WHAT IS GLOBALIZATION?

BY ARTHUR MacEWAN
 
 

We are fond of viewing our own period as one in which great transformations are taking place, and it is easy to recite a list of technological and social changes that have dramatically altered the way we live and the way we connect to peoples elsewhere in the world. Yet, other surges of globalization in the modern era have been similarly disruptive to established practices. The first surge by which we might mark the beginning of modern globalization came with the invasion of the Western Hemisphere by European powers and with their extension of ocean trade around Africa to Asia. Adam Smith, writing The Wealth of Nations in 1776, did not miss the significance of these developments:

The discovery of America, and that of a passage to the East Indies by the Cape of Good Hope, are the two greatest and most important events recorded in the history of mankind... By uniting, in some measure, the most distant parts of the world, by enabling them to relieve one another's wants, to increase one another's enjoyments, and to encourage one another's industry, their general tendency would seem to be beneficial.

Alongside of what Adam Smith saw as the great gains of globalization (not his term!), were the slaughter, by battle and disease, of millions of Native Americans, the enslavement and associated deaths of millions of Africans, and the subjugation of peoples in Asia. Smith did recognize the "dreadful misfortunes" that fell upon the peoples of the East and West Indies as a result of these "greatest events" (though he does not mention Africans in this expression of concern). He saw these misfortunes, however, as arising "rather from accident than from any thing in the nature of the events themselves."

The first stage of modern globalization illustrates not only the combined great gains and "dreadful misfortunes" that have characterized globalization but also the vast scope of the process. The political and economic changes that followed from the European conquest of the Americas and forays into Asia are relatively well known. Equally momentous were the huge cultural transformations that were tied to the great expansion of economic contacts among the continents. Peoples moved, or they were moved by force. As they came to new locations and in contact with other peoples, almost every aspect of their lives was altered -- from what people eat ("Italian" spaghetti with tomato sauce comes from Asia, the spaghetti, and America, the tomatoes) to their music (jazz is now the best known example, blending the backgrounds of different continents to emerge in America) to religion (the cross accompanied the sword in the era of colonial conquest).

The second great surge of modern globalization came in the 19th century, both as product and cause of the Industrial Revolution. On the one hand, the expansion of industry generated large reductions in transport costs that brought huge increases in international commerce. On the other hand, for the emerging commercial centers of Europe and North America, the opening of foreign markets and access to foreign sources of raw materials fueled (sometimes literally) the expansion of industry. Great Britain, as the "workshop of the world," was at the center of these changes and over the course of the century saw its foreign trade increase three times as rapidly as national income.

Britain during the 19th century provided a foreshadowing of current-day globalization as it officially touted "free trade" as the proper mode of organization for commerce -- not just for itself, but for the entire world. The gospel of "free trade" was then carried around the globe by the British navy, and heroic ideological gymnastics allowed a growing colonial empire to be included under this same rubric. As the British historian E. J. Hobsbawm has commented, "British industry could grow up, by and large, in a protected home market until strong enough to demand free entry into other people's markets, that is 'Free Trade'." In today's globalization it is the United States, a country that also attained its economic power on the foundation of protectionism, that preaches the gospel of "free trade" to the rest of the world.

Current day globalization is, by and large, a continuation of the process that began in the 19th century (which in turn had its roots in the great transformation that began along with the 16th century). Two world wars and the Great Depression disrupted the progress of globalization for some sixty years and shifted its center from Britain to the United States, but it is now back on track. By the 1980s, the extent of economic connections that had been established among the world's national economies by 1913 had been reattained, and in subsequent years international trade and investment have continued to expand their roles in the economies of most nations.
 

Change in the world economy today, however, is not simply an extension of what went on in earlier periods, not simply a quantitative extension of well established trends. What distinguishes the current era from earlier phases of globalization is that now capitalism is ubiquitous. Virtually everywhere, production takes place for profit and is based on wage labor. In the 19th century, capitalism may have provided the leading dynamic of the international economy, but in many parts of the world -- most everywhere outside of Europe and North America -- a great deal of economic activity was organized through families (peasant farms or shops), under semi-feudal conditions, or through slavery. These activities were all connected to markets and to a world capitalist system, but they were not capitalist in themselves. Certainly there are important aspects of life and work today which take place outside of markets and are not directly capitalist -- for example, work in the home, interactions within governments, volunteer activity, and some other forms of production. Yet capitalism holds sway, dominating and defining economic relationships in almost all parts of the world.

