Podcast Notes: Globalization

Beginning January 2020, countries one-by-one began restricting movement of people in and out of the country by imposing new rules on travel. Many shut their borders completely. Governments hoped that this would slow down the spread of the coronavirus. This shutting down of nations went beyond the mo...

Beginning January 2020, countries one-by-one began restricting movement of people in and out of the country by imposing new rules on travel. Many shut their borders completely. Governments hoped that this would slow down the spread of the coronavirus. This shutting down of nations went beyond the movement of people. Countries started conserving their supplies of relevant material such as hospital supplies, medicines to treat the virus, and ingre-dients by preventing their export, while simultaneously scouring other countries for imports. Prior to Covid-19, when you asked anyone what came to their minds when they heard the word globalization, they would usually mention connectivity, or international trade. With both taking a hit due to the virus, a legitimate question was whether this was a major hit to the idea of globalization. But skeptics did not wait for the virus to ask this question. A growing consensus around the world between the 1980s and the early 2000s for lowering barriers to encourage more trade, and nations competing to attract foreign investment, was challenged by the economic shock in 2008. The US financial services industry, following some highly questionable lending practices, became unstable and through its connections affected banks across many countries, triggering a period of economic slowdown primarily in the rich economies. When the effects spilled over to other countries that closely traded with those affected by the financial shock, it raised doubts about the benefits of closely integrated economies. Opinion leaders and scholars claimed that globalization was under threat and saw turbulent times ahead.1 Some retreat from globalization showed up in a few trends. Protectionist policies were imposed by countries upsetting trade agreements; "Buy American" kind of rules altered pref-erences; and immigration flows were discouraged. Studies also suggest that foreign content in global manufacturing production and foreign direct investment which maintained growing trends till the mid-2010s have been sluggish since. The year 2016 seemed to bring the arguments to a head as Britain voted to exit the European Union (EU) and the US president-elect won on a platform that included a protectionist trade position demonstrated by his withdrawal soon after from an impending transpacific trade agreement. Divergences in trends were also highlighted by conflicting positions taken by global leaders. China's President Xi Jinping, in his address on January 17, 2017 at the World Economic Forum at Davos, said, "We must redouble efforts to develop global connectivity to enable all countries to achieve inter-connected growth and share prosperity. We must remain committed to developing global free trade and investment, promote trade and investment liberalization and facilitation through opening-up and say no to protectionism."2 Just three days later, Donald Trump at his inauguration as US president on January 20, 2017 said in his address, "We must protect our borders from the ravages of other countries making our products, stealing our companies and destroying our jobs. Protection will lead to great pros-perity and strength.... We will follow two simple rules; buy American and hire American."3 However, these seemingly contrasting positions did not represent a complete picture, as the United States remained more open to transnational business than China, which imposed several restrictions on foreign companies and continued to push a policy of self-reliance within the country. Meanwhile, elsewhere in the world, nations continued to negotiate trade agree-ments and pursue market opening initiatives. Major events like the 11 September 2001 terrorist attack on the US World Trade Center, the 2008 global financial crisis and the spread of the Covid-19 virus tend to shock the system, generate a few articles about the end of globalization, disrupt established patterns for a while, before we observe a return to trend lines.4 We are already seeing the efforts at post-Covid recovery with the DHL Connectedness Index for 2020 tracking international trade, capital, information and people flows showing a high level of global connectedness. On the other hand, some surveys show that people believe the world is more globalized than it really is, which creates fears about globalization. Managers overestimated these measures by five times.5 Some of the contrasting views circulating the globe can be attributed to how people under-stood globalization. For example, President Xi very clearly kept using the term "economic glo-balization." Countries like China, India, Thailand, Vietnam and Indonesia continued to grow and benefit from trade, but many rich countries did not. Many commentators were identifying globalization with free trade without spelling it out as such. Other areas of global integration were also playing their part in shaping attitudes to globalization. When Britain decided to exit the EU, a major driving force was not trade but Britain's long-standing resentment of the top-down regulations imposed on it by the EU Commission. The rise of political parties in Europe arguing in favor of nationalism was not targeted at trade but resentment over growing immigration. Globalization is a complex collection of international trends that challenges one's search for a comprehensive view! NEOLIBERALISM VERSUS POPULISM The nationalism versus globalization debate takes various forms depending on underlying ideologies. The concept of neoliberalism, a set of shared economic/political beliefs, lays stress on individual freedoms in individual lives and in the economy. The role of the state is to ensure private property rights, free markets or help create markets where they do not