Ashridge

Virtual Learning Resource Centre

Globalisation: Threat or opportunity?

Bookcover

by Paul Streeten, Copenhagen Business School, 2001.

Abstract

This book seeks to define globalsiation at least 13 different ways as listed and discussed in this summary. The advantages and disadvantages accruing from globalisation are considered and some global success stories are shared.

(Summarised by Edgar Wille in November 2001)

(These book summaries aim to represent some of the key aspects of what the author has written. They do not necessarily represent the views of the summariser or of Ashridge. Equally the author of the book summarised must not be held responsible for any misperceptions of the summariser. A summary does not have space for all the illustrative cases which provide the richness of a book and there is no substitute for reading the whole book. There is an element of simplification in a summary so that the message may seem more obvious than it necessarily is, though the most powerful ideas are often simple and obvious in their essence.)

Introduction

I recommend that managers should have the book on their shelves at least for reference. When we read a book we are in dialogue with the author and with people mentioned. So it was for me in this case. Some of my parts in the dialogue I have included in brackets to encourage the idea of reading being dialogue.

We need to be thinking about globalisation from a variety of perspectives. It is suggested by this book that some of the literature of the past decade jumped to premature conclusions. The Borderless World by Kenichi Ohmae is mentioned in this connection. The borders are still there. In fact as new states proclaim themselves there are more borders and an increasing move to keep out immigrants from one to another. However the issue is debateable. Ohmae suggested that for really large companies, national borders have effectively disappeared and along with them, the economic logic that made them useful lines of demarcation in the first place. Ohmae affirmed that strong nationalist feeling did not prevent the industry in such countries from seeking the benefits of inward investment. (Currently if terrorism can be globalised, cannot the cells of globalisation be applied to create peaceful and prosperous trade and industry?).

Back to the top

Defining Globalisation

So I re-started my reading at the end of chapter 26. ‘Definitions of globalisation’ sharpens up our sense of what we are talking about. Here are some of them; they cover different aspects and are open to debate:

  1. The power to act instantly at a distance.
  2. Core activities of an economy acquire the technological and organisation potential to work as a unit in real time on planetary scale.
  3. The growing interpenetrating of markets.
  4. When it comes to acid rain, oil spills, depleted fisheries, tainted groundwater, fluorocarbon propellants, radiation leaks, toxic wastes or sexually transmitted diseases, national frontiers are simply irrelevant.
  5. The manifestations of globalisation include: the spatial reorganisation of production; the interpretation of industries across borders; the spread of financial markets; the diffusion of identical consumer goods to distant countries; massive transfers of population within the south as well as from the south to the east and the west and resultant conflicts between immigrant and established communities in formerly tight knit neighbourhoods.
  6. Globalisation is the process whereby the world’s people are becoming increasingly interconnected in all facets of their lives, cultural, economic, political, technological and environmental.
  7. Value adding activities owned or controlled and organised by a firm (or group of firms) outside its (or their) national boundaries.
  8. The term ‘globalisation’ is meant to convey the increasing linkages among countries or the deeper integration of the world economy by trade, finance, and direct investment and technology.
  9. The complex process resulting from the rapidly increasing flow of goods, money, people, ideas and images across national boundaries, globalisation is creating a patchwork of connected and overlapping, but never the less distinct, worlds. Thanks to modern communication and transport technologies they pay little heed to geography and conventional political boundaries.
  10. Globalisation is a myth suitable for a world without illusions, but it is also one that robs us of hope. (Need this be so?)
  11. That loose combination of free trade agreements, the internet and the integration of financial markets that erases borders and invites the world into a single, lucrative but brutally competitive market place.
  12. The compression of time and space.
  13. Globality as a state of being, moves beyond the process of globalisation. The theme at Davos in 1999 was ‘responsible globality’.

It is interesting to note that most of the globalising companies remain firmly embedded in their countries of origin.

(This summary is written at the end of ten days which shook the world, after the destruction of the twin towers in New York which symbolised globalisation under the description ’World Trade Centre’. The aftermath is seeing an unprecedented coming together of nations to combat world terror and to overcome the adverse effects of globalisation, whereby something in New York affects all parts of an interconnected world. The creation of a global coalition can become a hopeful expression of globalisation meeting positively the formidable impact of the most unimaginably evil form of globalisation).

It is clear that national interests have not been cancelled out by the large degree of global integration, in which we were thinking with Robert Reich (see book summary on the Work of Nations) that international corporations were overriding the power of state institutions.