The ubiquity of capitalism gives a new character to the economic connections among peoples in distant parts of the world. There has, in particular, been a grand homogenization, both of consumer markets and of production activity. Wal-Mart and McDonald's establish themselves in Mexico to sell the same sorts of products in the same way as in the United States. At the same time, Mexican workers at the Ford plant in Hermosillo produce the same cars that are produced in US factories and they do so with equipment and procedures that are among the most "modern" in the world. Also on the production side, plants in Mexico and the United States are sometimes integrated with one another in a "global assembly line," with Mexican workers engaged in the labor intensive aspects of the operation and US workers engaged in the more highly skilled activities; for example, in clothing production, design and cutting is done in the United States while the pieces are stitched together on the Mexican side of the border.

Mexico, because of its proximity to the United States and the reduction of trade restrictions between the two countries, presents an extreme example of the cross-border integration of production. Yet in broad terms, we are presented today with a new international organization of production, as people on different corners of the globe produce the same sorts of products with the same technologies and often for the same employers -- though the ultimate employers often operate through local subcontractors.

The homogenization of the world economy creates a new set of relationships, a direct competition, among workers in different parts of the world. Although such competition always existed, it is much more extensive and intense than in the past and, most important, it takes place between workers whose wages are dramatically different from each other. It is one thing when US and Canadian workers, who have very similar wages and standards of living, are in competition with each other. It is quite another thing when the US and Canadian workers are in competition with Mexican workers.

This new relationship among workers in different countries presents obvious problems for the workers in the rich countries: they simply cannot compete with workers who, using the same equipment and methods of production (i.e., the same technology), are paid far, far lower wages. Yet similar, though perhaps less obvious, problems exist for the low-wage workers as well. With wage labor markets existing throughout most of the world, virtually all workers are placed in competition with one another. While workers in Bangladesh may be willing to accept very low wages to assemble clothing for the European market, they are always faced with the prospect that Vietnamese workers may accept even lower wages. Or Indonesian workers, who assemble sports shoes for the US market, may face the prospect of production innovations that will substitute machinery and skilled workers for unskilled workers on an assembly line, making it profitable for the firms to move their production back to the United States.

In a capitalist world, where many different sites around the world provide firms with the labor markets they need, those firms can have a great advantage over workers. That advantage, however, depends upon "free trade," the elimination of government barriers to the movement of goods and funds across national boundaries. Free trade has given firms the option of either moving themselves or moving their sources of supply in response to cost differences (wage differences, but also other cost differences). Free trade, however, does not include the reduction -- let alone the elimination -- of barriers to the movement of workers. So labor does not enjoy the same freedom in the globalized economy as does capital. Since "freedom" means having alternatives, and having alternatives means having power, a system that enhances the freedom of firms relative to the freedom of labor means giving businesses more power relative to labor. (Even were barriers to migration to be reduced, there are still substantial costs to labor movement compared to capital movement; and capital's advantage, while reduced, would not be eliminated.)

The drive for free trade existed, as pointed out above, in the British-led globalization of the 19th century, but the United States has been able to push the concept to a whole new level. In part, free trade is important for the power it confers on business, but it is also important as ideology. The ideology of free trade has provided the defining rationale for the North American Free Trade Agreement (NAFTA), the Free Trade Agreement of the Americas (FTAA), the World Trade Organization (WTO), and the programs pushed on low income countries by the International Monetary Fund (IMF) and the World Bank. The opening of markets, the opening of sources of supply, the spread of private economic activity -- all of this is supposed to provide a new era of rapid economic growth for the world and serve the needs of the poor as well as the rich.
 

The concept of free trade has a certain intuitive appeal. After all, if the firms and people of a nation are free to buy their supplies from the lowest-cost source of supply, then they will be able to buy more and satisfy their needs more thoroughly than if their government limits the sources from which they can buy those supplies (bans imports) or imposes extra costs (tariffs) on supplies from abroad. For low income countries, desperate for economic growth, it would seem absurd for their governments to place restrictions on imports, forcing firms and people to waste resources on expensive domestic goods. Moreover, it only takes a moment's reflection to note the huge gains we attain from international commerce: not only the banana I eat for breakfast and a good portion of the oil that fuels my car and heats my home, but also the ideas and culture from elsewhere in the world -- to say nothing of the competitive pressures from abroad that help drive economic advances in my own country. For a small country, the gains from foreign commerce are a virtual necessity.