exist, and keep state intervention to a minimum to allow market mechanisms to work, for otherwise influen-tial groups will influence state intervention for their benefit.6 This ideology dominated much of the thinking and prescriptions of major global institutions, including the World Bank, International Monetary Fund (IMF) and the World Trade Organization (WTO), but took a hit at the time of the 2008 financial crisis as having been the cause of the crisis. The nationalism versus globalization debate takes various forms depending on underlying ideologies. The concept of neoliberalism, a set of shared economic/political beliefs, lays stress on individual freedoms in individual lives and in the economy. The role of the state is to ensure private property rights, free markets or help create markets where they do not exist, and keep state intervention to a minimum to allow market mechanisms to work, for otherwise influen-tial groups will influence state intervention for their benefit.6 This ideology dominated much of the thinking and prescriptions of major global institutions, including the World Bank, International Monetary Fund (IMF) and the World Trade Organization (WTO), but took a hit at the time of the 2008 financial crisis as having been the cause of the crisis. In its simplest form, the opposing view of populism meant meeting the desires and demands of the people versus those of the elite. It provides the justification for a focus on business growth within the country to create jobs.7 The UK's referendum to exit the EU was seen as a grass-roots reaction to their elites going along with diktats from the EU on immigration and taxes and helping to form the policies. The rise of nationalistic political parties in the Netherlands, France and Greece also illustrated populism and the voice of those who were being hurt by events beyond their control. Opposing neoliberalism, we also have the demonstrable success of communist party-led governments of China and Vietnam showing that autocratic governance with dominant state enterprises also furthers economic development. Neither nationalism nor populism necessarily mean withdrawing from globalization, but it alters the nature of interac-tion between the countries. Although globalization seems a recent phenomenon, poets and philosophers from early times have thought beyond their borders and seen the world as one. An ancient Sanskrit couplet declares, "Narrow-minded people say 'This one is of my group, the other is an outsider': such is the thought of people with petty minds. For people who are magnanimous and broadminded, the whole world is a family."8 have been fought by people claiming others' property and territory as their own. Therefore, even as we try to understand globalization as a transnational phenomenon, it will inevitably be contrasted with nationalism and national interests. As we watch live news feeds from around the world, we may well believe that the globe is one place, and it is right there in our living rooms. We see a Coca-Cola bottle everywhere we travel (the company says that its products are available in over 200 countries).9 However, one still needs to obtain a visa to visit most countries (depending on the passport you hold), one has to change currency at the borders of most countries, the mobile phone that we carry from home does not work everywhere, and our hair dryer may get burned out because of voltage differences (assuming we are able to plug it into the different power socket). In several ways, we maintain our differences, and we haven't even begun talking about language and culture. Globalization can raise strong emotions and be viewed in either negative or positive terms. Images of protests in various parts of the world fill our screens as people attribute the poor prices for their crops to decisions made in faraway places or the insult to their religious sentiments to the insensitivity of other cultures and connect it all to the negative effects of globalization. On the positive side, our stores pleasantly surprise us with the variety of foods and other products they offer through all seasons, and from all parts of the world, which is also attributed to globalization. Arguments in favor of freer trade, a component of globalization, credit it with helping to reduce unemployment and aiding economic development in some parts of the world while hurting others. Many have begun to view globalization as inevitable and attribute it to larger forces that are beyond their control. Such a feeling of helplessness may also lead them to shun responsibility for globalization's effects. The terms used in the discussion often reflect the position of the individual. Thus, we see people refer to the world as a "global village," which is meant to suggest something warm, fuzzy and involving close relationships, with people helping each other as in the popular image of a village. If you have lived in a village, you can wonder what a village with about 8 billion people would look like! Others see globalization as standardization, resulting in the same music, clothes and shops with the same products all over the world. Some fear it is Americanization. Supporters and opponents face-off on global issues. The COP26 meeting held in Glasgow, Scotland, in November 2021 was attended by leaders from about 200 countries to discuss measures to reduce global emissions. There were also about 100,000 protestors marching on the streets demanding more action against climate change and similar protests were said to have been held in about 100 countries. If one can draw a fault line that divides the issues for and against globalization, then on the one side we would have the economic arguments that globalization is a good thing by making more goods and services available for consumption, and on the other side we would have the arguments that the costs of globalization don't make it worthwhile. Those who are for globali-zation would talk about competitiveness, availability of goods and services at a lower price, and the new products and jobs