Is globalisation new?

Guyana and the wider world
Stabroek News
September 17, 2000

This week we examine the argument as to whether globalisation is a new process, or one that has been around for a long time. Those who support the view that it is new, stress the difference or separation between the present world system and that of the past. Those who oppose this view, stress the similarities and continuities between the present and the past.

All encompassing
Last week I indicated that globalisation had already encompassed all aspects of our lives. Today, not only has the global economy been fundamentally transformed, but our world outlook as well. This is revealed by the fact that I can think of no activity, no matter how local we may intend it to be, that will succeed, if it is not conceived, planned, and executed with a global perspective in mind. This is true for our politics, economics, culture, behaviour, institutions, ideas, belief systems and religions. It is all around us, in our external trade and financial relations, the migration opportunities open to the population, our educational system, and the media, arts and sport.

Some writers object to this broad view on the grounds that this approach treats globalisation as virtually indistinguishable from global capitalism. This, they claim, is too broad, since the result is that the process is not then easily measured. There is merit to this argument. The broad view, as I interpret it, argues that globalisation marks a new stage in the evolution of global capitalism.

New phenomenon
These differences are sharply reflected in the position of those writers who claim that globalisation is not a new phenomenon. There is strong support for this view among some Caribbean scholars.

The argument is that globalisation represents little more than a return to the hey-day of free trade and open economies that lasted from the late 19th century to the beginning of World War I (1914-1918). That period of rampant free trade and open economies was interrupted by two World Wars; the collapse of the global capitalist economy in the 1930s (referred to as the Great Depression); and, the protectionism and market restrictions that occurred, when the former colonies became independent after World War II. The economic evidence marshalled in support of this is impressive.

Consider that globalisation has brought about huge cross-border movements of people. Guyanese living overseas attest to this. Indeed it is estimated that today about one in every 100 persons live in a country other than that of their birth! However, although accurate figures are not available, it does appear that this proportion is probably less than that which existed at the end of the 19th century. Of course the world's population was far smaller then.

Globalisation has been accompanied by a rapid rise in international trade as well, in both the developed and developing economies. In the developed economies, total imports and exports as a per cent of GDP is just about 40 per cent today, compared to about 27 per cent a decade ago.

In the poor countries it is about one-sixth compared to one-tenth a decade ago. However, the global ratio today is about 14 per cent. In 1913 it was already 13 per cent.

Foreign investment
Foreign investment has also increased rapidly as a result of globalisation. This has been noticeable since the 1980s as countries have liberalized and removed restrictions on foreign investment. The US alone has more than tripled its overseas investment over the past 10 years. However, global foreign investment is today equal to 4 percent of global GDP. This compares to a ratio of 3 percent in 1913.

International production
Another striking feature of globalisation is the rise of TNC international production. That is the overseas production of firms based in one country. Dramatic as this is, the national base of operation of the TNCs as a whole is still far more important than the international base of production. This is reflected in the fact that the Boards of Directors of these transnational firms have a very small "foreign" element. Technology

As is well known, the explosion of technology underlines the rapid growth of investment, international production, and international trade. However, although the technology was different in the late 19th century, it is true that it also played a fundamental role in the expansion of the global economy at that time.

In our discussion last week we also saw that different points of view shared the common view that globalisation cannot be separated from neo-liberal policies or liberalisation. It is also argued that this was the case in the hey-day of free trade in the late 19th century. Then, as now, barriers to trade were reduced and restrictions on capital flows removed. In the late 19th century, this was superintended by the major colonial powers, which forced their colonies to go along. Now the force is not exerted through direct colonial rule. Instead, indirect pressures from institutions like the IMF/World Bank, and the economic and political leverage of the major powers achieve the same end result.

There are clearly strong historical parallels in the economic data. These, however, suffer from a major limitation. It is evident that the changes under globalisation have occurred at a far faster rate and over a far wider span of economic activity than was the case in the late 19th century. Thus for example, the revolution in computer technology is not only rapid and on-going but its scope is tremendous. It affects almost every economic activity on earth. Simply because, it is based on the mastery of information collection, processing and dissemination, which every activity can benefit from. It is difficult in the face of this type of evidence to deny that the global economy as a whole is undergoing an historically unprecedented growth and diversification. Added to this, there has been a paradigm shift as well, in the way we interpret the world, and act on it.

Next week we will pay closer attention to the twin-half of globalisation, that is liberalization, or the practice of neo-liberal policies.

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