Back to the top

Advantages and disadvantages

These definitions make clear that a process is operating which, while it will have its ‘ups’ and its ‘downs’, is impossible to reverse. (One asks whether the protesters of Seattle, Montreal, Prague and Genoa would achieve their objectives better if they entered into dialogue with this book and sought to smooth the rough edges of globalisation instead of banging their heads against the inevitable. I refer of course to the real demonstrators - not those who are in it for a fight).

Chapter 3 is entitled ‘Uneven benefits and costs of globalisation’ and gives an approximate balance. It sees it as good for output, people with assets, profits, people with high skills, the educated, professional, managerial and technical people, creditors, large firms, men, the strong, risk takers, global markets, sellers of technologically sophisticated products, global culture, global peace, businessmen, lawyers, economists. The author regards it as bad (particularly in developing countries) for employment, people without assets, wages, people with few skills, the uneducated, workers, debtors, small firms, women, children, the weak, human security, local communities, sellers of primary and manufactured products, local cultures, local troubles, environmentalists, consumers' rights groups, family organisations, farmers, religious organisations.

Much of the book contains analysis of the impact of globalisation in these two opposite directions and the creation of the privileged elite and the under-privileged masses. The underprivileged do not share the benefits of global integration. They are left outside its scope in lives and societies that disintegrate because the powerful global forces use them rather than sustain them. There is discussion in the book on how to avoid this. Given that globalisation is inevitable what can be done to ameliorate its disadvantages and let all share in global wealth? (The Genoa and other protesters fought against globalisation not for its amendment to achieve benefits for all).

Back to the top

Integration and disintegration

At several points, Paul Streeten brings out reasons why partial international integration leads to national disintegration:

  1. Downsizing, restructuring and re-engineering reduce the demand for low skilled workers in the risk and middle income countries and keep wages low, if they manage to keep their jobs.
  2. Income gaps increase as professional and skilled people in developing countries have to be paid at high levels to prevent them becoming part of the brain drain, moving to rich countries. This skews the wage structures in such countries and creates envy and unrest.
  3. Globalisation causes a reduction in tax revenues to pay for social services, though there is increasing need for such services.
  4. The elite who stay in low income countries opt out of national commitments in order to live like the elites in advanced countries. This leads to neglect of social services. The elite of poor countries get surgery, education for their children, vacations and shopping expeditions by visiting the rich countries, where they also invest their money, while educational, medical and economic improvements in their own countries are neglected.
  5. These elites join the global culture and move away from local ones. But it means that the countries are denied the help they could give to overcome eg, female genital mutilation, sexual subjugation, witchcraft and punishment by amputation. They still go on in their countries because ‘could be’ reformers are not concerned.
  6. Minorities break away to form new states or ‘states’ within states with the part aim of gaining some of the global benefits.

Back to the top

Overcoming the disbalance

However, this book tries to maintain a balance by suggesting throughout its pages ways of overcoming these disadvantages. One quotation clarifies this:

‘Markets, to be efficient, have to embedded in a framework that enables their productive potential to flourish and to be used for socially and ecologically sustainable development. The reduced power of national government, combined with the spread of world-wide free markets and technological innovation without a corresponding authority to regulate them and hold them accountable, has contributed to the marginalisation of large regions and groups of people. The state has become to some extent ungovernable, while the global society is ungoverned. While some groups acquire unprecedented wealth, unemployment, poverty, inequality and alienation are increasing, partly (though not solely) as a result of this process. Crime, drugs, terrorism, violence, civil wars, diseases and environmental destruction are becoming globalised. Competition forces firms to reduce costs and labour, and natives suffer’.

Paul Streeten examines briefly the main aspects of globalisation - trade, financial flows, technology and transnational corporations. He considers the impact of globalisation on growth, productivity, unemployment, income distribution, technology, institutions and culture, and highlights how it reacts unfavourably on less developed countries, who to a large extent lack capital, materials, management skills and infrastructure; who don’t have credit banks, training schemes, widespread land ownership; who may have a culture which inhibits them from accepting certain jobs, thereby creating simultaneously labour shortages and unemployment, inefficient work through inadequate nutrition, health and education; who find more developed countries show little interest in their exports; who suffer from policies which overprice labour, underprice capital and overvalue exchange rates, thus preventing efficient labour utilisation.

It is in the interests of the 37000 parent transnational corporations world-wide who control 75% of world trade to concern themselves with these issues. Not to do so is storing up trouble for the future. Somehow the poor people in low income countries have to be protected against being battered by these forces, for reasons of ‘political stability’ as well as ‘common humanity’.

