The Inevitability of globalization

Globalization is one of the most charged issues of today. Extreme opponents charge it with impoverishing the world’s poor, while fervent supporters see it as a high speed elevator to universal peace and prosperity. Economic globalization, however, constitutes the integration of national economies into the international economy through trade direct foreign investment by corporations and multinational companies, short term capital flows, international flows of workers and humanity generally, as well as flows of technology.{{more}}

Such economic globalization for example is distinct from another component of globalization which may lead to increased international accessibility to print and other media, internet access to newspapers and magazines or growing enrollment of foreign students. The University of St. Georges (Grenada) is currently benefiting from that aspect of globalization as among the countries from which it enrolls students are India, Pakistan, Iraq, The United Kingdom and the United States of America. St. Vincent and the Grenadines stands to benefit enormously from such globalization if it is able to market itself and attract a University that majors in medicine to these shores.

Globalization continues a pace as trade and investment flows surge around the world tying national economies ever closer together. For more than two decades, the developed world has pursued globalization policies and the result has been a wealthier and more dynamic global economy. That globalization- friendly environment is now being viewed with some unease because the phenomenon has succeeded too well for the rich world’s comfort as they reflect on the achievements of the globalization- powered economies of India and China.

Today’s globalization is, however, somewhat different from what it was in earlier times. The earlier integration of countries into the world economy was driven by developments in transport and communication rather than by policy changes. The first transatlantic telegraph was laid in 1866, and by the turn of the century, the entire world was connected by telegraph, and communication times fell from months to minutes. Transportation by railways and ocean going vessels played a major role in the communication system. But today the most dynamic change is in the degree to which governmental policies have intervened to reduce obstacles to the flow of trade and investment world wide. The new information technologies have created a landscape where movement in services and capital are several times faster than hitherto. Adam Smith noted over two centuries ago that orange producers in the tropics had little to worry about competition from Glasgow where oranges could grow in glass houses; the cost difference would be so high that the tropical farmers felt secure behind a solid buffer of competitive advantage. For most commodities and activities today, technology matters and many people have access to the same pools of knowledge. Furthermore, multinationals can take scarce knowledge almost anywhere if they choose to produce globally. The buffer has shrunk dramatically in most activities and international competition is quite fierce. Today it is differences in climate, skill or of domestic institutions and policies, reflecting local conditions that lead to competitive advantage.

The openness to trade had been at the heart of the rapid growth in the East Asian countries from the 1970’s whereas the hasty freeing of financial flows was part of the interruption of their growth. The freeing of capital flows in haste without putting in place monitoring and regulatory mechanisms and banking reforms were serious errors of judgment.

Making Globalization Work

When poor countries embrace free trade, they would want to have domestic adjustment assistance programs to aid the local industry that experiences disruption from international competition, as in fact the rich countries have long done. But since they do not have the resources to finance such programs, international aid agencies like the World Bank should be mobilized to provide the necessary finance. This action by domestic and international institutions would be joined to facilitate the poor countries’ beneficial trade integration into the world economy.

Occasionally, globalization will do harm and require attention. Countries must, therefore, create institutions and policies that can reduce to probability of any negative impact. Again if one thinks of immigration, a substantial influx of immigrants can precipitate a reaction that may make it extremely difficult to keep the door open. There is clearly prudence with proceeding with caution even if one considers that international migration is an economically and socially benign form of globalization. In the final analysis, globalization must be managed so that its fundamentally benign effects are ensured and reinforced. Without wise management it could be imperiled.