, once the symbolic analysts have come to rely on foreigners for their in-person services, there is less incentive to invest in training for American NSA’s, further reducing their potential earnings (Reich, 289, 1991).

Another opportunity of globalization that also has dangers is the destruction of trade barriers involved in the process of free trade. When the IMF provides a loan of last resort, it also institutes a stringent set of economic “structural adjustments” intended to boost the economy of the ailing country in the long term, even if it is painful in the short term. One such adjustment is the forced abolition of trade barriers, tariff and otherwise. The intention of such policies is to let the free market bring wealth to all nations, in a sort of lateral redistribution of capital. In the short term, however, destroying trade barriers means leaving a developing country’s infant industries unprotected in the face of international competition. This collapse of domestic industry will inevitably counteract any intentions to increase manufactured exports. In fact, since the introduction of free trade, due to IMF policies or otherwise, many developing countries have experienced decreases in their terms of trade ("Globalization," 84, 1997).

As an example of how that can happen, consider the following. In the past, developing countries modeled their trade policies after the protectionism utilized by fully industrialized nations, such as the U.S., and often used a development plan called Import Substitution Industrialization. Under such a plan, hefty tariff barriers stall manufactured imports and raw materials are heavily exported for income. Meanwhile, infant industries are being developed, which will be the eventual industrial base for the developing country. The plan worked fairly well until OPEC restricted the supply of oil, causing an oil price shock, and the developing countries suddenly found themselves with debts that they could not pay. The IMF stepped in and covered the debts, saving the nations from the economic disaster of loan default. When the IMF instituted its policies, however, the infant industries, meant to be the industrial base of the developing nation, could not compete without the protection of tariff barriers increasing the prices of manufactured imports, and they collapsed. It is yet to be seen if free trade will, in fact, pull such impoverish countries out of debt, and into prosperity, but, at least in the short term, free trade has certainly hindered independent industry in lesser developed countries.

Forced movement of people, and the resultant racial tensions, can also be seen as dangers of globalization. In his article, Tucson North and South, Robert Kaplan describes the racial and economic climate if Tucson, Arizona. The city is divided into the prosperous north, inhabited by white, symbolic analysts joined to each other and the developed world by the world wide web, and the impoverish south, inhabited by socially alienated whites and immigrant Mexicans, both joined together and divided from each other by gangs. The Mexican immigrants find low paying jobs, displacing the white NSA’s of Tucson who are unwilling to work for such low wages. The whites resent their resultant unemployment, and the process produces racial disharmony (Kaplan, 56, 1998).

Immigration, however, does not always result in racial tensions. Kaplan also writes about Vancouver in his article entitled, "Canada: The Wild Card." In contrast with Tucson, which draws unskilled Mexican immigrants seeking low paying jobs that they could not find in their home country, Vancouver draws highly skilled foreign symbolic analysts, who are, in fact, a boon to the economy of the city. The difference is astounding. Whereas in Tucson, immigration is resented and considered a financial drain, Vancouver welcomes its mostly Asian immigrants with open arms. While in Tucson the whites and the Mexicans stay separated-by either gang signs or North/South Tucson divisions, the whites and the Asians of Vancouver easily intermingle, and frequently intermarry, without conflict (Kaplan, 52, 1998).

Facilitation of the activities of Transnational Criminal Organizations (TCO’s) is another danger of globalization. For instance, global financial markets allow the TCO’s to move money and goods from country to country with ease, allowing them to take advantage of whatever country has the most money and the most lax law enforcement. Secondly, the porous borders that have accompanied free trade ease smuggling; high trade volumes mean less chance for suspicion, inspection, and identification of smuggled goods. Thirdly, and critically, relaxed capital flows have been vital in the facilitation of money laundering. Criminal organizations can simply recycle drug profits like a multi-national corporation, and the money will be extremely difficult to trace in the global financial system (Castells, 191, 1998).

