Chapter 9

Globalization
9.1 . Conceptualizing Globalization
There is currently a popular view that the world economy is undergoing profound changes in the
relationships through which it is organised. Specifically, and for some considerable time now,
‗globalization‘ has become a fashionable topic—a buzzword. Indeed, it is currently difficult to read
newspapers, watch television documentaries or study academic articles without frequently
encountering some reference to the concept, and it is clear that the framework of analysis in many
spheres is becoming heavily influenced by so-called globalization.

The broad subject of ‗economy and globalization‘, for example, has recently spawned a large and
growing literature, much of which, such as key works by Friedman (2000) and Stiglitz (2002), has
been embraced by the mainstream, and can be found in bestseller lists the world over. The
perceived importance of this area essentially stems from the acknowledgement that past, present
and future globalization processes undeniably have strong implications for how problems of
economic development are analysed. Moreover, there is conflict and controversy around exactly
what these might be; globalization is a highly contested concept.

The popularity of ‗globalization‘ as a concept brings with it the danger that, in increased use, there
is a failure to articulate exactly what is meant by the term and by the changes to which it refers.
Indeed, we suggest that typically the concept is used very loosely, and hence is fairly vacuous; its
use is devoid of analysis and rigour. Scholte (2000: 1), for example, notes that:

in spite of a deluge of publications on the subject, our analyses of globalization tend

to remain conceptually inexact, empirically thin, historically and culturally illiterate,
normatively shallow and politically naïve. Although globalization is widely assumed
to be crucially important, we generally have scant idea what, more precisely, it
entails.

Of course, we should not seek a very simplistic definition especially for such a broad, potentially
complex, and contested phenomenon, as globalization. Nevertheless, we need to be precise and get in
to the core of the subject to be able to set the context and parameters for debate. Yet they are often
overlooked, as the very nature of globalization is difficult to confine to one sphere, and thus to define
it precisely or to measure it empirically.

− Indeed, globalization is clearly a multifaceted phenomenon, with implications that encompass not
just the economic but also the social, political, cultural and geographical. Radice (2000: 6), for
example, notes ―globalization has been a prominent topic among geographers and sociologists as
well as economists and political scientists, and is studied within every paradigm, from neoclassical
economics to postmodern social theory to realist international relations theory to Marxism‖. In this
regard Vellinga (2000) comments that it has the characteristics of a ‗theoretical umbrella‘, in a
similar way to dependency theory.
− More broadly globalization refers to the acceleration and intensification of mechanisms, processes,
and activities that are allegedly promoting global interdependence and perhaps, ultimately,
global political and economic integration. It is, therefore, a revolutionary concept, involving the
deterritorialisation of social, political, economic, and cultural life.

− It would be a mistake, however, to view globalization deterministically. Just as there are powerful
forces of integration at work through the shrinkage of distance on a global scale, so there are forces
of disintegration as well.

− Although, globalization has certain identifiable characteristics, there is no consensus in the field
about any of these recognizable characteristics. In the first place, it involves a growing
consciousness of the world as a single place. This is reflected in phrases such as ‗the global village‘
and ‗the global economy‘ or the world market‘. Few places are more than a day‘s travel away and
communication across territorial borders is now almost instantaneous. In 1980, there were about 1
million international travellers per day. In 2000, more than 3 million people crossed territorial
borders as tourists each day.

− First, new information and communications technology have improved access to overseas markets
and streamlined both the production and distribution of goods and the trade in foreign exchange.
Second, societies and their members are becoming more and more dependent upon one another as
problems such as global warming, the international drugs trade, and terrorism can only be managed
through greater cooperation at a supranational level. Fourth, some observers argue that globalization
is erasing cultural differences, yet with a homogenizing effect and process towards particular culture
that is becoming dominant. Sociologists, for example, like to talk about the Coca-Colaization or
McDonaldization of global culture.

− Finally, some observers claim that the sovereign state‘s capacity for independent political action is
weakened by globalization. This is especially true in the area of economic policy. The idea of a
domestic economy hemmed in by well-defined borders and managed by the state is now
obsolete. Today, domestic economic policy is subject to global market forces. The state has little
effective influence or control over these forces. Any state that tries to exert its influence risks dis-
investment, capital flight, and recession.

− In short, globalization involves a radical transformation of existing economic and political structures
in international relations. It involves an aspiration to think and act globally and an acknowledgement
that humanity cannot effectively be ordered along geographical lines. To talk about globalization,
then, is not only to embark on a description of the present, but involves a comprehension of
the forces shaping the future. In this sense, it is a multifaceted, complex, and dynamic concept.

− At its most basic, the term globalization is used to refer a range of economic, technological, cultural,
social, and political forces and processes that are said to have collectively produced the
characteristic conditions of contemporary life. Foremost among these characteristics is a dense,
extensive network of interconnections and interdependencies that routinely transcend national
borders. The interconnectedness is said not only to be more extensive in scope than in previous
periods, but the connections are also more intensive and the speed at which such interactions occur
is increasing. These interconnections have occurred and are expressed in ways that appear to ‗bring
 together‘ geographically distant localities around the world, and events happening in one part of the
world are able to quickly produce effects in other parts of it. It is this enmeshment that gives rise to
consciousness of the world as a single, shared place—a ‘global village’.

 Three Dimensions of the Enmeshment/Complicated Process are:

− Extensity: the degree to which cultural, political, social, and economic activities are
‗stretching‘ across new frontiers to encompass the world.
− Intensity: changes in magnitude and regularity of interconnectedness.
− Velocity: changes in the speed of global interactions and processes.
(Source: Held et al., 1999)

− It is worth pointing out that the globalization concept itself is of relatively recent vintage.
Globalization was first used in production management studies to describe the global spread of
production systems facilitated by technological advances in telecommunications and transport
systems whereby corporate headquarters were able to control production sites on the other side of
the world. The term then spread throughout economics and then the rest of the social sciences to
explain changes believed to be occurring as a result of increasing interconnection of economic,
social, political, and cultural systems throughout the world.

Scholars were highlighting the apparent emergence of a ‘new international division of labour’
resulting from this industrial restructuring. This entailed the relocation of production away from
‗core‘ urban areas by companies in certain labour-intensive sectors (textiles, electronics assembly)
with unionized, protected labour forces towards weakly organized and cheaper labour forces in
‗peripheral‘ communities in developing countries (Fröbel et al. 1980; Schoenberger, 1988). The
establishment of export processing zones (EPZs) or what is known as foreign outsourcing was
central to this process. One of the first and most notorious methods of foreign outsourcing was the
maquiladora (Spanish for ―mill‖) in Mexican border towns. Manufacturers built twin plants, one on
the Mexican side, and one on the United States side. Companies in the United States sent partially
manufactured products into Mexico where labor-intensive plants finished the product and sent it
back to the United States for sale. Outsourcing to Mexico became more widespread after the North
American Free Trade Agreement went into effect in 1994. Firms in the United States also outsource
to many other nations, including China, India, Indonesia, Jamaica, Malaysia, the Philippines, and
South Korea. In the 21st century, few products were made entirely within the United States.
Although a product may be fabricated in the United States, some component parts were probably
produced in foreign countries.

− Globalization entered more widely into popular discourse after the end of the Cold War. The
collapse of the Berlin Wall and the end of the Soviet bloc in 1989 heralded what the US President,
George Bush Senior, announced as a ‘new world order’ and it is the characteristics of this new
world order that the term globalization is partly used to describe. A main feature of this order was
the triumph of capitalism and free market economic system over socialism and its centrally planned
or command economy. However, beyond that there were many questions asked about what this
implied for international relations between states given the absence of a countervailing power to
constrain US imperialist ambitions in particular and those of the West in general. Further issues
 included changes in North–South relations and the realignment of countries that formerly allied with
the Soviet bloc.

− With these thoughts in mind, it would seem that the key to understanding globalization is to start
with the idea that it is a phenomenon that is essentially multidimensional and manifold and involves
different actors that act and interact at different levels.

− The multidimensional aspects of the phenomenon precisely refers to the economic, the political,
social, cultural, technological, etc., phenomena and the manifold realities of social life affected by
changes in these phenomena. Yet globalization describes the modes of interactions, processes,
patters of relations and activities entailing interdependence— the complex interconnections and
mutual influence between different forces.

− Indeed, Held has asserted this boldly:

Globalization is neither a singular condition nor a linear process. Rather, it is best
thought of as a multidimensional phenomenon involving domains of activity and
interaction that include the economic, political, technological, military, legal,
cultural, and environmental. Each of these spheres involves different patterns of
relations and activities.
(Held in Shapiro and C. Hacker-Corson Eds. 1999: 93)

− There is much common sense in this position. Globalization is ‗a complex and multidimensional
phenomenon that involves different levels, flows, tensions, and conflicts‘. Moreover, it is right to
emphasize that, in a sense, ‘there is no such thing as globalization per se’. Instead, the term is used
as a cover concept for the heterogeneity of processes that need to be spelled out and articulated.

− The process characterized by increasing interconnectedness or interdependence, implies that

economy, culture, politics/ideology/ and communication technology have been the driving forces as
well as forms of globalization. Despite this fact, for many scholars especially in mainstream
economics, the economic logic seems to be the underling and pushing force of globalization.

− The concept of globalization is a very difficult one to pin down to a strait-jacket definition
essentially because the term has come to refer to a gamut of interlocking variables and trends so
much so that, once the term is mentioned, it evokes a lot of passion and emotion. These perceptions
are at once geographical, ideological, and academic.

− Globalization is multifaceted process and phenomena subject to various perceptions. While some
people see the process as positive and promising, others see it as less attractive and even
threatening. The International Monetary Fund (IMF, 2001), conceives of globalization as a process
of growing global interdependence of countries through increasing volume of cross-border
transactions in goods and services and of capital flows and also through the more rapid and
widespread diffusion of science and technology.

9.2. Eight Dimensions to Globalization

 Globalization captures a range of elements and processes across a number of key domains–
economic, political, cultural, social, ecological, and technological, financial, geographical. In the
discussion that follows, eight different dimensions of globalization are identified and each are
briefly explained. Thus at any time when we use the term globalization we are referring to one or
more of these eight senses.

1. Economic Globalization: a rapidly growing worldwide production process—the emergence of

a new integrated production system—that enables global firms to utilize capital and labour
across the world. The expansion of economic forces that seek the removal of artificial barriers
and restriction across national boundaries, that hinder the free flow of goods, services, and
factors of production on the world market.

2. Political Globalization: the diffusion of the neoliberal agenda promoting state expenditure
reduction, deregulation, privatization, and generally open economies.