Another moment's reflection, however, reveals that things are not so simple. Free trade is not the only way to engage extensively in international commerce. In fact, none of the countries we now denote as "developed" attained their development through free trade, though all engaged extensively in international commerce. There are, it seems, some substantial advantages to having the production of certain kinds of goods take place within a country, as compared to obtaining those same goods from abroad. The US textile industry in the 19th century, the US auto industry through most of the 20th century, the Japanese computer industry in the mid-20th century, the South Korean steel and ship building industries later in the 20th century -- all generated broad economic gains in terms of the transformation of technology and the formation of a skilled work force that far surpassed the costs that arose from the government protection they received in their early stages of expansion. None of this provides a justification for protectionism in general; continuing protection of sugar and steel production in the United States imposes costs with no off-setting benefits (except to those directly engaged in the industries). Yet the experience of two centuries of capitalist development does demonstrate the fallacy of the free trade argument. Efforts by the US government to push free trade on low income countries today may make sense from the perspective of the interests of US firms, but it is hardly a prescription for economic advancement in low income countries.

But there is more. Globalization as it is being organized under the banner of free trade is doing nothing to reduce the "development gap," the huge difference in material well-being between the peoples of the rich nations and the peoples of most of the rest of the world. In fact, there is some evidence that under the regime of increasingly open world markets, the "development gap" is increasing. Worse yet: there is a good deal of evidence that free trade globalization is contributing to increasing inequality within nations, not only within the low income countries of the "South" but also within the United States and the other high income countries of the "North."

As the international economy is increasingly organized in a way that enhances the power of firms and tends to undermine the power of labor, it is certainly likely that greater inequality would be the outcome. Unfortunately, available data do not allow us to draw strong conclusions about what has been happening to world income inequality in recent decades. What we do know is that income distribution in today's world is already grossly unequal, with hundreds of millions of people living at the edge of subsistence, while the elites in all countries live in obscene luxury. We also know that, although some low income countries have made substantial gains (South Korea and some other countries of East Asia), the current surge of globalization has provided no general relief for the world's poor. Furthermore, we know that globalization -- new patterns of international trade and investment -- has disrupted people's lives, pushed people out of their traditional lines of work, shifted the location of economic activity, and forced people to adopt new patterns of consumption. All of this makes many people's lives very unpleasant, regardless of what can be uncovered with the aggregate statistics regarding income distribution and economic growth.
 

One might well absorb this summary of change in the world economy and respond with the comment: So, what else is new? It does seem that periods of great change in the world economy, whatever immediate benefits they may generate for the elite and whatever their long run benefits for society in general, are accompanied by severe disruptions, hardships and inequalities. Current day experience seems to fit well with the pattern established in the 16th and 19th centuries, to say nothing of earlier eras of imperial expansion. (Many commentators quite reasonably reject the term "globalization" in favor of "imperialism" precisely because the latter term underscores the great inequalities of power and income that are always so important in international affairs.)

Yet perhaps there is something new in the current era in the particular type of political response to globalization that has been generated in recent years. The "dreadful misfortunes" of earlier eras have also generated political responses -- sometimes in the form of spontaneous rebellion, sometimes as more organized resistance and revolution, and sometimes as waves of new oppositional organizations and alliances. The political response to globalization at the beginning of the 21st century, however, has some distinguishing characteristics that are worth emphasizing.

Most important, parts of the response to globalization are themselves global. The coming out "party" for the anti-globalization movement in Seattle in the fall of 1999 involved people and organizations from all over the world. As a coordinated effort by groups from many rich countries and many poor countries, the action in Seattle -- and the ones that have followed in Washington, Quebec, Prague, Puerto Allegre, and elsewhere -- suggest something is different about the nature of political action. Many times, opposition movements based on national identities have, at least implicitly, been in conflict with one another; at other times, organizations in rich countries have opted to "support" groups in poor countries, but not as a joint and coordinated effort. While progressive movements have always talked about their internationalism, this time around the talk may translate more effectively into practice.