Increased action of TCO’s is a particularly dangerous effect of globalization, because TCO’s work with little regard for peace, democracy, or capitalism. In fact, a TCO will routinely corrupt law enforcement, politicians and judges, and kill anyone they are not able to corrupt and who dares to stand in their way. They rely on violence and corruption to achieve a single end: profit. Often, in Latin American countries with weak political infrastructure, the TCO’s have the ultimate power. TCO’s stand in firm opposition to the idea of human rights, and their dictator-like regime must be brought to an end (Castells, 193, 1998). As if TCO’s having power over politicians is not bad enough, globalization also allows for investors to have unchallenged power over politicians. Under the conditions of globalization, developing countries rely on the capital provided by investors to pay debts--both primary and to the IMF--and to support domestic industry. Due to the relaxed capital flows also accompanying globalization, however, investors can pull their money out just as easily as they invested it in the country. As Walter Wriston is quoted in Richard Coughlin’s article "The Peso Crash and the Asian Flu" (1998), “Money only goes where its wanted and only stays where its well treated….” (page 1). Politicians of developing countries must, therefore, consider the reaction of the investors before making any decisions concerning financial policy, creating a clear conflict of interest.

A final danger of globalization is the overuse and abuse of natural resources. This danger could manifest itself in one of two ways. Firstly, while the goals of such TRF’s as the IMF and the World Trade Organization is to aid development in lesser developed countries, that very development will mean increased global environmental degradation. In the long run, development means more superconsumers--people, like Americans, who consume and discard at will, just because we have the means and the “stuff.” In the short run, development means guiding each developing country past the inevitable stage of “dirty” industry. When nations are first developing, they tend to put national development before international ecology, and skip the costly measures that more industrialized countries now use to cut down on pollution. The effects are cyclical, because less environmental protections means less overhead, which, in turn leads to a cheaper product. A cheaper product will have increased sales, which leads to more (dirty) production.

When industrialized nations try to prevent such products from crossing their boundaries, they are stopped short by the World Trade Organization. For instance, the U.S. wanted to prevent filthy, but inexpensive, Venezuelan oil from flooding their markets, and the Venezuelan’s termed the action a non-tariff trade barrier. The dispute was brought before the World Trade Organization, who sided with Venezuela, and ordered the U.S. to either buy the oil, or simply pay Venezuela the cost of the oil each year as compensation for lost sales. Decisions such as this, that place free trade above environmental common sense, are a great danger to the future of our global ecosystem (Bleifuss, 1, 1997).

Secondly, when LDC’s are forced to break down trade barriers in accordance with the policies of the IMF, and their domestic industries collapse, they have only the natural resources to fall back on for income. Once the countries begin to rely on a forest for a sole source of income, overharvest can be very tempting, or even unavoidable. The unfortunate irony is that not only does the world lose a valuable forest, but, through the process of overharvest, the underdeveloped country loses its only source of income.

These are the opportunities and dangers of globalization. As I look over my paper, the dangers seem to outweigh the opportunities, but this is not actually the case. While my list of dangers may be longer, things like TCO activity, racial tensions, and imbalance of investor power are issues of greater or lesser significance in each area across the globe, sort of site specific. On the other hand, opportunities like free trade and transnational regulatory frameworks are absolute necessities for all nations to grow and prosper in the twenty-first century. So, while the lists may seem lop-sided in one direction, my preference is for the other side. Globalization allows us to all work together for a mutually better future.
Minimizing the dangers; maximizing the opportunities.

The dangers of globalization can be minimized in a number of ways. Firstly, trade barriers could be lowered gradually in developing countries in an attempt to allow infant industries to better adjust to the international competition. The imbalance of power held by the Transnational Criminal Organizations may be deactivated by the global legalization of cocaine, reducing its value to nearly nothing. The imbalance of power held by investors may be lessened by policies that restrict the flows of money in and out of a country on a single business day. Overuse and abuse of natural resources can be reduced through the institution of “rental” policies under which developed nations pay for sections of a forest to remain intact, as compensation for lost income. Also, such nations could be encouraged to commence “ecotourism,” the system by which wealthy foreigner pay large amounts of money to visit untouched areas of third world countries, again using an intact forest for income, rather than a ravaged one.

Opportunities could be maximized by creating transnational regulatory frameworks with representation of industrialized and non-industrialized countries, instead of the traditional industrialized only model. Also, the gradual destruction of tariff barriers and the environmental provisions described above could be considered opportunities of globalization as well as reduction in the dangers of globalization.Source

1 comment:

risal's blog said...

wah...maf sob aku gak bisa kasih koment soalnya...gak tauk artinya nih...hehehe