Changing premises of globalization

Citation

Ali, A.J. (2009), "Changing premises of globalization", Competitiveness Review, Vol. 19 No. 4. https://doi.org/10.1108/cr.2009.34719daa.001

Changing premises of globalization

Article Type: Editorial From: Competitiveness Review: An International Business Journal, Volume 19, Issue 4

Whether the premise of globalization is inclusive, universally shared, and valid, irrespective of time and location, is a persistent and ever present concern. In recent months, this concern has been voiced repeatedly by followers and foes of globalization alike. The tragic societal consequences of the current economic downturn and the depth of threat they pose to governments and companies across the globe have fundamentally altered expectations and challenged assumptions which until recently had been promoted as sound, confirmed, and guaranteed.

Globalization, whether viewed as a twentieth century, or even older, phenomena, was assertively projected in the 1990s as a cure-all to economic ills and a vital medium for generating growth and spreading prosperity across the world. It was promoted as a sure destiny for the international community, and groups or nations that did not ride the globalization train would be left to poverty, misery, and chaos. The ultimate conclusion was “economic globalization is the savior.”

Economic globalization was characteristically linked to the rise and spread of capitalism and to the emergence of superpowers, especially the domination of western nations as exemplified by England and the USA. These two linkages have their own special connotations which were not necessarily viewed positively in other parts of the world. During the globalization euphoria, however, the implications of these connotations (capitalistic drive to dominate emerging and developing markets, western invention, etc.) were generally ignored. Self-congratulation, arrogance, and the celebration of “good news” blinded the defenders of globalization from taking note of existing minefields and the wreckage that the “globalization train” had left behind.

As early as 1860, Richard Cobden – a nineteenth century British liberal who zealously promoted global free trade – underscored the importance of economic globalization. He considered the free movement of trade as “the grand panacea which[…] [would] serve to inoculate with the healthy and saving taste for civilization all the nations of the world.” Forbes magazine (Lee and Foster, 1997) reported that “As Cobden’s version of free trade spread its blessings throughout the world, investment followed it, and so did people.” The blessing, however, vibrated as a severe economic crisis around 1870 started in Great Britain and engulfed several nations. The crisis lasted until early 1900 and many governments struggled to contain its devastating consequences, be they economic, social, or political.

Of course, the current economic crisis is neither the last nor the most critical. Nevertheless, relative to other economic crises that have preceded it, this crisis has touched every corner of the world and has had a far reaching adverse impact that has left even those individuals and communities who are not at the core of global capitalism in a state of chaos. In addition, this crisis has been overwhelmingly attributed to prevailing global capitalism and, in particular, to the unbridled desire to maximize profits and personal gain through questionable means.

Indeed, experts make a powerful argument that the current crisis is a predictable outcome of an era of market worship where the welfare of the community and organization is not only enslaved to an unregulated market but is also deviously subordinated to the selfish pursuit of individual interests. The market worship is a uniquely threatening development and constitutes a profound departure from the principles of democratic or “populistic” capitalism which appeared during the early years of the state formation in the USA. The market worship, as a form of capitalism, is driven by the following assumptions:

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  markets regulate themselves and capital markets are naturally efficient;

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  managers as Principal Agents know what is good for the shareholders and by necessity for the society;

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  efficient operations must take priority over human needs;

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  profit maximization is the engine for economic growth and prosperity;

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  growth and unfettered capitalism are interdependent and they benefit everyone; and

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  consumers are rational individuals whose identity and self-fulfillment are best realized in the marketplace.

Acting upon these assumptions has produced illusionary prosperity and given rise to mega scams (e.g. Bernard Madoff), major corporate scandals, and fraudulent practices. Consequently, the global landscape has experienced:

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  dramatic increase in job losses which is expected to reach a staggering 50 million by the end of 2009;

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  rapid decline in manufacturing globally;

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  an increasing rate of corporate bankruptcy reaching almost all corners of the globe;

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  a wide range of government bailout and spending across the globe designed to offset the sharp decline in private spending and investment;

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  political unrest, changes in governments, and a serious rethinking of political and economic priorities as governments across the globe attempt to project a sense of normality, contain economic damages, limit panic, and maintain stability;

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  tremendous loss of faith in political and regulatory institutions and in capitalism and its ability, as a system, to cope creatively with unfolding calamity and absorb sudden shocks; and

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  a rise in deglobalization activities and protectionism.

