The Nature of Globalization

Alex MacGillivray (2006), in his book, “A Brief History of Globalization,” states: “The planet we live in is now an incredible shrinking planet.” This, of course, is a metaphor, a figurative language to dramatize the fact that time and geographical distance between countries and among people are no longer barriers that separate men and nations. Scientific advances in technology, more specifically, the invention of amazing machines and incredible computers have made it possible for humans to conquer time and space. The fast pace of transportation and communication has, indeed, transformed the earth into an incredible shrinking planet!

Today, contemporary society is now on the threshold of a new phase in human history: the second Industrial Revolution – the Computer-Induced Revolution; the Electronic Age, the Electronic Revolution, Technological Convergence. Various metaphors have been applied in this new Industrial Revolution, including Alvin Toffler’s “Third Wave” (1980), John Naisbet’s “Megatrends” (1982), and Theodore Levitt’s “Era of Globalization” as used in an economic context. The economic trend at present is shifting from a national to a global economy.

Globalization refers to the process of increasing integration between units around the world, including nation-states, households/individuals, corporations and other organizations. It is an umbrella term, covering economic, trade, social, technological, cultural and political aspects, and is the opposite of deglobalization (Levitt, Theodore, “Globalization of Markets,” 1983).

A broad overview definition is that globalization is the worldwide process of homogenizing prices, products, wages, rates of interests and profits. It relies on three forces for development: the role of human migration, international trade, and rapid movements of capital and integration of financial markets. (Shariff, Ismael, “Global Economic Integration,” 2003).

The International Monetary Fund (IMF) stresses the growing economic interdependence of countries worldwide through increasing volume and variety of cross-border transactions, free international capital flows, and more rapid and widespread diffusion of technology. Modern-day globalization takes the initial phase of a borderless economy, free trade, import and export liberalization, the lifting of protective tariffs, and trade without boundaries as espoused by the World Trade Organization (WTO) and its initial global political organization – the GATT or General Agreement on Trade and Tariffs. Globalization from this economic paradigm favors the reach and power of multinational and transnational giant corporations. The change in the policy environment is a “liberalization revolution,”  a freeing up or opening of markets and reduction in the role of government in terms of ownership and control over production of goods and services. The umbrella concept of liberalization includes removal of all barriers to trade, foreign investment and exchange controls; freeing of product and factor markets; rules-based systems of regulation; policy regimes favouring financial stability. A less economic-focuses definition from the Encyclopedia Britannica states that globalization is the “process by which the experience of everyday life… is becoming standardized around the world. This could be in the form of political, informational, or cultural globalization.

The Global Scenario Group, an environmental research and forecasting organization, views globalization as part of the shift to a Planetary Phase of Civilization, characterized by global social organization, economies, and communications. The GSG maintains that the future character of this global society is uncertain and contested (Florine, A. 2000. The Third Force). However, critics maintain that the present trends of globalization lean towards American hegemony.

Reniichi Ohmae’s phrase, “the borderless world,” captures the sense of radical progress and modernity, and of life beyond the constraints of the traditional nation-state, which infuses much of the popular writing about globalization (Ohmae, 1990. The Borderless World, Collins, New York). Many relish the excitement and the widening of opportunities and want to remove barriers to markets and mobility.

The economist’s perspective takes as a reference point the idea of globalization as a model of fully internationally integrated markets, defined by David Henderson (1999. The May Affair. London) as those meeting two conditions:

  • Free movement of goods, services, labor and capital: thus a single market in inputs and outputs;
  • Full national treatment for foreign investors (and nationals working overseas) so that, economically speaking, there are no foreigners.

The ultimate consequence of such a world would be the equalization of prices – and returns to capital and labor – the ‘law of one price’ – subject to differences in quality and transport.

Another way of characterizing globalization is though a mixture of legal and organization categories. Richard O’Brien, in his End of Geography (1992) London), has helpfully made the following distinctions:

  • Purely domestic, national activities
  • International (or cross-border)activities involving sales of goods and services, financial flows or movements of people across frontiers.
  • Multinational activities involving operations in more that one country at once. Multinational companies operating in several countries can incorporate different combinations of multiple domestic business and/or international cross border business.
  • Offshore activities – those outside a specific national jurisdiction
  • Global activities , which are qualitatively different from those that are international, multinational or offshore. The term suggests a different degree of integration and coordination. Customers can be offered a global service, wherever they are, and production can be organized with little regard to national frontiers.

Globalization essentially refers to a mixture of international, multinational, offshore and global activities and involves a general progression from the domestic to the global (Dr. Vincent Cable, 1999, Chatman House, London).

Aspects of Globalization

Globalization has various aspects which affect the world in a variety of ways:

  1. Industrial globalization, trans-nationalization. This refers to the rise and expansion of multinational and transnational enterprises.
  2. Financial globalization. This refers to the emergence of worldwide financial markets and better access to external financing for corporate, national and sub-national borrowers. International lending institutions provide capital especially to the developing Third World governments through loan politics. This task is accomplished by the IMF, the World Bank and a consortium of transnational banks, called the Paris Club, supervised by the W.B. The IMF-WB basically requires liberalization, deregulation and privatization in a recipient country. They also call for austerity measures by a debtor country in order to effectively amortize its loans.
  3. Political globalization. This refers to the spread of political sphere of interests to the regions and countries outside the neighbourhood of political (state and non-state) actors and the potential formation of a global citizen movement. These social movements of “citizens of the world” may take the form of global justice movement, international criminal court, global pluralist religious movement; international human rights movement, global anti-nuke movement; global environmental protection movement, and the like.
  4. Informational globalization. This refers to the increase in information flows between geographically remote locations. In this aspect, globalization is refined and disseminated as “global information highway” due to the advent of high technology, the electronic media, the Internet, and the computer revolution. Information is a source of power in organizations – local, national or international, and computers are a means of gaining information. Under the global capitalist system, information has become a commercial commodity which works for the advantage of the information-rich people and which results in the dependence of the information-deprived people. As information accumulates in massive, centralized data banks, those with access to it gain enormous power for dictating public tastes, policies, behaviour and choices. Such information already plays an important role in marketing products, endorsing candidates, propagating certain beliefs or ideologist, or developing a particular level or quality of consciousness.
  5. Cultural globalization. This refers to the growth of cross-cultural contacts. People of the world get a better understanding and appreciation of cultural diversity and plurality through direct and indirect contacts such as international travels and tours, exchange scholarships, religious pilgrimage, export or culture through the widespread use of television, the computer and other forms of electronic media.
  6. Globalism. This refers to the universal, internationalist impulse that the world is connected. It refers to the connection between cultures, nations, and peoples; it embodies cultural diffusion, the desire to consume and enjoy foreign products and ideas, adopt new technologies and practices, and participate in “world culture.” The danger lies in totally adopting a particular cultural hegemony as the standard culture and behaviour. This would lead to the death of diverse ethnic cultures – languages, arts, religions, beliefs, practices and other cultural identities which took millions of years to be developed.