3. Cultural Globalization: the consumption of global products across the world, often implying a
homogenizing effect as with Coca-Colaization and McDonaldizaition (Mc-World). This
implies an increasing trend of convergence in tastes and in the consumption of material or
cultural goods/products.

4. Sociological Globalization, a new imagination that sees the emergence of a single ‘world
society’, an interconnected social whole that transcend national societies
5. Financial Globalization: the instantaneous ‘world markets’ in financial products traded in
world cities across the globe continuously24 hours a day.

6. Geographical Globalization: the reordering of space replacing the international by

transnational or trans-state practices in an increasingly borderless world, often viewed as a
network of world cities. ….the transcending of physical obstacles to social and cultural
arrangements loose importance and an awareness of this by people.

7. Technological Globalization: the combination of computer and communication technologies

that have created time-space compression, the instantaneous transmission of information across
the world

8. Ecological Globalization: a concern that current social trends will outstrip to live as a living
planet, aspiring to a green political globalization.

Some of the major dimensions of globalization are discussed in more details in the following section.

A. Economic Globalization
− On the economic level, control of the global economy is seen as being concentrated in a small
number of massive transnational corporations, whose turnover may be greater than the GDP of
many nations, which can pick and choose where to locate their production, administrative, and
research and development centers. Countries are said to be forced to cut tariffs and taxes if they
wish to attract foreign direct investment from these TNCs. The increasing number of free trade
 agreements, whether global (GATS), regional (NAFTA), or bilateral (ANZCERTA), are reducing
the ability of states to form economic policies to promote their national interests. Finally, MEIs,
such as the IMF, WB, ADB, and the EBRD, are increasingly influential in policy formation,
especially in the case of developing and transitional countries which are encouraged to remove
protectionist tariffs, privatize state industries, abolish price controls, and lift restrictions on private
investment in order to obtain loans. Governments have come under pressure to increase labour
flexibility by making it easier to hire and fire workers, introduce temporary and precarious working
conditions, and remove various trade union, health and safety, and minimal wage protections.
− In many modern industries the scale of investment needed for Research and Development (R&D)
and production facilities can mean that the size of a single domestic market is insufficient to support
that industry. The production of electronic components requires high levels of investment in both
R&D and the manufacturing process, and this drives firms to go global. This is especially so when
product life cycles are shortening, increasing the pressure to recover investment quickly.
Competitive pressures on costs also push firms to reduce product lines and to expand globally to
seek every possible saving from economies of scale in R&D, manufacturing, and marketing.

− The desire to cut costs can be seen in the aluminum industry. Aluminum is a relatively expensive
metal to produce as it takes a lot of electricity to turn ore into metal. This is why aluminum firms
locate their smelters in locations with access to cheap energy. Other industries will seek out cheap
sources of labor. In the footwear industry, which uses relatively simple technology and is therefore
labor intensive, labor costs represent about 40% of total costs. Hourly wages in some countries are
very low. For example, in manufacturing, those in China are just 3% of those in the USA. As a
result manufacturing has been relocating to countries with low labor costs such as China and India.

− Firms may globalize because they have outgrown their domestic market and in any case, the pace of
growth in mature, developed economies for many industries is relatively modest. To maintain a rate
of growth required by capital markets will mean for most of the world‘s leading companies that they
must seek opportunities beyond their domestic borders.

− The case of Wal-Mart is a very good example of this. Up to 1991 Wal-Mart was a purely American
based company. Then it embarked on a joint venture with another retailer, Cifra, in Mexico. In just
11 years it developed 1,170 (27% of the total) stores outside the USA. Some commentators argued
that it needed to do this in order to survive, to meet capital market requirements and the expectations
of its own employees whose wealth was tied to a share purchase plan, the value of which depended
on the growth prospects of the company.

− The rapid improvements in technology and the consequent reduction in communication and
transport costs have enabled people to experience other societies‘ lifestyles first hand or through the
medium of TV and film or the internet. This has led to a convergence in tastes which MNCs have
been quick to exploit by creating global brands such as Coca Cola, Levi, Sony, Nike, and
McDonalds. This has been called the ‗Californiazation’ or ‗McDonaldization’ of society.

− Global companies mean global customers. Global customers require basic supplies of input
materials, global financial and accounting services, and global hotel chains to house travelling
executives. Dealing with one supplier of a standard product or service has many advantages for the
global buyer; lower purchase costs, a standard product of consistent quality, lower administration
 costs, and more opportunities for cooperation with suppliers. For example, Japanese banks became
more global following the globalization of Japanese car manufacturers (an important customer).

− After the collapse of USSR and the ideology of communism, Capitalism driven by its logic of
private property, free market, and the rolling back of the state( market liberalization), and growth
oriented sort of development policies have emerged as the sole way to progress of mankind. These
policy issues and ideas are collectively known as Neo-liberalism which has been prescribed by
global forces (actors such as IMF and World Bank, and of course the WTO. Technology is also a
central to any a count of globalization since it is a truism that without modern communication
infrastructures, in particular, a global system or worldwide economy would not be possible.

− Though politics, economics, and technology are often considered as the engine of globalization; it
has also, cultural, social, ecological and legal dimensions. This chapter will focus on the conceptual
meanings and debates, challenges and prospects of economic, financial, cultural and
ideological/political/ aspect of globalization. Finally, the impacts of globalization on Africa and the
Africans response to Globalization will be discussed.

B. Political/Regulatory Globalization
− Politically, globalization is thought to result in the erosion of nation states and national sovereignty
by new international actors. The state‘s control over its national economy is being lost through the
activities of private business enterprises such as transnational corporations (TNCs) whose decisions
(for example, on the location of factories) are seen to be increasingly made in a global context,
while economic policy formation is increasingly being influenced by multilateral economic
institutions (MEIs) such as the IMF and WB.
− The state‘s political sovereignty is seen as being impinged upon by regional formations, such as the
EU; its regulatory functions are increasingly being determined by supranational organizations such
as the ITU and WTO and by international trade agreements. On issues such as human rights and
environmental and labour standards states are under increasing pressure from INGOs to maintain
and improve on them.

− Governments have taken steps to remove barriers to trade and the movement of finance through
international organizations such as the General Agreement on Tariffs and Trade (GATT) and its
successor organization the World Trade Organization (WTO) and they have also set up free trade
areas, customs unions, or common markets.
o Free trade area—member states agree to remove tariffs and quotas on goods from other
members of the area. Members have the freedom to set the level of tariff imposed on imports
of goods from non-members of the area.
o Customs union— this is a free trade area but with the addition that members agree to levy a
common tariff on imports of goods from non-members.
o Common market—this is a customs union but with the addition that member states agree
to allow free movement of goods, services, capital, and labor.

− There have been major reductions in the barriers to movement, particularly for goods and capital
brought about by liberalization. These have been brought about multilaterally through negotiations
in international institutions such as the General Agreement on Tariffs and Trade (GATT) and its
successor organization, the WTO, or bilaterally between individual governments.
− Changes in political regimes have also helped reduce barriers, e.g. the collapse of communism in the
late 1980s and early 1990s led to Eastern European countries becoming more interconnected
economically, politically, and militarily particularly with Western Europe and the USA. Many of the
former communist countries have joined NATO and the EU. China has opened up its economy to
foreign investors and has joined the WTO. Governments, particularly in poorer countries in Asia,
Africa, and Latin America, anxious to promote economic development, facilitate the movement of
capital into their countries by setting up export processing zones (epz) where MNCs can invest,
produce, and trade under favorable conditions. China has 15 zones employing 40 million people.
Kenya has 45 zones, while Honduras has 24. MNCs are usually given financial incentives to invest
and often they are allowed to import goods and produce output free of tax. The International Labour
Organization estimated that, in 2006, there were nearly 4,000 export processing zones employing
around 66 million people. There are also many free trade zones or free ports which are supposed to
act as entrepots and be used for storage purposes.

− While much writing on globalization has emphasized the diminishing capacities of the state, a more
nuanced view recognizes that states have not been idle, passive, powerless actors in these processes.
Indeed, different states have enthusiastically followed pro-globalization policies. Indeed, the state
has often been a key creator, shaper, and mediator of globalization (Cerny 1997; Evans et al. 1985;
Palan et al. 1996; Weiss 1998, 2003).

C. Cultural Globalization
− On the cultural level, local and national cultures are seen to be increasingly submerged in an
undifferentiated global mass culture, described by Ritzer (1993) as ‗McDonaldization‘. This
involves the replacement of indigenous, traditional, national, and local cultures by an international
culture of consumerism, seen in the global spread of pop music and Hollywood films, the increasing
control of mass media by Western conglomerates and the endangering and disappearance of
minority languages and cultural practices.

− Although globalization is often seen as an economic phenomenon involving trade and investment, it
also has many other cultural and social dimensions. Held argues that globalization is all-pervasive.
He defines globalization as: the widening, deepening and speeding up of worldwide
interconnectedness in all aspects of contemporary social life, from the cultural to the criminal, the
financial to the spiritual.

− As Held observes, globalization is not confined to economic life but also influences many other
areas of society. And he contends that each of these areas is becoming more deeply affected by the
phenomenon. Cultural life involving the attitudes, behaviour and values that are characteristic of a
society, can be influenced by the process. Globalization can influence culture through the transfer of
knowledge, ideas, and beliefs across national borders.

− Mass media, such as television and film, illustrate how culture has been influenced by globalization.
American programmes such as The Simpsons, Heroes and Friends are watched worldwide. In
Germany, in 2002, around one in four TV programmes was made in the USA while in Italy it was
15%. Similarly, US films like The Matrix and Charlie‘s Angels are widely shown around the world.
 In Mexico roughly four out of every five films shown are produced in US studios. The collapse of
communism in Eastern Europe and the arrival of cable and satellite system opened up more markets
to US media companies.

− Diet is another area influenced by globalization. In France, the consumption of fast food such as
hamburgers, and soft drinks like Coca Cola has increased and this is attributed by some
commentators to the globalization of fast food chains like McDonalds and Burger King. The
movement of people can also have an impact on diet. In the second half of the 20th century, many
migrants came to the UK from India and Pakistan. With over 8,000 Indian restaurants in the UK,
now almost all British towns and cities have an ‗Indian‘ and it is claimed that the favorite meal,
when eating out, is curry.

− Another obvious route for transfer of culture across borders is through education. Universities in the
USA, Western Europe, and Australia have enthusiastically embarked on campaigns to recruit
students from abroad. Some have also gone in for FDI by setting up education facilities in other
countries or have established partnerships with foreign colleges. The EU, through its Erasmus and
Socrates programmes, has created large numbers of students studying in other member states. In a
further move to facilitate the movement of students and workers across borders, more than 40
European countries have initiated a program of reform of their university systems. The idea is to
standardize the structure of university studies with degrees taking from three to four years and the
introduction of a common system of assessment, the European Credit and Transfer System.

