Does globalization benefit the wealthy and harm the poor?

The social, political and economic effects of globalisation have been hotly debated since the terms emergence. Globalisation is defined as a process of change which affects all regions of the world in a variety of sectors including the economy, technology, politics, the media, culture and the environment. It is characterised by the organisation of business on a global scale, the exchange of huge capital across national borders, a continued improvement in communications, a less exclusive relationship between domestic and foreign policy, and the emergence of a global consumer culture. There are several opinions on whether or not globalisation is unprecedented, how much it undermines the power of the nation state, how governments should respond, and how it effects world living standards and the distribution of wealth. I shall consider these opinions in exploring the notion that globalisation benefits the wealthy and harms the poor.

Schools of thought on globalisation include the hyperglobalists, skeptics and tranformalists. Hyperglobalisers believe the integration of relationships internationally lessens the role of the nation-state (some see this as a positive, others a negative). Skeptics deny rises in cross-border transactions, and transformalists think globalisation sees individuals, communities, countries or regions become integrated into global networks of power and prosperity, while others are excluded and merginalised. Although the speed and volume of globalisation of the late 20th century is unparalleled in history, a similar trend was seen in the period between 1870 and 1914. Advancements in transport and communications allowed trade between nations previously isolated. Like today, entrepreneurs moved freely about the globe in search of the highest profits, without the interference of governments. As globalisation skeptics assert, foreign debt investments accounted for nine per cent of global output in 1913- comparable with such investment at the end of the 20th century . Perhaps then, the current period of globalisation really began in 1870 (rather than around 1975, as many attest) and was interrupted by two world wars, the depression and the socialist era.

Globalisations effect on the power of nation-states is debated by experts. Some say national borders are becoming irrelevant to economic activity, some that the world economy is no more integrated now than it was at the end of the 19th century, and that the power of states is unhindered. Stewart Firth takes a view somewhere between these extremes: Globalisation has shifted the balance of power between markets and states in markets favor and between capital and labour in capitals favour. Because of markets, entrepreneurs can move freely from country to country to where the cheapest labour can be found. Governments wishing to stay economically competitive are deregulating, privatizing, floating currencies and opening economies in order to attract international investment regardless of the cost. This is the cause of concern for anti-globalisation groups: neo-liberalism, international financial capital and structural adjustment (are) key causes of global property. Brook Larmers article Two Girls and Shoe illustrates the relationship between laborer and consumer, with sympathy for both. While American youths work to buy US$65 Nike shoes in order to survive in a social hierarchy based on fashion, Asian youths work in factories, their health jeopardised by the fumes of solvent-based glues, for US$2 a day in order to survive.

The causes of globalisation also subject to debate. In 1983 when the term was in its infancy, the Professor Theodore Levitt of the US Harvard Business School said advancements in technology was increasing the reach of the global media, reducing the cost of communication, and shrinking the world. He predicted that, as a result, consumer tastes everywhere were converging, creating global markets for standardised products on a scale never seen before. Globalisation meant that multinational companies that made different products to suit local tastes were doomed. They would be undercut by “global corporations” that offered the same products in the same way everywhere, benefiting from “enormous economies of scale” in production, distribution, marketing and management. Twenty years later, we have seen the rise and, perhaps, peak of this phenomenon. With the fall of communism, Americana was celebrated: People in former communist countries celebrated their freedom by cracking open cans of Coca-Cola, MTV embraced the globe’s youth and, in 1990, McDonald’s opened in Moscow. (Tomkins, 2003) The emergence of capitalism from the Cold War opened up markets and allowed corporations to exploit foreign labour.

