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Globalization's Bed of Nails, Part 2: The Pessimists

Posted on the 21 March 2013 by Stephendeangelis @EnterraCEO

In my last post, I looked at the optimistic side of globalization. I used a post by an anonymous British blogger as the basis of arguments presented in that post. ["Theories of Globalisation," realsociology, 9 February 2013] In that same post, he (or she) also presented the arguments raised by globalization pessimists, transformists, and transnationalists (the latter two categories will be discussed in the final segment of this series). This post will look at the arguments presented by individuals who are not so keen about the concept of globalization.

The first argument they make is that "increased trade has had unequal benefits." Even globalization optimists admit that globalization has been uneven and the result has created a spiky world. Optimists, however, would argue that dissing globalization because it hasn't benefited everyone equally would be throwing the baby out with the bathwater. Globalization's first beneficiaries were developed countries as multinational corporations moved into new markets; but, it has been Asian countries that have ultimately benefited most. Spreading the beneficial effects of globalization to the rest of the world certainly needs to be a priority.

The second argument raised by pessimists is that transnational corporations "pollute [and] extract resources from and exploit cheap labor in the developing world." Have there been abuses? Undeniably. Does that mean that developing countries will be better off if large corporations are forced to leave those countries? I believe that argument would be hard to make. That doesn't mean, however, that large corporations shouldn't be held to certain standards to ensure that they don't conduct activities that pollute and exploit resources (including human resources).

The third argument raised is that "culture may be increasingly global, but this mainly means Americanisation." Although there are concerns about local cultures being lost as a result of globalization, many large companies (especially those involved in the food and drink industry) have found that they must adapt to local tastes in order to succeed. Pessimists point out the ubiquity of McDonald's, Coca Cola, Walmart, and Starbucks as evidence of the Americanization of the world. Bhaskar Chakravorti, director of Tufts’ University's Institute for Business in the Global Context, paints quite a different picture. "He says all these examples represent 'the myth of American global market power' — they are outliers that disguise the real failing of American multinationals to succeed around the world, and especially in fast-growing emerging markets." ["Why Most American Companies Are Terrible At Globalization," by Tim Fernholz, Business Insider, 5 March 2013] Fernholz provides an excerpt from a forthcoming paper written by Chakravorti and his colleague Gita Raohas:

"In 2010, emerging markets represented 36% of global GDP; these markets already account for the majority of the world's oil and steel consumption, 46% of world retail sales, 52% of all purchases of motor vehicles and 82% of mobile phone subscriptions. With two-thirds of global growth coming from these markets, in a decade they will account for the majority of the world’s economic value. Yet U.S. companies derived less than 10% of their overall revenues from emerging markets: about as little as 7%, according to HSBC estimates for 2010. The 100 largest companies from the developed world overall made 17% of their revenues from emerging markets, according to a McKinsey report; in other words, the U.S. lags not only emerging market firms in capturing share in emerging markets, but it lags the developed world overall. By considering the difference between the 'absolute potential' represented by the 36% number or, to take a much more conservative benchmark, the global peer average of 17% and the U.S. share of 7%, we derive two measures of the gap – and the degree to which U.S. industry has not participated in global growth."

In other words, concerns about the Americanization of the world are probably exaggerated. Fernholz has a lot more to say about why U.S. companies haven't done better at globalizing, but that's a topic for another day.

Another argument raised by globalization pessimists is that, rather than spreading democracy like the optimists claim, it has spread "U.S Military power, as outlined by John Pilger in the War on Democracy," and has encouraged the U.S. to spend "almost $700 billion on its military every year." I would suggest that the fall of the Soviet Union had more to do with the spread of U.S. military power than the globalization. That event unleashed former clients to use the military hardware they had received from the Soviet Union (mostly in internecine civil wars) and the world became a much more dangerous place. At the same time, the U.S. found itself the sole remaining superpower capable of dealing with regional conflicts. The September 11, 2001, terrorist attacks on U.S. soil further convinced American politicians that it needed to engage its foes "over there" in order to protect citizens at home. This strategy has certainly been controversial, but laying that strategy at globalization's doorstep doesn't really advance the debate.

The next argument raised is interesting. It claims that "the spread of global media really means the spread of massive media firms such as Rupert Murdoch’s News Corp, with programmes such as Fox News presenting a pro-American view of the world. Also think of popular culture – X factor, and Hollywood and global advertising. The pessimist view on such aspects of the global media is that they lead to increasing cultural homogenisation." This is a companion argument to the Americanization argument raised earlier. What I find interesting about this argument is that it specifically refers to Fox News, a well-known conservative news outlet that is a source of much anti-globalization sentiment. In fact, I would place Fox News among the ranks of globalization pessimists. Unlike most pessimists, who believe that globalization is bad for the world, Fox News and supporters of its views, believe that globalization is bad for America.

The next argument raised by the pessimists involves urbanization. "Zygmunt Bauman argues that global cities are best described as 'fortress cities' – especially in the developing world cities are places of huge inequalities where the rich hide themselves away in exclusive gated communities and the poor are left to the slums." It would be hard to argue with the fact that cities are "places of huge inequalities." Most analysts argue, however, that cities are also places of huge opportunities. To read more about this view of cities, read my post entitled Will Cities Save Us? In that post, I cite an article by Charles Kenny. ["In Praise of Slums, Foreign Policy, 13 August 2012] Kenny doesn't sugarcoat conditions found in urban slums. He writes about "the stench of open sewers, the choking smoke of smoldering trash heaps, [and] the pools of fetid drinking water filmed with the rainbow color of chemical spills" that found in many slums. But he also argues that poor people living in slums are generally better off than poor people living in rural areas. He explains:

"Most people who've experienced both rural and urban poverty choose to stay in slums rather than move back to the countryside. That includes hundreds of millions of people in the developing world over the past few decades -- and 130 million migrant workers in China alone. ... For all the real horrors of slum existence today, it still usually beats staying in a village. Start with the simple reason that most people leave the countryside: money. Moving to cities makes economic sense -- rich countries are urbanized countries, and rich people are predominantly town and city dwellers. ... Slum dwellers may be at the bottom of the urban heap, but most are better off than their rural counterparts. Although about half the world's population is urban, only a quarter of those living on less than a dollar a day live in urban areas."

For a really pessimistic view of globalization, read what Gail Tverberg has to say. ["12 Reasons Why Globalization is a Huge Problem," The Energy Collective, 24 February 2013] In a nutshell, she says that globalization is a huge problem because it negatively affects the developed world -- especially the U.S. (i.e., globalization allows developing countries to use up resources too fast, raises energy prices too high, transfers jobs to lower cost countries, transfers consumption to emerging market countries, transfers investment spending to developing countries, and encourages global interdependence). It's good grist for a Fox News story.

On the whole, the pessimistic view of globalization certainly highlights its shortcomings, but it falls short of convincing me that globalization has been bad for the world. The fact that so many people have been raised out of poverty in the past half century convinces me otherwise. In my opinion, we should discuss globalization without praising or burying it. That also seems to be the view of those who see globalization as transformative. I'll discuss their arguments in the concluding segment of this series.

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