− Another conduit for such transfers is through the world of work. For example, the UK and the USA
have been favored locations for Japanese car companies, in other words, capital has been moved to
these countries from Japan. The movement of capital across national borders brings with it different
ways of working such as Just-in-Time where suppliers deliver raw materials and components
immediately before they are needed in the manufacturing process, or quality circles where small
groups of employees meet together to identify how production could be improved. Domestic firms
have, in turn, been influenced by this, e.g. Nissan has persuaded suppliers to alter their production
methods. And Nissan‘s rivals such as General Motors, Ford, and Chrysler, finding their market
shares slipping because of their inability to compete with the Japanese, have responded to the threat
by introducing some of their working methods. As a result, in the UK and USA, car industry
working methods have become similar to those in Japan. Another example concerns McDonalds
setting up in Moscow in partnership with the City Council. It had to devise a strategy for dealing
with a Russian workforce that had a reputation for being surly and slovenly. McDonalds introduced
expatriate managers and training programmes to show the Russian staff how things should be done.
Moscow City Council officials could not believe that the employees in the fast food outlet were
Russian because they were so friendly.

− A further impact of globalization is on health. A new treatment for disease, discovered in one
country, can be quickly transferred to others, helping to limit the spread of disease and improve the
quality of health care. On the other hand, diseases may also spread more quickly as people move
across borders, e.g. the outbreak and spread of Severe Acute Respiratory Syndrome (SARS) in
2003. SARS originated in Southern China. It then spread very quickly to other Asian countries, as
well as Europe, North America, and Canada, which had over 300 cases. Illness can also be spread
through trade. In 2004 it was found that poultry farmers in Vietnam and Thailand had contracted the
 virus associated with avian flu. The infection spread to other countries through cross-border trade in
poultry and the movement of migratory birds.

− With regard to crime: globalization, by removing barriers to movement, can make it easier for
criminals to operate in other countries. Criminals can move more easily across borders, as can
pornography, prostitution, and illegal substances such as drugs. Large amounts of cocaine are
produced in Colombia and gangs there ensure that the drug finds its way to users in the USA. The
Russian mafia is involved in trafficking women for the vice trade in Amsterdam. Communications
technology facilitates the electronic movement across borders of money generated by these illegal
activities into countries where the criminals can portray it as being derived from a legitimate source.
Or they may move the money to countries where the laws regulating such money laundering
activities are deficient.

− Religion, or the spiritual dimension as Held calls it, is another area that is globalized. Major
churches, for example the Catholic, Anglican, Muslim, and Jewish churches all operate
multinationally and have been spreading their values over large parts of the world for the last 2,000
years. In the UK the established churches, such as the Church of England, are in decline in contrast
to evangelical churches which have their roots in the USA and, ironically, have their roots in
English Puritanism.

D. Technological Globalization
− Improvements in communications and reductions in transport costs have facilitated the movement of
goods, services, capital, and people. Modern communications technology makes it easier for
businesses to control developments in distant areas. It further allows people to connect and interact
over long distances, and with transport becoming easier and cheaper, goods and people are able to
travel long distances quickly and at a relatively low cost. For instance the cost of flying the Atlantic
has fallen even faster, by half in 10 years (The Observer, 9 November 2003). The internet and
cheaper telephony not only make it easier for Multi-National Corporations (MNCs) to control their
foreign operations but also for migrants to maintain links with their countries of origin.
Furthermore, it has been a major force in integrating the world‘s financial markets. A trader in a
bank in New York can use the computer to monitor movements in share prices, interest rates, and
currency rates in all the major financial markets and can respond by buying and selling almost
simultaneously. Vast amounts of money can be transferred across borders at the press of a button.

− The growth in demand for telecommunications services has recently been driven by the
development of the cellular technology associated with mobile phones. Another factor, the internet,
has revolutionized telecommunications. It has become a very cheap and reliable method of
communicating text, data, and images and it is also being increasingly used for voice
communication. The number of people in the world with internet access grew more than tenfold
from less than 100 million in the mid-1990s to over 1 billion in 2006 with China having around 131
million users and India 68 million. However, although their numbers are huge, the proportion of
people with internet access is lower in these countries compared with the rich countries of North
America and North Western Europe.

− India is a good example of a country that has benefited from the impact of advances in
communications technology. It has a ready supply of relatively cheap educated labour and has
 become an increasingly popular location for call center jobs. This has come about as a result of the
advances in communication technology which have significantly reduced the costs and improved
the quality and reliability of telephony. The cost of a one minute phone call from India to the USA
is just over 20 cents and around 15 cents to the UK. Consequently, there has been a movement of
jobs from the UK and the USA to South East Asia. More than half of the world‘s top 500 companies
outsource either IT or other business processes to India.

E. Geographical Globalization (Changing Geographies)

− What is clear, however, and arguably what most people consider when they think of current
‗globalization‘, is that throughout the world there is a development towards levels and forms of
global interaction that are significantly different to previous intercourse at international level.

− The difference is highlighted by Scholte (2000: 3) in terms of the importance of relations that
transcend borders. He argues that globalization is a ―new and distinctive‖ phenomenon only when it
is conceptualized in terms of ―deterritorialisation‖. He suggests that ―the proliferation and spread of
supraterritorial – or what we can alternatively term ‗transworld‘ or ‗transborder‘ – connections
brings an end to what could be called ‗territorialsism‘, that is, a situation where social geography is
entirely territorial‖ (p. 46, emphasis added). His point is that ―although … territory still matters very
much in our globalizing world, it no longer constitutes the whole of our geography‖ (200: 46).

− The importance of transcending borders is also associated with recognition of recent advances in
transport, information and communication technologies. These advances have markedly eased
previous difficulties inherent in interaction over difficult, including large, distances. Not only have
the costs (both actual and time) of long-distance transport and telecommunications fallen
dramatically, but the last decade has seen the advent and evolution of email and the Internet. These
new technologies herald the cheap and almost instantaneous transfer of vast amounts of information
across the entire wired-up world, and create the potential (as yet only partially realized?) for a new
‗layer‘ of market and non-market activities that are detached from physical localities. The Internet
has already made it possible, for example, to order goods from CDs through to cars directly from
suppliers in other parts of the world, creating a market that leaves behind (further than previous
forms of international trade) the necessity of being fixed to a physical locality. It has also had an
enormous impact in terms of reducing the constraints of borders and distance with regards research
and learning activities in academia, for example. Economic activity focused around these
developments is commonly termed the ‗new‘ economy, although there is a degree of confusion as to
what, exactly, this constitutes.

− For some authors the phrase ‗new economy‘ is used in a relatively narrow sense, to refer simply to
technological advances. Gordon (2000: 71-2), for example, defines it as ―the post-1995 acceleration
in the rate of technical change in information technology together with the development of the
Internet‖, and seeks to compare it with the great inventions that have previously transformed
economies. For others, such as Reich (2001) and Atkinson and Gottlieb (2001), the new economy is
a wider phenomenon, is a wider phenomenon, encompassing both new technologies, and the
emerging global economic relationships that they help to facilitate and that in turn condition their
use. In the latter sense, the new economy has roots fundamentally in the capitalist organisation of
economic activity. Reich (2001: 1), for example, points to a society where ―we can get exactly what
we want from almost anywhere at the lowest price and highest value‖. The foundations of such
 developments are seen to lie in modern capitalism, although advancements in technology combine
in driving them to a ‗new‘ level, primarily because it becomes increasingly easier to transfer
information, and thus, it is claimed, to compare, contrast and make informed decisions

 Neo-Liberal Globalization and Anti-Globalization

− What has been described as globalization is in fact only one possible variant of globalization – the
neo-liberal one, described by Chomsky (2000) as ‗a particular form of globalization, that has been
instituted by state and corporate power, with primacy given to the rights of investors, financial
institutions and so on, and with people being incidental‘. This has been associated with the
emergence of the New Right, the election of Reagan in the US and Thatcher in Britain whose
governments pursued neo-liberal economic policies and radical programmes of socio-institutional
reform in domestic and foreign arenas alike throughout the 1980s and 1990s; the dominance of a
neo-liberal ‗free trade‘ agenda (‗the Washington Consensus‘) within the Bretton Woods institutions
(WB, IMF) that emphasized public sector reform, privatization, deregulation, and residualized
public welfare provision; and the establishment of new international governmental organizations
concerned with global trade and finance (WTO, WIPO). For these reasons globalization is perhaps
most often used to denote profound transformations to capitalism over the past several decades,
including the opening up of non-capitalist countries and markets to capitalist values, institutions,
and social relations.

− This globalization has not gone uncontested. Beginning with the anti-austerity protests opposing
IMF-imposed structural adjustment programmes and drawing on a wide range of national and
international social movements, including environmental, development, labour, and consumer
movements, the ‗anti-globalization movement‘ has grown in strength so that meetings of MEIs,
from Seattle to Prague to Genoa to Gleneagles, have been met by determined mass demonstrations.
These opposition forces have also come together at various world, regional, and national forums, not
just in the alternative summits that accompany MEI meetings but also in free-standing meetings
such as the WSF and the ESF, to express alternative visions and engage in social dialogues in
opposition to neo-liberal globalization.

− The reaction can also be seen in the growth of campaigns to regulate the practices of TNCs in areas
such as sweatshops, environmental impact, and the introduction of new technologies such as
genetically modified (GM) foods. Many of these campaigns are organized on a transnational basis
using the same technological advances, such as the Internet, that are exploited by the corporations
whose activities they oppose. Other reactions to globalization include the growth of right-wing anti-
immigration politics in Europe and North America and the global growth of nationalistic, ethnic,
and xenophobic movements, while globalization has also spurred the growth of religious
fundamentalist movements. Finally, reaction to globalization can be seen in various national and
local initiatives such as the ‗slow food‘ movement in Italy, the development of farmers‘ markets in
the UK, and LETS schemes in many countries.

 Between Integration and Fragmentation

− It is well known that the twin processes of state-building and national integration in Europe during
the 16th and 17th centuries deposited a veritable mosaic of so-called ‗nation-states‘ in the late 18th
and 19th centuries wherein the conditions of state-building did not coincide with those of nation-
 building. In other words, there never was such a thing as a nation state. All states typically contained
many nations, minority cultural communities or distinct identities, and not every self-conscious
nation had its own state. This is why Anthony Smith‘s preference for the term ‘national state’—the
state that has been nationalized—makes more sense than the fallacy of the nation-state.