The question I am exploring refers to the emergence of global capitalism since the end of the Cold War, which is a part of the phenonon known as globalisation. I would argue that what we saw during the 1990s was reaction to end of the bi-polar world. The fall of the USSR as a superpower left the USA and its allies to spread hedgemony to places isolated during the soviet era. Capitalism was new and exciting to these countries, as well as American and British corporations who rubbed their hands together. This led to a period of imbalance, where governments pursued international trade and forgot about socialist principals of protecting their own. Australian governments have accepted and embraced globalisation, saying pain now will be rewarded with pleasure later. They subscribe fully to the claims of capitalism, that in the long run, globalisation will render Australia wealthier and more secure. They argue, like all in favour of globalisation, that what has brought wealth to some will eventually bring wealth to the rest, as economic growth means increased funding for public services (Sen, 2001). Australia has already seen a socialist backlash to some of its globalisation-inspired policies such as the deregulation of HECS in the education sector, the proposed Medicare reforms, and problems with reducing tariffs for trade with its big brother, the USA.

Amartya Sen thinks that governments pursuing foreign investment and open markets at the expense of public service are making it harder and harder for wealth to be evenly distributed. Regardless of economic growth, much of the population will be retarded from economic ventures if education and health services arent provided to the highest quality possible. Similarly, if one has no capital, and no access to micro-credit, it is not easy for a person to show much economic enterprise in the market economy. Australian governments have claimed that the pressures of globalisation have left them with no choice but to privatise government assets and reduce the role of the state in the economy. They claim they cannot spend more on education, health etc. because Australia would lose international competitiveness and offend the financial markets whose confidence is vital to national prosperity. Critics think that the governments are selling off assets not because of globalisation but because Australias economy has been in long-term recession since the 1970s. The period of globalisation has been marked by high unemployment figures in many Western countries.

There are obvious benefits in globalisation and sustainable economic growth, as long as social concerned arent ignored. In 1997 Foreign Minister Alexander Downer claimed that the removal of Australian tariffs in the decade to 1997 added an average of $1000 to the annual family income, reduced the price of a $20 000 car by 25 percent, reduced the cost of clothing and footwear by 14 per cent and made previously unavailable products available. The theory held by leading economists, including those that run international institutions such as the IMF and the World Bank, is that the world has found the ability once again to prosperity: a golden age of free trade and open economies ended in 1914 but, with the right policies, it can now be regained. (Firth, 1999, p242) This theory says governments should withdraw further from interfering with markets, which will allocate resources to the best effect and produce economic growth just like during the last period of globalisation.

Rapid growth in global economic flows, power of transnational corporations and global markets in overcoming anachronistic nation state boundaries. Scientific innovation, especially the rapid development of information technology: globalization goes hand-in-hand with the spread o an Сinformal mode of production which is replacing the industrial mode.

Stephen Castles

Controversial. Some think globalization Offers huge opportunities for economic growth and improved living standards, while others think it erodes the autonomy of the nation-state, removing its ability to pretect its citizens by means of economic management and welfare policies.

Categories of theory

Hyperglobalisers believe all types of relationships are becoming integrated at the global level, transcending the nation-state and making it increasingly irrelevant.

Positive hyperglobalisers advocate open, global markets, who believe that these will guarantee optimal economic growth and will, in the long run, bring about improved living standards of everyone. See nation states as a mere nuisance in a world economy.

Negetive hyperglobalisers think globalization only benefits a small middle class elite, while for most people, globalization means that the world is becoming a lumpen planet, rich only in megacities with megaslums, where billions of people eke out a meager livingЕ globalization can lead to social fragmentation, cultural uncertainty, conflict and violence.

Skeptics

Think that the level of international transactions care comparable to the period preceding the First World War. They say that over 80% of world trade involves first-world countries within the OECD region, therefore not all regions have participated in this so-called globalization. Say role of nation states is just as important as ever. The skeptics discount the idea that global travel and the diffusion of media are giving birth to a global culture of even a global civillisation.

Transformalists

Think globalization means the development of new forms of global stratification in which some individuals, communities, countries or regions become integrated into global networks of power and prosperity, while others are excluded and merginalised.

Causes

Rapid growth in global economic flows, power of Transnational corporations and global markets in overcoming anachronistic nation state boundaries. Scientific innovation, especially the rapid development of information technology: globalization goes hand-in-hand with the spread o an Сinformal mode of production which is replacing the industrial mode.