World has become indeed small! A kid in a village in Andhra Pradesh, India and that born in New York are tomorrow’s potential competitors for a job or partners in a company that may bring out the next big thing in technology after Google! The point is that the new economics and the world shifts in business and education has created constituencies that can cooperate and compete in ways that were unthinkable just a decade ago!
Is Globalization New?
Globalization or the movement and interlinkages between populations in different countries to profit and benefit from arbitrage between the prices/cost of resources is not new. It is well known that extensive trade existed between Sumerians, Chinese, Persians and Indians. The very foundation of this resource movement lay in one set of people identifying sources of improved techniques and systems or better products.
These movements and trade were not restricted to just commerce but eventually often did ended up not only change the habits, vegetation, and markets in the constituent countries but also affect the socio-economic structure. Modern migrations for trade were undertaken with the explicit thought of extending one’s sovereignity over a new geography. Columbus, for example, had a very deliberate goal when he left the shores of Central America after discovering the naive Native Americans.
When the East India Company entered India with the charter from the Queen (given on Jan 1, 1600), its main aim was to benefit in trade. However, as the political structure in India grew weaker over the century, the land of India did become a juicier target for rule.
That was also the time when the science and technology was advancing within the west and industrial revolution was about to begin. Faster and more effective ways to make cloth and tools meant that the local artisans were no match for such technology. There was a clear arbitrage opportunity – cheap cotton grown in India and cheaper cloth made in England. If it could be sold at a monopolistic price then the profit potential was astronomical! And thats where the British rule became an important cog in the entire trade equation.
Meanwhile other things were also happening – tea from China had been brought into India, spices from India had found their way to Europe, and new machines and a language were introduced on the ancient land hitherto unaware of these.
The trade was not just restricted between the trader and the market, it also extended between two his markets. Indian farmers were being encouraged to grow opium which was introduced in China and when the rural and poor population become enough of an addict, the prices could be set monopolistically!
The 20th century brought the vestiges of the colonization (that was a direct consequence of arbitrage power gone greedy) down. However, the corporations, which were now private endeavors realized that the multi-national appeal with monopolistic price setting was still the best way to make profit. Therefore, taking their products to places which did not either have the wherewithal to produce those products or where the quality standards had not reached the levels of the developed countries, yet, was the best way to ensure relatively monopolistic prices.
So the driver of the global movement was the lure of arbitrage and the cherry on the top of the pie came from the ability to set monopolistic prices.
Is Globalization entirely Evil?
Given that global arbitrage hunters have indulged in colonization, wars, and monopolies which necessitated brainwashing, killings, and crippling of the constituent populations, the question remains then – is Globalization essentially evil?
If carefully looked around, it is obvious that cross-pollinising of ideas and structures made the world more efficient and changes that took even the victims forward.
In fact, there have been enough successes of globalization too. These happened when anyone converted traits hitherto not found useful into telling strengths! Japanese, from the 1970’s through to 1990’s achieved singularly the greatest turnaround in fortunes of a society. The family values where pushing for higher virtues and performance was commonplace became strengths in corporations where the employees achieved newer heights by converting corporations into extended familial entities! The impersonal corporations were no match for the astounding increase in the quality of Japanese organizations. Success and “familial bonds” of these new organizations beckoned further success globally. Soon the tide had turned.
Growth of Korean corporations have also followed the strengths of the Japanese companies.
Role of the Governments
From financing of Columbus to Korean Governments help to its Chaebols and more recently the backing of Chinese Government to its companies in terms of political influence as well as finances, the “Hand of the Governments” of the day has been hidden but unmistakenly been there with solid support!
In fact, it can be argued that such a growth and influence on foreign markets is not possible with the backing of politcal policy and machinery. This is because in transnational trade a lot of trade and commercial barriers are involved which can only be influenced by Government to Government lobbying!
The countries where transnational corporations from other countries enter have used two methods – Product/Services oriented liberalization or Technology transfer oriented liberalization.
Some countries let the companies bring in products while favoring the infrastructural companies to come and invest. As the country becomes a good market for foreign products, several other companies come in to improve infrastrcutural facilities as it becomes the next big commercial profiting opportunity. Singapore falls into this category. Its actually an example of how this category needs to function!
The technology oriented liberalization is used by countries which have a certain clout because of the buying power which the transnational want to exploit. Such countries aim to get the latest technologies get transfered to domestic corporations, so the imports may be reduced and their own corporations can compete in the export markets.
India, in the past, and China very recently have been partially following that model.
So is gobalization a good or a bad thing? Can it used to improve the standards of a society’s people?
I believe that the answer is YES if the country knows how to use it in its own favor.. and NO if the establishment is corrupt and will lose a major part of its sovereignity in return!
Get Drishtikone Updates
in your inbox
Subscribe to Drishtikone updates and get interesting stuff and updates to your email inbox.
Thank you for subscribing.
Something went wrong.