− The consolidation of the national state since the French Revolution in 1789 also meant that modern
democratic theory and practice was constructed upon Westphalian foundations. The gradual
emergence of liberal democracy in the late 18th and 19th centuries was therefore predicated upon the
concept and reality of the national state. Slowly all of the familiar features of latter-day liberal
democracy were grafted onto the sovereign national state, yielding representative and responsible
government based upon popular consent, the rule of law, the constitution, the legitimacy of peaceful
opposition, public accountability and a set of procedures and institutions designed to guarantee
citizens‘ rights and provide a series of checks and balances against the threat of tyranny. And as
Held has remarked, the cornerstone of modern democratic thought hinged upon liberalism,
democracy and the national state:

The vast majority of the theories of democracy, liberal and radical, assumed that the
nature and possibilities of political community could be elaborated by reference to
national structures and national possibilities, and that freedom, political equality and
solidarity could be entrenched in and through the nation state.… In the contemporary
era, the key principles and practices of liberal democracy are associated almost
exclusively with the principles and institutions of the sovereign nation state.

− In this way democracy became ‗liberal democracy‘ and the state became the national state‘, each
wedded to the other. The issue that we must confront, then, is how to define the relationship
between liberal democracy, the national state and globalization. More specifically, we must examine
the political implications of globalization, and it is to this that we now turn.

− Most political theories of justice and representative governance assumed the

presence of sovereignty. Globalization has challenged these assumptions and is
changing the global governance agenda. However, we should not fail to note, a
political theory of global governance is in its infancy (see McGrew, 2001). If it had
been politically expedient in international relations (as both theory and practice) to
depoliticize issues of redistribution between rich and poor for much of the post-war
era – by preserving the distinction between international economics and
international politics as well as by defining global governance largely as the efficient
provision of a limited range of collective goods – this is no longer the case. Political
and ethical issues are increasingly front-loaded in North–South discussions.

9.3. Theoretical Debates on Globalization

− The theory of globalization today is a field of intensive and multidisciplinary debate. Attendees are
numerous, and often opposing views of the mentioned phenomena. The efforts towards theorizing
about globalization most often highlight its individual aspects. Numerous conceptions, however,
emphasize the economic dimension of globalization. Removing "artificial" barriers to flow of goods,
services and factors of production on the world market (as the Received January 08, 2008
 consequence of modern development of transport and communication means) is seen as a crucial
channel of international integration. Thus, globalization is defined as integration on the basis of the
project, which expands the role of markets on a global level.

− There are also conceptual approaches that emphasize other relevant dimensions of globalization –
social, geographic, psychological. Globalization is understood as a social process in which
geographic obstacles to social and cultural arrangements lose importance and where people are
becoming increasingly aware that they lose importance. Another definition of globalization, as
intensification of worldwide social relations which link distant localities in such a way that local
happenings are shaped by events occurring many miles away and vice versa, is well known.
Globalization is also understood as a spatio-temporal compression of the world and intensification
of consciousness of the world as a whole. Even this small sample of definitions is sufficient to
conclude that globalization is a complex phenomenon with multiple effects, which makes it hard to
define. There are, in fact, three possibilities for defining globalization. First, it can be defined as
intensification of global flows of goods and production factors, facilitated by modern transportation
and communication means. Globalization can also be defined as a compression of time and space in
a way that events in one part of the world have instantaneous effects on distant locations. The third
approach is to comprehend globalization as a historical structure of material power. Globalization
represents historical transformation in the economy, politics and culture.

− The driving force of globalization is certainly the progress of technology. It speeds up the effects of
globalization, and contributes to essential transformation of the functioning of economic systems.
''... international economy is no longer divided vertically to separate national economies, but
involves a number of different levels or types of market activities, which spread horizontally over a
wider area of virtual space - replacing physical geography of national borders with quasi geography
of market structures, transaction costs and informational cyber space.''

− The theory of globalization is a very propulsive area of research, but composed of contributions
from many authors. Therefore, it is necessary to systematize sometimes quite heterogeneous
understandings of globalization. Quite spread out, but, for the purposes of further consideration, an
entirely appropriate classification of globalization theories differentiates three courses of analysis of
this multidimensional phenomenon:
1. Hyperglobalists
2. Transformationalists
3. Skeptics

1. Hyperglobalists
− The Hyperglobalists viewed globalization as a legitimate and irrepressible historical process, which
leads to a world order based on the market and supranational institutions. Globalization presents a
new era in the development of civilization, without precedent in the course of human history.
− This process is referred to as progressive and socially desirable. It is also stressed that the intensity
and dynamics of current changes in the economy lead to changes in core framework of social action.
Guided by the self-enforcing growth of global markets and technological progress, globalization
inexorably destroys all previously established hierarchical structures. The role of the nation-state in
this context is also significantly diminishing. Multinational corporations concentrate vast resources,
and become the main carriers of economic activity on a global level. This creates a global
 civilization in which the market is integrated on the world level, multinational companies are
becoming major actors in the economic process and international institutions substitute the role of
national states. Multinational companies have fundamental influence on the economy and represent
natural response to the "borderless" economy that is characterized by homogenous consumer tastes.
These companies crowd out national models of economy as relevant units of economic activity.

− The hyperglobalists conceive globalization as a process, which has the internal logic and predictable
outcome, the global society based on a fully integrated market. In other words, all the variety of
heterogeneous cultures withdraws in front of the unique social pattern, based on markets and
institutions derived from the radically liberal cultural framework. In this sense, a well-known
assumption about the ''end of history'' is generated, which implies that the modern, global capitalism
with liberal democracy as the political framework, represents the last word of socio-economic
evolution.

− The aforementioned approach has evident deterministic character. Globalization is seen as a kind of
final stage in the spontaneous and self-enforcing process of creating a global society, as the most
efficient model of society, which stops the further process of selection of types of socio-economic
order. It should also be mentioned that this reflection of globalization includes liberal-oriented
authors such as Theodore Levitt, Thomas Friedman as well as protagonists of neoclassical economic
theory – Sachs, Friedman and others. Moreover, all theories of socio-economic dynamics that
conceptualize that process as a simple succession of phases, with the ''optimal'' final form of society
as a social outcome, which stops further dynamics, can be considered as a part of the same
intellectual tradition.

2. Transformationalists
− Proponents of this view (Giddens, Scholte, Castells, Walerstein) are more moderate in terms of
emphasis of ubiquity and linearity of the globalization process, as well as assessing of progressivism
of its effects. Nevertheless, they do not accept skeptic thesis about globalization either. For them,
the indisputable fundamental changes in the organization of society that globalization brings are the
growing overall integration and acceleration of socioeconomic dynamics through "compression" of
space and time. However, their approach is multidimensional, taking into account mechanisms of
globalization other than economic ones. In this sense, a sociologist of modernism, Anthony
Giddens, considers globalization as a phenomenon shaped by forces of "modern" capitalism—
politics, military power and industrialism. These forces are the sources of the various dimensions of
globalization.

− There are also opinions that the liberal economic policy, which is inseparable from globalization,
creates political backlash by groups whose interests are negatively affected. It is difficult to predict
how much and in what direction will this political backlash influence future developments in the
global economy. The founder of the theory of the ‗‗world system‘‘, Wallerstein, believes that the
contemporary discourse on globalization is a "gigantic misreading" of current trends or deception
imposed on theory by the powerful groups. He believes that what is called "globalization" is actually
the final phase in the development of the world capitalist system that started around the 1450s, and
had a period of genesis, normal development and terminal crisis. At the end of the twentieth
century, the capitalist world-system extended to all regions of the world and reached its
 geographical limit. One of the main reasons of the crisis is the exhaustion of the possibilities of
accumulation within the system.

− The current period is the final stage of the downward, B-phase of the Kondratieff cycle, that began
in 1967/1975 and will last a few more years. The ending of this phase began with the crisis in East
Asia, Russia and Brazil. Wallerstein predicts that the last sub-phase of the cycle will end with a
severe crisis in the USA. The world system reached its asymptotes and cannot get back into
equilibrium. Therefore, the world system is in the situation of bifurcation—there are alternative
routes to new structure, each of them has its own path of cyclical rhythms and secular trends. It is,
however, impossible to predict which of the alternative systems will be established, because the
choice is a function of numerous particular choices.

− Globalization represents, according to Wallerstein, an uncertain process of transition of the world-

system into an unknown socio-economic alternative. Transformationalists take up much more
moderate position in terms of progressivity and outcomes of globalization, when compared to
hyperglobalists. Globalization is not linear-progressive in character, but represents a stream of
capitalistic development, subject to cycles and probabilism. The underlying influence of
globalization on socio-economic trends is not questioned, but its final effects are considered
uncertain. In this sense, such an understanding of globalization is not deterministic.

3. Skepticism
− The third group of thinkers, who expressed skepticism with regard to ubiquity of the process of
globalization, also have critical position towards globalization. In that sense they emphasize that the
level of integration and openness of today's economy is not unprecedented. International trade and
capital flows were more important relative to GDP in the pre-1914 period (the first wave of
globalization) than in the contemporary economy. In addition, instead of the destructible character
of globalization in relation to the hierarchy and the nation-state, they emphasize the significant role
of national economies in pursuing economic liberalization and promotion of cross border activity.
The creation of regional blocks as the essential characteristic of the world economy offers
argumentation that the world economy is less integrated than it was in the late nineteenth century.
Within this direction of thought, assessments of the non-sustainability of the current unification of
the world are also present, because it raises radical resistance within individual cultures, which in
the end can lead to a conflict of civilizations.

− In short, skepticism is expressed both in terms of impacts of globalization and its ubiquity, as well
as in terms of sustainability of unification influences that it produces.

− Another classification of globalization theories is also possible. It consists of three theoretical

orientations:
1. Structural
2. Conjuctural
3. Social-Constructivism

− Structural explanations perceive globalization as a lawful process, inherent to socioeconomic

dynamics. Globalization presents an understandable result of the development of society, lead by the
 logic of technology and capital accumulation. Determinism present in this kind of approach is
evident.

− Conjuctural explanation of globalization considers consequence of unification of techno-economic

tendencies with specific historical conditions and policies, which determine its character. This
approach deals with the cyclic character of globalization, the causes of its acceleration or slowdown
in certain periods.

− Social constructivist explanations are more interested in the origin of ideas, values and norms about
globalization, and the ways in which they became part of scientific and everyday discourse. By
setting appropriate tendencies in the world economy and their classification under the concept of
globalization, the process became socially and ideologically constructed. In this way, the idea of
globalization itself becomes in a certain sense, through the influence on the awareness of actors, the
initiator of the further process of global integration. It can be concluded that each of the previous
explanations can fit into one of the main directions of contemporary theories of globalization -
hyperglobalists, transformationalists or skeptics.