It is recognised that the developing countries cannot stand aloof from globalisation. One writer has ironically said that there is ‘only one thing worse that being exploited by capitalists and that is not being exploited by them’. (In the current war on terrorism several voices are calling for being ‘tough on terrorism, tough on the causes of terrorism’ and all over the less developed world there is ready ground among the poor in which the seeds of terrorism can be sown.) Globalising forces led by the advanced world are seen as the enemy in much of the developing world. Thus moderating the undesirable effects of globalisation is good business sense as well as a duty to fellow human beings.

Back to the top

The practical value of Utopianism

This book could be seen as soft and paying insufficient attention to harsh realities. It could be criticised as being Utopian. In chapter eleven it makes out the case for being Utopian:

  1. Utopianism can be useful as a framework for analysis. Think afresh as if you were working in a political vacuum (just as re-engineering starts with a blank sheet of paper).
  2. Utopianism gives a sense of direction, which can get lost if we think too soon and too much of what is feasible.
  3. Excessive concerns with what is feasible tend to confirm the status quo.
  4. Circumstances sometimes change suddenly and what was deemed impossible becomes feasible eg the Berlin wall, disappearance of Soviet Union, ex communist countries joining NATO, the peaceful end of apartheid in South Africa, the handshake between Rabin and Arafat on the White House lawn. (A well worked out, if Utopian, plan comes into its own, much as Shell’s scenario planning for the unthinkable stood it in good stead.)
  5. Ideas thought to be utopian became realistic at the right moment as large numbers of people support them. Thinking the unthinkable, unencumbered by inhibitions and obstacles or political constraints, yet in some detail, can open the door to change.

However, Streeten enters a caveat, calling for collaboration between ‘Pedants’ and ‘Utopians’. What he calls pedants are the bureaucrats and technical people who understand how things are and have their feet on the ground. Utopians are the idealists, often young people, but who lack the attention to detail. Marry the two and we will have pedantic Utopians or Utopian pedants who will work out in considerable detail the ideal world and ways of getting to it, even utilising informed fantasy (similar to Shell scenarios). Otherwise, he says, when the opportunity arises, we shall miss it for lack of preparedness.

Back to the top

Global success stories

The realistic side of idealisation receives support from Paul Streeten’s reminding us of global success stories reaching back into the 19th century. In 1874 the Universal Postal Union began the coordination of world-wide letter and parcel post. In 1884 Greenwich Mean Time (GMT) was adopted as the basis of time keeping globally. More recently the UN has more success stories to report than are usually recognised. Some of these are described. Examples are given of transnational companies who include in their global policies outsourcing of activities to areas where they will bring most benefit while saving the companies money. (Strangely enough the very groups who protest against globalisation are themselves thoroughly globalised as the scenes at various recent summits suggest.) Idealistic, yet practical, voluntary bodies transcend national boundaries and are indeed global, eg Amnesty International, Friends of the Earth, Greenpeace, the Red Cross, and many other non governmental bodies and charities. The book also brings out positive work done by the World Bank, World Trade Organisation, IME and similar organisations, some of it while mobs raged outside. (But the mobs were news: the boring positive activity was not.)

Mention is made of the way in which self help has been established with aid from Western know how in ventures such as: the Kulai palm oil project in Malaysia; the Kenyan Tea Development Authority; and the National Dairy Development board in India, the latter run mainly by women, on traditional and informal lines, while processing, credit and marketing follow modern formal sector lines.

One of the best stories in the book is of local self help through the Gameen Bank in Bangladesh. It is a wonderful model of how to lift the poor out of poverty. It lends small sums, mainly to poor rural women - to women because they will ensure that its benefits reach their children. They use the money to build fishponds or to buy dairy cows and rice husking machines. It uses peer pressure in small groups of five to achieve repayments. It teaches people to help themselves and it has a particularly good repayment record, eg 94%. It fosters enterprise rather than dependence. The bank started with personal loans by Muhammad Yunus, its founder, of $27 to 42 poor people in his village to free them from the slavery to moneylenders and middlemen.

This model has been replicated around the world (another aspect of globalisation). (Sonia Hepstonstall , wife of a regular contributor to the Virtual LRC, tells of the same method being employed in Bosnia in villages where the men folk were decimated leaving the women to carry on the best they could.)

Back to the top

Food for thought

I recommend the book as a resource to help managers in conventional organisations see ways of offering non patronising assistance to developing countries in a way that benefits themselves and contributes to the creation of situations which will reduce global threats which would cause all companies to suffer.

The nature of the book limits the amount that could be shared in a summary or review. There is so much more detail, interestingly presented, than I could hope to summarise. So if you are concerned about getting ideas about how your company can operate in the global scene, as we often say, there is no substitute for reading the book itself. I hope this has whetted your appetite.

Back to the top