that new businesses provide. Those against would talk about growing inequality of income distribution, loss of jobs as supply chains reorganize, threats to indigenous culture and the environment, and the negative effects of the power of multination-als on smaller businesses. These contrasting views and effects drive countries and their leaders to change positions. FIRST AND SECOND ORDER EFFECTS Actions that may initially be seen as conflicting can often be understood under a broader conceptualization of first and second order effects. This allows for an analytical or ontological convenience.10 Different fields use this categorization to distinguish between, say, action and reaction, instance and abstraction, or event and category. In the sciences (such as physics or math), the first order may be a necessary and the second order a sufficient condition; in devel-opmental change theory, the first order is change at the personal level and the second order is the obstacles to implementing the change. The terms can also represent action and consequen-tial reaction. When action is first initiated and produces some results, they may be considered as part of the first order effects. Subsequently, there is reflection, implications are examined, and these may result in a reconsideration and changes in the initial effort that further produce some results, which may be considered a part of the second order effects. We can discern two different logics that correspond to the first and second order effects. As applied to globalization, a nation and its people, as they engage with the rest of the world initiate first order actions. These may occur owing to the exigencies of international collabora-tion, such as a gathering of powerful countries that are setting human rights goals or loosening trade barriers, with which an individual participant nation feels pressured or convinced to comply. When the nation takes a hard look at what it has agreed to or the effects of its decisions become known, it may have second thoughts, and the second order effects begin. It may try to renegotiate, or seek concessions for participation, or institute protections that would insulate some part of its society from the harsher effects of the first order action. President Clinton agreed in 1997 to the Kyoto Protocol, which required nations to take actions to control greenhouse gas emissions. Yet the US Senate refused to ratify US partic-ipation, effectively withdrawing from the protocol because they felt that it would hurt US industry. The going back and forth was evident during the COP26 meeting in Glasgow and while nations pledged to cut emissions, the meeting was unable to reach the target of limiting global heating to 1.5°C, but agreed that nations would meet again in 2022 and re-examine their national plans. Many of the arguments about global issues fit this description, which can more colloquially be expressed as two steps forward and one step backward. When globalization is seen as an ongoing process, policy positions and actions taken by government and subsequent actions to revise them are a part of the first order/second order effects. CONTRASTING SCHOOLS OF THOUGHT The contrasting scholarly views and real-world debates about globalization can be accommo-dated in three schools of thought delineated by Heldt et al.11 The "hyperglobalizers" are those who look upon the current globalization trends as a new era and believe everyone is becoming subject to a new set of rules and the discipline of a global marketplace. The "skeptics" are those who think contemporary globalization is not historically unprecedented, the nation-states are still strong, their governments are powerful, and the world economy is dominated by major regional trading blocs. The "transformationalists" see globalization as a force that is bringing about unprecedented change in a historical perspective, and as replete with contradictions, while nations try to adapt and adjust to these trends, the nature of which remain uncertain.12 The first and second schools see globalization as an end-state, and primarily economic in nature, while Heldt et al. lean toward the transformationalist school in seeing globalization as a process and beyond merely an economic realm. As we proceed to discuss various aspects of globalization, its implications and the views for and against, it would be useful to bear this threefold categorization in mind, for the same event can be seen through each of these three lenses. Did the raising of national barriers due to Covid-19 prove the skeptics and did the spread of vaccines and treatment research across countries prove the transformationalists? The objective of this book is to introduce the multi-dimensionality of globalization, reveal its complexity, and provide a systems framework that can help you understand the context and guide decision making. The book is neither pro-nor anti-globalization and does not have an agenda to convince you of one point of view. This book will argue that globalization is an evolving phenomenon and is all around us. It is a process and not a state of affairs. As nations confront this process, some may prosper while others suffer, and so it is important for individ-uals, organizations and nations to understand how to make decisions in the face of what seems an inexorable process of external change. World events have indirect and direct ways of affecting businesses. Unhappiness with US foreign policy leads to American icons like McDonald's fast food restaurants being set on fire in Pakistan. A dislike by the Chinese government of a US missile shield deployment in South Korea leads to a boycott of Korean businesses in China. When France strongly opposed the US invasion of Iraq, sales of French wines in the United States suffered. A global manager needs to have a perspective on events that goes beyond the conventional business or economic theories and be able to connect and synthesize diverse bits of information. Most business school students are required to take courses that provide them