 Reasons for Globalization

Most experts attribute globalization to improvements in communication, transportation, and
information technologies. For example, not only currencies, but also stocks, bonds, and other
financial assets can be traded around the clock and around the world due to innovations in
communication and information processing. A three-minute telephone call from New York City to
London in 1930 cost more than $300 (in year 2000 prices), making instant communication very
expensive. Today the cost is insignificant.

Advances in communication and information technologies have helped slash the cost of
processing business orders by well over 90 percent. Using a computer to do banking on the Internet,
for example, costs the banking industry pennies per transaction instead of dollars by traditional
methods. Over the last third of the 20th century the real cost of computer processing power fell by
35 percent on average each year. Vast amounts of information can be processed, shared, and stored
on a disk or a computer chip, and the cost is continually declining. People can be almost anywhere
and remain in instant communication with their employers, customers, or families 24 hours a day, 7
days a week, or 24/7 as it has come to be known. When people in the United States call a helpline
or make an airline reservation, they may be connected to someone in Mumbai (Bombay), India,
who has been trained to speak English with an American accent. Other English speakers around the
world prepare tax returns for U.S. companies, evaluate insurance claims, and attempt to collect
overdue bills by telephone from thousands of kilometers and a number of time zones away.

Advances in communications instantly unite people around the globe. For example,
communications satellites allow global television broadcasts to bring news of faraway events, such
as wars and national disasters as well as sports and other forms of entertainment. The Internet, the
cell phone, and the fax machine permit instantaneous communication. The World Wide Web and
computers that store vast amounts of data allow instant access to information exceeding that of any
library.
 Improvements in transportation are also part of globalization. The world becomes smaller due to
next-day delivery by jet airplane. Even slow, oceangoing vessels have streamlined transportation
and lowered costs due to innovations such as containerized shipping.

Advances in transportation have allowed U.S. corporations to subcontract manufacturing to

foreign factories. For example, in the early 2000s the Guadalajara, Mexico, factory of Flextronic
International made pocket computers, Web-connected TVs, computer printers, and even high-tech
blood-glucose monitors, for a variety of U.S. firms. Low transportation costs enabled Flextronic to
ship these products around the world, and the North American Free Trade Agreement (NAFTA)
made the Mexico location more attractive to Flextronic.

Advances in information technologies have also lowered business costs. The global corporation
Cisco Systems, for example, is one of the world‘s largest companies as measured by its stock
market value. Yet Cisco owns only three factories to make the equipment used to help maintain the
Internet. Cisco subcontracts the rest of its work to other companies around the world. Information
platforms, such as the World Wide Web, enable Cisco‘s subcontractors to bid for business on
Cisco‘s Web site where auctions take place and where suppliers and customers stay in constant
contact.

The lowering of costs that has enabled U.S. companies to locate abroad has also made it easier for
foreign producers to locate in the United States. Two-thirds of the automobiles sold in North
America by Japan‘s Toyota Motor Company are built in North America, many in Kentucky and in
seven other states. Michelin, the French corporate giant, produces tires in South Carolina where the
German car company BMW also manufactures cars for the North American market.

Not only do goods, money, and information move great distances quickly, but also more people are moving
great distances as well. Migration, both legal and illegal, is a major feature of this era of globalization.
Remittances (money sent home by workers to their home countries) have become an important source of
income for many countries. In the case of El Salvador, for example, remittances are equal to 13 percent of
the country‘s total national income—a more significant source of income than foreign aid, investment, or
tourism.

9.4. The Institutions of Globalization [The Globalizers]

Three key institutions helped shape the current era of globalization:
A. The International Monetary Fund (IMF),
B. The World Bank, and
C. The World Trade Organization (WTO).

All these three institutions trace their origins to the end of World War II (1939-1945) when the United
States and the United Kingdom decided to set up new institutions and rules for the global economy. At
the Bretton Woods Conference in New Hampshire in 1944, they and other countries created the IMF
to help stabilize currency markets. They also established what was then called the International Bank
for Reconstruction and Development (IBRD) to help finance the rebuilding of Europe after the war.

A. The International Monetary Fund (IMF)

The IMF makes loans so that countries can maintain the value of their currencies and repay foreign
debt. Countries accumulate foreign debt when they buy more from the rest of the world than they sell
abroad. They then need to borrow money to pay the difference, which is known as balancing their
payments. After banks and other institutions will no longer lend them money, they turn to the IMF to
help them balance their payments position with the rest of the world. The IMF initially focused on
Europe, but by the 1970s it changed its focus to the less-developed economies. By the early 1980s a
large number of developing countries were having trouble financing their foreign debts. In 1982 the
IMF had to offer more loans to Mexico, which was then still a developing country, and other Latin
American nations just so they could pay off their original debts.

The IMF and the World Bank usually impose certain conditions for loans and require what are called structural
adjustment programs from borrowers. These programs amount to detailed instructions on what countries have to
do to bring their economies under control. The programs are based on a strategy called neoliberalism, also
known as the Washington Consensus because both the IMF and the World Bank are headquartered in
Washington, D.C. The strategy is geared toward promoting free markets, including privatization (the selling off
of government enterprises); deregulation (removing rules that restrict companies); and trade liberalization
(opening local markets to foreign goods by removing barriers to exports and imports). Finally, the strategy also
calls for shrinking the role of government, reducing taxes, and cutting back on publicly provided services.

B. The World Bank

Following Europe‘s postwar recovery the IBRD became known as the World Bank. Its mission was
redirected to help developing countries grow faster and provide a higher living standard for their
people. The World Bank made loans to developing countries for dams and other electrical-generating
plants, harbor facilities, and other large projects. These projects were intended to lower costs for
private businesses and to attract investors. Beginning in 1968 the World Bank focused on low-cost
loans for health, education, and other basic needs of the world‘s poor.

C. World Trade Organization (WTO)

Another key institution shaping globalization is the World Trade Organization (WTO), which traces
its origins to a 1948 United Nations (UN) conference in Havana, Cuba. The conference called for the
creation of an International Trade Organization to lower tariffs (taxes on imported goods) and to
encourage trade. Although the administration of President Harry S. Truman was instrumental in
negotiating this agreement, the U.S. Congress considered it a violation of American sovereignty and
refused to ratify it. In its absence another agreement, known as the General Agreement on Tariffs and
Trade (GATT), emerged as the forum for a series of negotiations on lowering tariffs. The last of these
negotiating sessions, known as the Uruguay Round, established the WTO, which began operating in
1995. Since its creation, the WTO has increased the scope of trading agreements. Such agreements no
longer involve only the trade of manufactured products. Today agreements involve services,
investments, and the protection of intellectual property rights, such as patents and copyrights. The
United States receives over half of its international income from patents and royalties for use of
copyrighted material.

 Criticisms Directed at the IMF, World Bank and WTO

Many economists believed that lifting trade barriers and increasing the free movement of capital
across borders would narrow the sharp income differences between rich and poor countries. This has
generally not happened. Poverty rates have decreased in the two most heavily populated countries in
the world, India and China. However, excluding these two countries, poverty and inequality have
increased in less-developed and so-called transitional (formerly Communist) countries. For low- and
middle-income countries the rate of growth in the decades of globalization from 1980 to 2000
amounted to less than half what it was during the previous two decades from 1960 to 1980. Although
this association of slow economic development and the global implementation of neoliberal economic
policies is not necessarily strict evidence of cause and effect, it contributes to the dissatisfaction of
those who had hoped globalization would deliver more growth. A slowdown in progress on indicators
of social well-being, such as life expectancy, infant and child mortality, and literacy, also has lowered
expectations about the benefits of globalization

I. Criticisms against the IMF and the World Bank

A. Loan Terms and Conditions
The IMF, in particular, has been criticized for the loan conditions it has imposed on developing
countries. Economist Joseph Stiglitz, a Nobel Prize winner and former chief economist at the World
Bank, has attacked the IMF for policies that he says often make the fund‘s clients worse, not better,
off. So-called IMF riots have followed the imposition of conditions such as raising the fare on public
transportation and ending subsidies for basic food items. Some countries have also objected to the
privatization of electricity and water supplies because the private companies taking over these
functions often charge higher prices even though they may provide better service than government
monopolies. The IMF says there is no alternative to such harsh medicine.

The IMF and World Bank are not immune from the influences of their major shareholders, particularly
the United States.

We look thus at IMF loans rather than World Bank program loans because the former are almost
always a prerequisite for the latter. Dreher and Vaubel (2004), also took loan conditionality as the
dependent variable and found that the number of conditions per IMF loan was positively related to
prior use of Fund credit relative to quota and to the number of World Bank adjustment loans, as well
as being positively related to world interest rates and recipient monetary expansion and negatively
related to recipient international reserves.

Thus, the bulk of the studies have concentrated on the determinants of IMF rather than World Bank
lending. The reason seems to be twofold.

− Firstly, as discussed above, an IMF agreement is usually a prerequisite for a Bank program
loan and most IMF agreements are followed by such a loan. Hence, many of the determinants
of an IMF agreement will also be determinants of the Bank‘s activities.

− Secondly, the aspects of recipient need that the IMF is meant to respond to, namely inflation,
balance of payments and budget deficits are much easier to measure than the more medium term
supply side determinants of World Bank program loans (structural imbalance, developmental
indicators etc.). Hence, from a methodological stand point it is much easier to construct the
independent variables in an equation estimating the determinants of IMF loans than those that
would need to enter such an equation for World Bank program loans.
 − Yet, both the World Bank and the IMF have historically led the way in economic-policy
conditionality, with the advent of ‘structural adjustment lending’ in the 1980s.
− This lending, which went straight to governments‘ budgets, was meant not only to help poor
countries with balance of payments difficulties, but also to lay the groundwork for sustained
growth.
− To achieve this, the lending came attached to Washington Consensus economic reforms, which
both institutions fervently believed to be the answer for economic growth in developing
countries.
− Loan Conditionality means that, in order to receive funding, developing countries had to
implement these reforms. Intended as a short-term instrument, Structural Adjustment lending
and its accompanying economic policy conditionality remained in place for over decades and in
the words of the Bank became ‗an important developmental instrument for supporting social,
structural and sectoral reforms over the medium term‘.