More importantly, the surge of home foreclosures in the USA and other places, along with massive layoffs and confiscation of property, serve not only as an indicator of an absence of a vital mechanism to safeguard against deception and manipulation (system failure) but represents also a remarkable lack of “heart” and any viable consideration for human suffering during hard times. In fact, there is a decoupling between corporate priorities and societal needs and concerns. The Wall Street Journal (Fairclough, 2009) reported that the current economic crisis has reached such remote parts of the world as the Gobi desert, citing the example of Mongolian bank officials who showed up at the tent of a nomadic herder and “threatened to foreclose on his goats, sheep and camels” as he could not payback a $2,700 loan. As the herder had no livestock left to satisfy the bank, a judge ordered the seizure of his family home – the tent.

The above situation is just one of millions of worldwide incidents which are directly linked to the spread of market worship and to a disregard of human factors and societal needs in the prevailing economic equation. There might be some who argue that human needs and social factors should not be part of market and economic consideration. Those who harbor this belief, however, overlook the fact that the realm of economics is inseparable from social and political factors. Indeed, the journey of mankind demonstrates, time and again, that theories, including economics theories, are irrelevant and have no value if they do not serve human beings and further the cause of humanity.

In a state of market worshiping, however, serving and advancing the cause of humanity faces formidable hurdles. Practically, the belief that individuals’ pursuit of their selfish interests is a virtue and that moral issues are best left to individual discretion makes it impossible to articulate and integrate social issues into economic activities if these are not contributing to profit maximization and efficient operation. This eventually reinforces and refuels the cycle of economic crisis. Furthermore, selfish pursuit of interest implies that individuals are not inclined to learn from history or listen to views which are inconsistent with their desires. In both cases, the prospect for learning is at its minimum.

The calamity of the current economic downturn, the severity of the prior economic crises, and the prospect of a reoccurrence of crises accentuate the need for posing serious questions necessary for minimizing the chances of another world economic crisis and safeguarding the international community from a chaotic future. One of the most important questions is “Do policymakers and business executives learn from previous crises?” McNamara (1999), a statesman and former president of the World Bank, argued otherwise. He stated, “I am not sure at all that we have learned from experience, and I worry that we will end up making the same mistakes again and again.” In advocating business globalization, the zealots have asserted with confidence that market growth and unfettered global trade will benefit everyone and that the blessings and prosperity which are associated with capitalism will be a normal outcome. Likewise, these zealots assert that globalization, in its current form and assumptions, are uniformly applicable across the globe and conformity to it is a virtue.

Such assertions are problematic and certainly not realistic. Capitalism, in its all variations, is a man-made system. It is not a divine creation and its blessings and benefits on a wider scale have never been empirically verified. A blind faith in the market and unfettered capitalism along with relentless promotion and projection of globalization as a savior of humanity has led to devastating consequences. This projection is totally unrealistic and has to be reconsidered and examined not only in terms of its outcome but also in terms of its ability to satisfy and meet ever-changing world conditions and human needs.

Certainly, in addressing business globalization, there is a need to acknowledge that the blind promotion of globalization has uncritically led to adopting premises which are impractical and or irrelevant to a wider segment of the international community. Whether we view globalization as a concept or process, it has to be adaptive and inclusive. Furthermore, elements of responsibility toward those who live on the periphery, especially the most vulnerable (e.g. the poor, children, emigrant workers, etc.) should be clearly articulated and pursued. That is, practical and workable premises of globalization should include:

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  long-term equitable growth is a global responsibility and is a global issue;

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  social and economic issues must not be separated and need to be linked to political policies;

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  the global logic is worthless if it is not based on solid foundations capable of dealing with social emergencies in both developed and developing countries;

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  the “supremacy of the market” is a discredited concept and irresponsibly acting upon it always leads to disasters; and

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  economic systems vary in their applicability and validity and effective and appropriate systems are those which are adaptive and satisfactorily optimize social and economic justice.

The above premises constitute a departure from the traditional ones. Perhaps, there are some who still hope that “market worshiping” is a sound practice and that it is likely that the current setbacks are normal and reversible. It is these very same people who in the last few decades have promoted globalization as the only savior of the world community. This “Savior”, however, for millions of people, is without doubt a false one. Indeed, the depth and scope of the current economic downturn is a powerful refutation of this illusion and the claims of “market worshiping” globalization. The only viable avenue for reversing the current trends is to treat social considerations and priorities as integral and inseparable factors in economic globalization.

Abbas J. Ali