with an overview of international business. They study trade theories, the role of the WTO, and how multinational corporations enter new markets and organize their businesses. However, they do not get to appreciate the burden of history or the trends in society and politics that have an important bearing on business matters. The problems and issues that make the front pages of the newspapers describe the cultural, political, technological and other influences on the business and economic issues of today. AACSB International, a US-based business education accrediting body, recognizing globalization as a significant force of change for business, estab-lished a Task Force on the Globalization of Management Education.13 Their report saw the potential value for a course that helps students develop a way of thinking about concepts that transcend countries. They wanted this foundational course to use a meta-cognitive framework which is cross-functional for discussing globalization and business that the functional courses can then build on. This book meets that need. I build a framework using systems analysis for this purpose, as it provides the tools for a multidisciplinary examination of issues. The book is interested in acquainting you with an understanding of the complexity of globalization and helping you develop skills to sort through the issues. I will impress upon you the need for a sense of history as you view events and see parallels from a multidisciplinary perspective. Looking at globalization as inevitable or irreversible avoids the main issue. It is more important to understand and examine how one can chart a course of action to play down its disadvantages and benefit from its opportunities. The central questions addressed by this book are: z How do we conceive and understand globalization? z How do we take a comprehensive view and analyze the issues in the context of the mul-tiple dimensions of the globalization process? The book begins with a review of historical trends that have sought to tie different nations and cultures together, especially colonization (Chapter 2). This will bring to the present the implications of history and the interconnections of the past and also help us arrive at a definition of globalization that we will use throughout the book. In Chapter 3, I discuss different approaches to systems analysis and develop the ACE framework composed of five domains, namely the social, political, economic, business and physical, to provide a systematic approach to the analysis of global issues. I then take up several contestable issues that have been closely intertwined and interact in the debate on globalization. While most chapters focus on individual domains, in the spirit of systems analysis, the connections with other domains will also be discussed. This perspective will be reinforced in the end sections of all the chapters. In Chapter 4, the issues that surround culture, such as fears of standardization and valuing diversity, are discussed. National identity, independence and the impact of political institutions and terrorism, and their consequences for the world, which set off simultaneous trends of collaboration and conflict, are considered in Chapter 5. In Chapter 6, I examine the economic arguments of growth and development of nations and their consequences for poverty. Chapters 7 and 8 direct our attention to the business effects of globalization and its implications for global industries and the management practices followed around the world. In Chapter 9, the changes taking place in our physical environment, the one truly interconnected arena, and the issues of technology, sustainability and virus are considered. The institutional features of our world that make it one place and the geopolitical implications of US--China rivalry are examined in Chapter 10. I conclude the arguments made throughout the book in Chapter 11 by reviewing the debate for and against globalization. Two appendices provide brief cases: (a) a global garments supply chain case, which draws attention to Bangladesh as a major producer of global apparel and the inter-actions of different domains as a consequence, and (b) Covid-19 and its disruptions in the economic, business, social, political and physical domains. These can be used to illustrate the ACE framework approach needed to examine global issues. - Globalization is a transnational phenomenon - contrasted with nationalism and national interests - The globe is one place, but differences in... - - Culture - - Language - - Currency - - Entry regulations - - Mobile phone frequency - - Voltage , etc. -... still exist! - Nationalism versus Globalization 1. Positions of Presidents Trump / Biden and Xi Jinping Are they really contradictory? - Neo liberalism versus Populism 4. Neo liberalism: individual freedoms and minimum state intervention in the economy - Populism: Meeting the needs Many view globalization as: - 1. Forces that are beyond their control 'Village' with over 7 billion people Standardization (same music, clothes, shops) Americanization of the people as opposed to the elite - Globalization raises strong emotions: [Positive] - Variety of foods - Through all seasons and from all parts of the world - Freer trade - Reducing unemployment - Aiding economic development [Negative] - Insult to religious sentiments Unfair treatment: Poor prices for commodities - Many view globalization as: - 7. Forces that are beyond their control 'Village' with over 7 billion people Standardization (same music, clothes, shops) Americanization - Three main streams in the globalization debate (Heldt, et al.): - 5. ❖ Hyperglobalizers: Globalization is a new era - everyone subject to a new set of rules and discipline of a global marketplace. 14. - ❖ Skeptics: - Globalization is a myth - nation-states still strong, governments powerful, world economy dominated by major regional trading blocs. 1. 1. ❖Transformationalists: - Globalization bringing about unprecedented change - nations adapt and adjust while nature of the trends remains uncertain.