 Contents of the Structural Adjustment Programs

1. Reorientation Productive Resources toward Export Oriented Agriculture:
− shift resources from growing food crops for the people to cash crops for exports
(like, cotton, flowers, fruits and vegetables).
− Rehabilitation and maintenance.
− Redirect financial and productive resources toward export promotion in order to
generate foreign exchange to pay foreign creditors.
− This led to diversion of prime agricultural land from domestic food crops to export
cash crop production; internal migration; environmental degradation
2. Elimination of Subsidies: to reduce government deficits and includes subsidies for
agricultural inputs and energy, as well as food and other items of popular consumption
(which made food prices expensive and hence difficult for the poor).
3. Reduction and cuts in government expenditure/spending on social programs such as
health, education, housing (makes access to these services facilities expensive and
unaffordable for the poor). Government spending in these areas is seen as wasteful and SAP
is intended to limit such wasteful social spending. (led to harsh outcomes such as high
unemployment, growth of informal sectors
4. Privatization and Deregulation of public/state owned enterprises and services; privatize
government owned assets. Attempts were also made to improve the efficiency of remaining
government institutions.
5. Devaluation of the Domestic Currency (which makes exports cheaper and imports more
expensive, favoring foreign investors).
− Devaluation, alongside with trade liberalization, was intended to improve a country‘s BOP
deficits and control its foreign indebtedness.
− Debt payment rescheduling and stricter debt management were regularly part of the
prescribed policy set.
6. Liberalization of Trade and open up trade investment (allowing TNCs to invest everywhere
and to repatriate their profits ore easily)
− In order to promote competition and free trade reduction of barriers to trade and foreign
investment and ownership, such as the reduction of tariffs on imports, and the removal of
price controls on consumer goods. Increased completion and flexibility have been
introduced into agricultural marketing.
 7. Increase Taxation: particularly on consumer goods.
8. Remove Wage Controls and Labor Regulation: limit or break powerful trade unions, which
are hindrance in the labour market (this lowers workers income and lowers increases in
taxation. Remove/reduce price controls and producer prices for cash crops raised.

− While the proponents argued that the reforms were essential and without alternatives, critics charged
that they paid little or no attention to the social dimensions of development, to the institutional
weakens of developing countries, and above all to peculiarities of local contexts in different social
and cultural settings. The debates has continued till this days.

− These policies were based on the Neoliberal understanding of economic development that was held
by the donor governments and IFSs (IMF and WB) at the time and which found expression in the
World Bank‘s Berg Report (1981) Towards Accelerated Development in Sub-Saharan Africa.

− While the proponents argued that the reforms were essential and without alternatives, critics charged
that they paid little or no attention to the social dimensions of development, to the institutional
weakens of developing countries, and above all to peculiarities of local contexts in different social
and cultural settings. The debates has continued till this days.

− These policies were based on the Neoliberal understanding of economic development that was held
by the donor governments and IFSs (IMF and WB) at the time and which found expression in the
World Bank‘s Berg Report (1981) Towards Accelerated Development in Sub-Saharan Africa.

B. Domination of Donors Interest (Economic and Political Interest)

− It is often argued, particularly by the anti-globalization movement, that the two Washington-based
multilaterals are strongly influenced by the economic and political needs of their major western
shareholders, especially the United States. This influence can take two forms—determining the
geographical flow of funds, that is, who gets what from the IMF and the World Bank; and
influencing the conditionality attached to such funds, that is, pro-gram loan recipients are expected
to undertake economic liberalization programs, which help to open up their economies to the global
economy and Western economic penetration.
− IMF lending may also be influenced by political conditions in recipient countries, such as
democratization or elections.
− Some argue that, IMF credits in the more democratic recipient countries are larger in pre-election
and post-election years, while the credits in more authoritarian regimes are marginally smaller in
post-election years. It is not just the receipt of a loan that may be influenced by western countries;
the terms of the loan might also be affected.
− Some countries secured favorable loan terms on their IMF programs due to the intervention of major
shareholding countries on their behalf.
− Most lending decisions were responsive to US pressure, with larger loans going to countries in
which American banks were highly exposed and to governments closely allied to the United States.
− The World Bank‘s ‗‗interests‘‘ in a given loan or aid pack-age are often influenced by the US
Executive and Congress.

− In the past, such conditionality has brought with it economic reform via structural adjustment and
stabilization programs.
− Program loans from the IMF and World Bank have economic liberalization conditions attached to
them. Such reform conditions, although they often have the potential to bring significant economic
gains, may well have negative social ramifications in the recipients unless adequate social safety
nets are in place. For example, reforms such as privatization, removal of state subsidies on food-
stuffs, devaluation, and trade liberalization can potentially increase unemployment and income
inequality as well as reduce real incomes of the poor. This, in turn, may lead to the growth of anti-
reform movements challenging incumbent regimes. There is already ample anecdotal evidence that
this has occurred. The 1990s and the first four years of the 21st century have witnessed a rise in the
number and forms of distributive conflicts in the Arab World, including riots, demonstrations,
strikes, violence, assassinations, clashes with labor unions and university students in addition to an
increase in crime rate.

− In addition, the very fact that the flow of funds is politically motivated may mean that the conditions
attached to these funds are weak.

− Yet on the contrary, there are many governments in many developing countries continue to believe
that the IMF and World Bank wield considerable influence over their economies. Western aid to
Mobuto‘s Zaire or Marcos‘s Philippines designed to bolster anti-communist pro-western regimes are
good examples. In the Post 9/11, the United States has been increasingly forthright in suggesting
that the War on Terror and US security are important reasons for foreign aid.

− Likewise, when President G.W. Bush proposed the first significant increase in US development
assistance in a decade, he offered the following justification while speaking at the United Nations
Financing for Development meeting in Monterrey, Mexico in March 2002: ‗‗We fight poverty
because hope is an answer to terror.’’

− Donor Interest also includes a pursuit of commercial interests via the promotion of donor trade or
investment opportunities by allocating aid to countries most likely to absorb donor exports and
investment. It also includes the pursuit of political, diplomatic and strategic objectives in order to
create an international environment, which favors the donor. According to Feeny and McGillivray
(2002: 3): This can involve allocating aid to countries which are in a strategic geographic location or
which have particularly close diplomatic ties with the donor. It can even involve rewarding
countries for particular actions with increased aid or punishing others with reduced or continually
low or zero levels of aid.

C. Policy Ineffectiveness/Policy Failures

− On a more general global level, there is a growing body of literature that suggests that IMF
conditionality is not effective in obtaining intended reform outcomes.
− The World Bank and the IMF, despite several attempts at reforming their conditionality, are still
attaching inappropriate economic policy conditions to their lending. In the case of Mali, the World
Bank and the IMF‘s predictable reaction to privatize the Malian water and electricity company in
the face of problems in the sector, failed to deliver results. Electricity coverage did not expand and
prices increased to the highest in the region.
− The World Bank and IMF‘s insistence on cotton sector liberalization and a new price setting
mechanism has resulted in a 20 percent drop in the price of cotton—a crop that sustains the
livelihoods of three million Malians. According to the World Bank, it is estimated that in the long
run this drop will result in a 4.6 percent increase in poverty across the country.

− In short, many critics argue that, far from delivering growth in developing countries, structural
adjustment with its specific economic reform agenda in many cases actually made poverty worse,
increasing unemployment, reducing wages, and raising the costs of basic services.

− In its own evaluation of structural adjustment lending, the IMF admits that its impact on growth has
been barely discernible. And an United Nations Conference on Trade and Development (UNCTAD)
assessment of IMF and World Bank structural adjustment programmes revealed that the proportion
of the population living below one dollar a day rose soon after the adoption of the programmes.
This was the case even in countries recognized as best Washington Consensus Performers by the
World Bank.

Perhaps the loudest critics of structural adjustment lending came from civil society in the
developing countries. The social costs of structural adjustment are well-documented in a civil-
society assessment of structural adjustment in 2002, which noted that ‗Poverty and inequality are
now far more intense and pervasive than they were 20 years ago, wealth is more highly
concentrated, and opportunities are far fewer for the many who have been left behind by
adjustment‘.

− It should however be noted that, if the claim about the ineffectiveness of policies proves true, then
effectiveness of granting or withholding IMF and Bank loans in terms of the carrot and stick effect is
severely weakened.

− Many researchers also criticize the structural adjustment policies to have failed to take into account
the political and social implications of reform programs and the risks that these policies have posed
for the stabilities of developing countries.
− From this perspective, the Washington Consensus development was seen as apolitical, overly-
economic approach, characterized by excessive conditionality as well as absence of genuine
ownership by the countries concerned.

D. Policy Contradictions and Inconsistency

− Another major criticism raised against the IMF and World Banks relates to contradictions and
inconsistencies seen in the policies and reforms programs they set for developing countries as a
condition for receiving loans.
− The 1980s to the 1990s witnessed major changes in the paradigm of international development
assistance.
− For the first three decades after WWII (the period when most developing countries achieved
independence), i.e., between 1950s-1970s), the development policies of IMF and WB had been
dominated by an Import-Substitution Industrialization Strategy (ISI) advocating for the promotion
of large-scale modern industries by means of strong government interventions in the market,
such as trade protection, directed credits, and subsidies.
− In the 1980s, this paradigm gave way to a new paradigm referred to as the Washington Consensus.
But its bases was what was known as the Structural Adjustment Policies)
− This new paradigm identified the market as a universally efficient mechanism for allocating scarce
resources and promoting economic growth. Under its influence, international financial institutions,
particularly the International Monetary Fund (IMF) and the World Bank, actively encouraged
governments to dismantle market controls. As a result, in its 1989 report on Sub-Saharan Africa:
from Crisis to Sustainable Growth, the World Bank (1989) acknowledged the need for Human
Centered Development as advocated by UNECA (1989) but at same time emphasized its
commitment to the Structural Adjustment (SAP) and Export-Led Development.

− By the beginning of the 1990s the doctrine of neoclassical market liberalism had become an
established paradigm in the international development assistance community. Known popularly as
the Washington Consensus, it advocated the free market as the controlling mechanism for economic
activities except for the supply of public goods including sound macroeconomic management.
Supremacy of this doctrine, however, was short-lived. Its adequacy as a guiding principle of
development policies began to be seriously questioned and severely criticized in the 1990s.

− The criticism stemmed from several observations:

i. that Latin American economies were not able to sustain economic growth after their
recovery from the debt crisis;
ii. that East Asian economies were plunged into crisis in the late 1990s due to a major
disruption in regional financial markets; and
iii. that SAP had failed to achieve economic growth and reduced poverty in low-income
economies, especially in Africa.

− Barely a decade later, in the mid-1990s, the Washington Consensus was replaced by a contrasting
paradigm called the post-Washington Consensus. It emphasized the need for various institutions in
different economies and recognized cases in which market intervention by the government can play
a positive role. The Post-Washington Consensus focused on Poverty Reduction Strategies,
emphasizing the need for delivery by government and civil society of social services to the poor
such as education and health care, and advocating for the initiative (―ownership‖) of aid-receiving
communities.
− This was further accentuated in its calls for a market friendly approach to development (World
Bank, 1991) have countered this approach with a systematic critique of Structural Adjustment by
arguing the necessity for African countries to compete in the global economy, not only through
comparative advantages but also through a modified version of import substitution.