Also, the globalization of political opposition to globalization has included steps by labor unions, which have long adhered to highly nationalist positions. So far, more of the new internationalism of the US labor movement has been in the realm of rhetoric rather than practice, but US unions have made some important efforts at cross border organizing -- in the form, for example, of supporting efforts of Mexican workers to organize firms in their country that supply the US market. (NAFTA, while allowing corporations, the organizations of capital, to operate in both the United States and Mexico, as well as Canada, makes no parallel provision for unions, the organizations of labor.) The rhetoric of internationalism, too, is important, especially because it marks such a departure from the past practices of the US labor movement. Some critics complain that the new-found interest of the US labor movement in conditions abroad arises from its own immediate concerns, the competition from low-cost imports, instead from a concern for workers elsewhere in the world. But that is just the point. If globalization forces US unions to secure the interests of their own members by pursuing a new internationalism, then that is certainly a change of significance.

The organized opposition to globalization goes far beyond the labor movement, however, involving a wide spectrum of social movements. Environmental and women's organizations, peasant groupings, student-based action committees, and others have all been a part of the actions. In addition, well established non-governmental organizations such as Oxfam, while not engaged in the protest actions in Seattle and elsewhere, have been a part of the general opposition to globalization. Not only is this opposition based on a wide range of social movements, but these different movements have at least begun to work in alliance with one another. Some aspects of this alliance, particularly that between environmental groups and labor unions, suggest a major shift from past conflicts.

Opposition actions have taken place in a wide spectrum of countries. On the one hand, there have been the much publicized actions led by young, often middle-class activists in the United States, focused on meetings of the principal international economic agencies such as the IMF, World Bank, and WTO. On the other hand, there have been actions in India, where peasant organizations have demonstrated against the international pharmaceutical and seed companies that are trying to use the internationalization of patent regulations to secure their control of world markets. While these geographically disparate actions are not coordinated through any cohesive international organization, they are part of an interconnected movement.

The opposition that has developed to globalization is not a cohesive movement, and it is not so well developed that we can have confidence in its lasting impact. Furthermore, it has many problems. Opposition to globalization sometimes is expressed as an opposition to connections with other peoples rather than as an opposition to the way those connections are exacerbating inequalities of power and income. Thus xenophobic protectionism is sometimes just below the surface of protest actions. By and large, however, the opposition to globalization appears to be based on an internationalism that may provide a basis for a progressive, and perhaps lasting, movement.

The more serious problems of this opposition arise from the difficulties in coming to grips with the power and complexity of the globalization process itself. A small example is provided by efforts in the rich countries to respond to the proliferation of imports of goods produced in "sweat shop" conditions in low income countries. Protests against the companies that utilize these shops -- firms such as Nike and Gap -- are met with the response that workers in these "sweat shops" are eager to obtain their jobs because these jobs are significantly better in terms of pay and working conditions than other available jobs. What's more, the response is often true. A sophisticated movement can come to terms with this reality by emphasizing the need to alter the context that impoverishes workers in low income countries and by stressing that such a context is most effectively transformed through political struggle. Also, by focusing on workers' right to political freedom -- in particular, the right to organize unions -- rather than on particular aspects of workers' conditions, anti-sweat shop activists can have a positive impact.

The "sweat shop" example helps clarify that globalization is not simply a collection of practices, not simply a peculiar set of connections among peoples around the globe. It is part of the long historical development and spread of capitalism. Within the framework of capitalism, it is difficult to solve problems that are based on the inequality of income and power, because those problems are generated by the system itself. Nonetheless, capitalism is not an immutable system, and it is probably not a permanent system. The oppositional struggles are not only responses to globalization, but they are part of the process of globalization itself. They will play a role in shaping events and in shaping the entire nature of the process. And they will contribute to answering the question: What is globalization?
 
 

Notes:

1 We usually measure "the extent of economic connections" by levels of imports and exports relative to total production or by the level of international investment relative to total production. For example, in 1913, US exports were 6% as large as Gross Domestic Product (GDP); the figure had fallen to 4.6% in 1950, but was up to 7.1% in 1973 and 10.6% in 1999. For Europe, the figures are: 22% in 1913, 16.7% in 1950, 21.8% in 1973, and 32.1% in 1999. Interestingly, Japan, for which exports were 20% of GDP in 1913, saw this figure remain relatively stable at around 10% of GDP in the latter half of the 20th century. Figures on foreign investment are harder to come by for the early part of the 20th century, but they seem to show a similar pattern. In recent years, the foreign investment figures show strong increases of economic connections. In the 1985-90 period, for the world as a whole, foreign direct investment (i.e., not including financial investments) were 5.4% of the level of GDP in the countries making the investments and 6.0% of GDP in the countries receiving the investments; in the 1996-98 period, the figures had risen to 8.2% and 8.4%, respectively.