− Then adjustment came again with human face: recognizing state role in social services or social
dimension of development. This broader view of development were reinforced by as series of UN
conferences throughout the 1990s that dealt with such issues as gender equality, human rights,
social development, sustainable environment, human security, participatory development.

− SAP is not yet abandoned but it has been repackaged in form and manner to cope with new
developments and programs such as along the MDGs.
− One of such repackage was the Poverty Reduction Strategic Papers (PRSP)—developed in contexts
of continuous repacking and reforming SAPs in response to new developments and criticisms.
− In a nut shell, all the above series of policy changes demonstrate that the criticism against the
inconsistent and at times contradictory nature of the policies and reform programs advocated by the
institutions is realistic and sufficiently based on evidences.

E. Country-Ownership
− In addition, the World Bank and the IMF have failed to ensure that their policy conditions are truly
country-owned. As a marker of ownership, both institutions look at whether policies are already
contained within a national poverty reduction strategy.

− However, there are serious questions as to whether national poverty strategies are adequate proof of
country ownership. Despite the fact that the development of national poverty strategies has
undoubtedly opened up space for country policy-making, participation of civil society and
parliamentarians is often extremely weak and sporadic.

− In addition, the strategies have been very broad making it easy for the Bank and the Fund to claim
alignment. Moreover, national poverty strategies are hardly free from World Bank and IMF
influence, either directly or indirectly.

− The Bank and the Fund are important sources of advice to governments in the preparation of a
Poverty Reduction Strategy Paper (PRSP), and they jointly assess the adequacy of the PRSP as the
basis for their support.

− A World Bank conditionality survey, for example, showed that 50 per cent of governments surveyed
felt that ‘the Bank introduced elements that were not part of the country‘s program‘.

− Even in the absence of direct influence, the strategies are open to a high degree of self-censorship,
as they are essentially business plans for donor funding, meaning governments have an incentive to
tell donors what they are likely to want to hear. Finally, even against this dubious proxy for
ownership the two institutions often fail. The Eurodad study found, for example, that four countries
with specific privatization conditions attached to their World Bank loans do not mention the reform
in their national poverty strategies.

− By their own admission, in evaluations of their new PRS lending approach the World Bank and the
IMF noted limited progress in ensuring their lending was aligned to national strategies.
II. Criticisms against the WTO
A. Unfair Trade Negotiations
− The WTO has faced much criticism as well. This criticism is often directed at the rich countries in
the WTO, which possess the greatest bargaining power. Critics say the rich countries have
negotiated trade agreements at the expense of the poor countries.

− The Final Act of the Uruguay Round that established the WTO proclaimed the principle of special
and different treatment. Behind this principle was the idea that developing countries should be held
to more lenient standards when it came to making difficult economic changes so that they could
move to free trade more slowly and thereby minimize the costs involved.

− In practice, however, the developing countries have not enjoyed special and different treatment. In
fact, in the areas of agriculture and the textile and clothing industries where the poorer countries
often had a comparative advantage, the developing countries were subjected to higher rather than
lower tariffs to protect domestic industries in the developed countries. For example, the 48 least-
developed countries in the world faced tariffs on their agricultural exports that were on average 20
percent higher than those faced by the rest of the world on their agricultural exports to industrialized
countries. This discrepancy increased to 30 percent higher on manufacturing exports from
developing countries.

B. Agricultural Subsidies
− The agricultural subsidies granted by wealthy countries to their own farmers have earned the
strongest and most sustained criticisms, especially from developing countries. Japan, for example,
imposes a 490 percent tariff on foreign rice imports to protect its own rice farmers. The average cow
in Switzerland earns the annual equivalent of more than $1,500 in subsidies each year as the Swiss
government seeks to protect its dairy industry from foreign competition.

− The United States enjoys some of the greatest advantages. Because of government payments, U.S.
farmers can sell their products at 20 percent below their cost of production in overseas markets.
United States corn exports represent more than 70 percent of the total world exports of corn. The
United States ships half of the world‘s total exports of soybeans and a quarter of all wheat exports.
Farmers in the United States can sell these grains at half of what it costs to produce them. The
resulting artificially low world prices hurt producers in poorer countries where there are no
government subsidies.

− For example, in 2002 the president of the United States authorized $4 billion in subsidies to
America‘s 25,000 cotton farmers. This action lowered world cotton prices by one-fourth. As a result
West African countries lost hundreds of millions of dollars, and the region‘s 11 million cotton-
producing households suffered increased poverty.

− The European Union (EU) gives its farmers even higher subsidies. The EU is the world‘s largest
exporter of skimmed-milk powder, which it sells at about half the cost of production. The EU is the
world‘s largest exporter of refined sugar, which it sells at a quarter of the cost of producing it.
Governments in the developed world pay more than $300 billion a year in farm subsidies, seven
times what they give in development aid. Such subsidies have a devastating impact on farmers in
 poorer countries. Mexican farmers are priced out of local markets for corn by subsidized U.S.
exports. Sugar growers in Swaziland and cotton producers in West Africa must compete with
products that rich countries dump onto the world market at prices well below the cost of their
production due to these subsidies.

C. Foreign Aid
− Foreign aid from rich countries does little to offset the impact of these subsidized farm exports.
Foreign-aid spending by wealthy nations amounts to only a tiny percentage of their incomes and
total government spending. The United States gives just 0.15 percent of its gross domestic income
(GNI), or about $35 a year per American, in foreign aid. Of this, about one-third goes to just three
countries—Israel, Egypt, and Pakistan—which together receive more than twice as much aid from
the United States as the poorest billion people in the world do. Europe gives 0.33 percent of its
collective GNI and has promised to increase giving to 0.39 percent. Although the United States and
Japan, the world‘s two largest economies, give the most aid in absolute terms, they are at the bottom
of the list of countries based on aid as a share of national income. The most generous are the smaller
countries of Northern Europe, including Denmark, Norway, The Netherlands, Luxembourg, and
Sweden.

D. Trade Disputes, Rules and Agreements

− Given the importance of foreign trade, one of the most important international agencies is the
WTO‘s Dispute Settlement Board, which is empowered to settle trade disputes under WTO rules.
Winners of such settlement decisions by the board are allowed to retaliate against countries found
guilty of unfair trade practices. Smaller, developing countries, however, fear cross-retaliation if they
confront larger, more powerful nations.

− Critics of the WTO in developing countries charge that the rules do not help them and that they have
been forced to bear the harsh adjustment costs to free trade while developed countries have not lived
up to their liberalization commitments. According to these critics, the terms of trade have gone
against the developing countries. The value of developing countries‘ exports has declined relative to
the value of their imports. Not only have the prices of such commodities as coffee, copper, sugar,
and cotton fallen substantially for decades but also earnings from labor-intensive manufacturing,
such as textiles and clothing, have declined as an ever greater number of developing countries
compete for the limited amount they can export to the rich countries. At the same time the
developing countries have faced increased prices on goods they import, ranging from computer
software to airplanes to medicine.

− A WTO meeting in November 2001 in Doha, the capital of Qatar, set in motion a multiyear
negotiating process aimed at further liberalizing world trade but with a focus on the needs of the
developing countries. However, disputes over agricultural subsidies, the definition of intellectual
property rights, and whether poor countries were to be entitled to ―special and different treatment‖
were not easy to resolve. The rich countries had the greater bargaining power, and their trade
negotiators were under pressure not to make concessions that would hurt people back home.

− In 2003 these issues came to a head as WTO talks in Cancún, Mexico, foundered. Representatives
of a group of 21 developing countries withdrew from the talks after the EU and the United States
 failed to meet their demands for lowering agricultural subsidies. The same countries also resented
EU and U.S. proposals that they accept new rules for foreign investment without first agreeing on
the issue of subsidies. Some observers believed that the failure of the talks in Cancún made it
unlikely that global trade rules could be negotiated by a self-imposed deadline of January 2005.

− Critics of the WTO have also charged that the developed countries have obtained a set of trade
agreements benefiting their large corporations. The Agreement on Basic Telecommunications, for
example, opened world markets to large telecommunications companies based in the developed
nations. These companies were previously excluded from these markets by government-owned
monopolies. The Financial Services Agreement likewise opened opportunities for banks, insurance
companies, and stockbrokers in the developed countries as they sought to expand into new markets.

− Instead of increasing economic stability, financial liberalization caused financial crises in most of
the world‘s economies. An IMF study found that 133 of the fund‘s 181 member countries suffered
at least one significant banking crisis from 1980 to 1995. The World Bank identified more than 100
major bank collapses in 90 developing or formerly Communist nations from the late 1970s to 1994.
Many economists believe that these crises were caused by the IMF-imposed financial liberalization
on countries that either lacked regulatory agencies or the experience necessary to oversee the
financial sector.

− Many people, groups, or governments oppose globalization in its entirety. Instead, critics of
globalization believe aspects of the way globalization operates should be changed. The debate over
globalization is about what the best rules are for governing the global economy so that its
advantages can grow while its problems can be solved.

− On one side of this debate are those who stress the benefits of removing barriers to international
trade and investment, allowing capital to be allocated more efficiently and giving consumers greater
freedom of choice. With free-market globalization, investment funds can move unimpeded from
where they are plentiful (the rich countries) to where they are most needed (the developing
countries). Consumers can benefit from cheaper products because reduced tariffs make goods
produced at low cost from faraway places cheaper to buy. Producers of goods gain by selling to a
wider market. More competition keeps sellers on their toes and allows ideas and new technology to
spread and benefit others.

− On the other side of the debate are critics who see neoliberal policies as producing greater poverty,
inequality, social conflict, cultural destruction, and environmental damage. They say that the most
developed nations—the United States, Germany, and Japan—succeeded not because of free trade
but because of protectionism and subsidies. They argue that the more recently successful economies
of South Korea, Taiwan, and China all had strong state-led development strategies that did not
follow neoliberalism. These critics think that government encouragement of ―infant industries‖—
that is, industries that are just beginning to develop—enables a country to become internationally
competitive.
−
− Furthermore, those who criticize the Washington Consensus suggest that the inflow and outflow of
money from speculative investors must be limited to prevent bubbles. These bubbles are
 characterized by the rapid inflow of foreign funds that bid up domestic stock markets and property
values. When the economy cannot sustain such expectations, the bubbles burst as investors panic
and pull their money out of the country. These bubbles have happened repeatedly as liberalization
has allowed speculation of this sort to get out of hand, such as in Indonesia, Malaysia, and Thailand
in 1997 and since then in Argentina, Russia, and Turkey. According to critics, a strong active
government is needed to assure stability and economic development.
−
− Protests by what is called the antiglobalization movement are seldom directed against globalization
itself but rather against abuses that harm the rights of workers and the environment. The question
raised by nongovernmental organizations and protesters at WTO and IMF gatherings is whether
globalization will result in a rise of living standards or a race to the bottom as competition takes the
form of lowering living standards and undermining environmental regulation. One of the key
problems of the 21st century will be determining to what extent markets should be regulated to
promote fair competition, honest dealings, and fair distribution of public goods on a global scale.

9.4. Criticisms Against Globalization

The debate over globalization focuses in particular on how it can be regulated to address:
− Growing income and wealth inequalities,
− Labor Rights,
− Health Problems
− Environmental Problems,
− Cultural Diversity and
− National Sovereignty

A. Inequality
While the dominant perception of globalization in western Europe and North America is the existence
of vast opportunities for world economic development and significant contributions to improving
people‘s condition of existence, the Third World, especially African countries, perception of
globalization is that of a dangerous process that increases inequality within and among states; a
process which increases poverty and sustains disempowerment of the weak.

By the late 1990s, 20 percent of the world‘s people living in the highest-income countries had 86
percent of the world‘s income; the bottom 20 percent had only 1 percent of the world‘s income. An
estimated 1.3 billion people, or about one-sixth of the world‘s population, have incomes of less than a
dollar a day. Inequality is growing worse, rather than better. More than 80 countries had lower per
capita income (income per person) at the end of the 1990s than they had at the end of the 1980s. In
1960 the top 20 percent had 30 times the income of the poorest 20 percent. This grew to 32 times in
1970, 45 times in 1980, and 60 times in 1990. By the end of the 20th century the top 20 percent
received 75 times the income of the bottom 20 percent. The income gap is even apparent in
cyberspace. The top fifth in income make up 93 percent of the world‘s Internet users and the poorest
fifth only 0.2 percent.

These inequalities in living standards and participation in the global economy are a serious political
problem in an era of globalization. Some countries have been unable to function at even a minimum
standard of basic competence in the globalized economy. The only profitable economic activity in
some of these countries is linked to criminal behavior, such as the trade in illegal drugs, smuggling,
and extortion of various kinds. Governments that are helpless to stop such activity or to collect taxes to
meet basic public service needs are characterized as failed states. Sometimes failed states can become
havens for terrorists and foreign criminals who use them as bases for activities harmful to other
governments and their people. These states may also provide safe haven for mercenary forces that
conduct raids into neighboring countries. In parts of Africa, for example, where diamonds and other
valuable resources attract criminal despots, mercenary armies have been engaged in mass killing to
terrorize local populations into giving them what they want. The international arms trade and easy
importation of weapons, which allows such behavior, is a serious problem

B. Labour Rights
− To stimulate economic development many developing countries have established free-trade zones
where investors are given special benefits, such as low or no taxes, and labor unions are discouraged
or not allowed. These benefits have led to violations of human rights. For example, the Workers‘
Rights Consortium, supported by many colleges and universities in the United States, has sent
inspection teams to developing countries to investigate the conditions under which caps and
sweatshirts are made for university sports teams. The consortium found violations of child labor
laws, intimidation of workers seeking to have their grievances addressed, and sexual harassment.
Because only 1 percent of the projected growth in the world‘s labor force is expected to be in the
high-income countries in coming decades, what happens to the world‘s lower-income workers in the
developing countries takes on added importance. It may well determine whether there will be an
overall rise in living standards as productivity gains are widely shared or an overall decline if
developing countries compete for jobs by holding down wages and allowing harsher working
conditions to attract investment and job creation.

− The UN‘s International Labor Organization (ILO) has tried to level the playing field by endorsing
five widely accepted core labor standards. These are elaborated in the ILO‘s 1998 Declaration of
Fundamental Principles and Rights at Work.
− The first promises freedom of association and states that workers should be able to join together
and form organizations of their own choosing.
− The second is the right of workers‘ organizations, including trade unions, to bargain collectively
with employers and governments.
− Third is the elimination of all forms of coerced or compulsory labor.
− Fourth is the effective abolition of child labor. The ILO‘s Minimum Age Convention sets a basic
minimum age of 15, but if a country is less developed or if only light work is involved the
minimum age can be lower. If hazardous work is involved, the minimum age is 18.
− The fifth provision is the elimination of discrimination in employment based on race, sex,
religion, political opinion, or national or social origin.

− Because the ILO has no enforcement powers, it has proven difficult to achieve these goals. In some
countries governments pledge to observe the ILO‘s standards but then ignore them. Where child
labor laws are enforced, government factory inspectors often simply demand that child workers be
fired. Many observers believe that to successfully attack the evils of child labor, child workers
should not merely be fired but should be placed in schools and families should be compensated for
the loss of income that occurs when children are removed from factories.
C. Health Problems
− Life-threatening diseases represent another facet of globalization. Improvements in transportation
that helped usher in globalization also made it possible for infectious diseases to spread rapidly
around the globe. In 2003, for example, a deadly form of pneumonia known as severe acute
respiratory syndrome (SARS) originated in China and quickly posed a worldwide health threat as
airline passengers infected with the virus spread the illness.

− The best way to address these health issues often conflicts with the WTO‘s stand on intellectual
property rights, in particular the patent laws that protect medicines made by pharmaceutical
companies. This issue is particularly prominent in relation to acquired immunodeficiency syndrome
(AIDS). Of the 20 million people who have died of AIDS most lived in poorer countries. In some
developing countries the infection rate is above 30 or even 40 percent of the adult population. Today
the worst affected countries are in Africa. The disease is also spreading rapidly in countries such as
India, China, and Indonesia.

− There are other killer diseases found mostly in poorer countries. Although tuberculosis (TB) affects
a small percentage of the population in rich countries, more than one-third of the world‘s population
was infected with tuberculosis in 2000. There are 8 million new cases of TB and 2 million deaths a
year from this disease, and these numbers are climbing. More than 1.5 million people die each year
from malaria, another disease that mainly impacts developing countries. Diseases spread by unclean
drinking water and tainted food kill nearly 2 million people a year, mostly infants and small children
and mostly among the 1.5 billion people in the world who do not have access to clean water.
− In the case of diseases that primarily affect poor people, little or no research is being done to provide
new medicines because the people affected are too poor to buy them. A major struggle has emerged
regarding AIDS treatment over whether patent laws will continue to require that people pay high
prices for life-saving drugs or whether lower-cost generic medicines can be provided. This issue has
been intensively discussed as part of the debate over the WTO‘s Agreement on Trade Related
Aspects of Intellectual Property Rights (TRIPs). Western pharmaceutical companies that do the
research and development wish to protect their investments and argue that without such protection
less will be spent to develop new life-saving drugs. The positions on behalf of developing countries
argue that scientific breakthroughs should be shared as widely and as inexpensively as possible.
They have resisted the extension of property rights.

D. Environmental Issues
− At least since the discovery of the ozone hole above Antarctica in the early 1980s, there has been
growing awareness that air pollutants can cross borders and affect everyone living on the planet.
The UN‘s Intergovernmental Panel on Climate Change, made up of the world‘s leading climate
scientists, for example, predicts that by the year 2100 the temperature of the planet could rise by as
much as 1.4 to 5.8 Celsius degrees (2.5 to 10.4 Fahrenheit degrees). This global warming is due to
the burning of fossil fuels, which occurs mainly in the developed, industrialized world, and the
destruction of rain forests, which occurs mainly in the developing world. Already Greenland‘s ice
sheet has thinned and Argentina‘s South Patagonia ice fields have retreated substantially. Glaciers
are melting, and weather patterns may already be changing.
− If global warming continues, experts expect deserts to advance, particularly across West Africa, and
sea level to rise, flooding coastal areas and submerging a number of Pacific Ocean island states.
One-third of the world‘s most populous countries would be flooded by even a small rise in sea level.
While developed countries such as The Netherlands can cope, developing countries such as
Bangladesh cannot afford to pay for the kind of dike system that currently protects The Netherlands.
Because of such dire forecasts, 160 nations in 1997 agreed to the first-ever binding pact to limit the
emissions of carbon dioxide and other so-called greenhouse gases that contribute to global warming.
Known as the Kyōto Protocol, the pact represented a modest step in limiting and rolling back
harmful greenhouse gas emissions.

− Environmentalists argue broadly in favor of sustainable development. By this they mean a pattern
of living that favors the preservation of habitat, the conservation of nonrenewable resources, and the
increased use of renewable energy sources so that Earth‘s ecosystems are not harmed beyond repair.
Environmentalists favor what is known as the Polluter’s Pay Principle—the principle that polluters
should pay for the right to pollute.

− Concerning Genetic Engineering, most environmentalists argue for a precautionary principle that
emphasizes careful study before new genetically engineered plants or animals are introduced into
ecosystems. Genetically modified plants, according to this principle, should not be introduced unless
it is clear that no damage will be done. Some politicians and agribusiness corporations believe such
a conservative approach would slow growth unnecessarily, lower living standards, and result in
greater costs for businesses and consumers. They favor rules based on proven danger and far
quicker introduction of genetically engineered products and processes.

E. Cultural Diversity
− There is widespread disagreement over what, if any, regulation is appropriate in the realm of
culture. Some people fear a loss of cultural diversity as U.S. media companies become dominant.
Such companies tend to ―bundle‖ their products so that a blockbuster movie is promoted by selling
soundtracks, books, video games, and other products. These cultural wares are distributed
worldwide, and along with reruns of U.S. television shows, tend to replace local alternatives. The
question is whether responses by other nations, such as prohibitions against the English language
and government subsidies of national cultural productions, are legitimate restraints of trade or
represent an unfair trade practice.

F. National Sovereignty
− In a world that seems to grow increasingly smaller many issues must be considered at a global level
and not only at a local or national level. However, at what point does this threaten national
sovereignty—that is, the ability of a country to be self-governing? Some environmentalists, for
example, have argued that environmental laws in the United States can be undermined if the laws
are found to violate NAFTA. In effect, they say, the United States has lost the right to make and
enforce its own environmental policies.
 Continuing Debates Over Globalization
Globalization raises other questions that will be central to the 21st century.
− What is the proper role for the IMF, WTO, and UN, and how should they be governed?
− What is the best way to finance development?
− How much autonomy should countries have when the economic, political, and environmental
decisions they make can have global repercussions?
− To what extent should global institutions be able to constrain what countries can and cannot do
in an increasingly globalized world?
− What is the right way to balance social and cultural values with the need for economic
efficiency?

As the 21st century progresses, more and more decisions regarding these and other issues will need to
be debated.