Globalization: theory and experience

Globalization: theory and experience.’Globalization’ is a favourite catchphrase of journalists and politicians. It has also become a key idea for business theory and practice, and entered academic debates. But what people mean by ‘globalization’ is often confused and confusing. Here we examine some key themes in the theory and experience of globalization.

Contents: introduction · globalization: delocalization and supraterritoriality · risk, technological innovation and globalization · globalization and the rise of the multinationals and branding · capitalism, markets, instability and division · conclusion · further reading and references · links · how to cite this article

See, also, globalization and the incorporation of education

‘Globalization’ is commonly used as a shorthand way of describing the spread and connectedness of production, communication and technologies across the world. That spread has involved the interlacing of economic and cultural activity. Rather confusingly, ‘globalization’ is also used by some to refer to the efforts of the International Monetary Fund (IMF), the World Bank and others to create a global free market for goods and services. This political project, while being significant – and potentially damaging for a lot of poorer nations – is really a means to exploit the larger process. Globalization in the sense of connectivity in economic and cultural life across the world, has been growing for centuries. However, many believe the current situation is of a fundamentally different order to what has gone before. The speed of communication and exchange, the complexity and size of the networks involved, and the sheer volume of trade, interaction and risk give what we now label as ‘globalization’ a peculiar force.

With increased economic interconnection has come deep-seated political changes – poorer, ‘peripheral’, countries have become even more dependent on activities in ‘central’ economies such as the USA where capital and technical expertise tend to be located. There has also been a shift in power away from the nation state and toward, some argue, multinational corporations. We have also witnessed the rise and globalization of the ‘brand’. It isn’t just that large corporations operate across many different countries – they have also developed and marketed products that could be just as well sold in Peking as in Washington. Brands like Coca Cola, Nike, Sony, and a host of others have become part of the fabric of vast numbers of people’s lives.

Globalization involves the diffusion of ideas, practices and technologies. It is something more than internationalization and universalization. It isn’t simply modernization or westernization. It is certainly isn’t just the liberalization of markets. Anthony Giddens (1990: 64) has described globalization as ‘the 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’. This involves a change in the way we understand geography and experience localness. As well as offering opportunity it brings with considerable risks linked, for example, to technological change. More recently, Michael Mann has commented:

… what is generally called globalization involved the extension of distinct relations of ideological, economic, military, and political power across the world. Concretely, in the period after 1945 this means the diffusion of ideologies like liberalism and socialism, the spread of the capitalist mode of production, the extension of military striking ranges, and the extension of nation-states across the world, at first with two empires and then with just one surviving. (Mann 2013: 11)

Globalization, thus, has powerful economic, political, cultural and social dimensions. Here we want to focus on four themes that appear with some regularity in the literature:

de-localization and supraterritoriality;
the speed and power of technological innovation and the associated growth of risk;
the rise of multinational corporations; and
the extent to which the moves towards the creation of (global) free markets to leads to instability and division.

Globalization: delocalization and supraterritoriality

Manuel Castells (1996) has argued persuasively that in the last twenty years or so of the twentieth century, a new economy emerged around the world. He characterizes it as a new brand of capitalism that has three fundamental features:

Productivity and competitiveness are, by and large, a function of knowledge generation and information processing; firms and territories are organized in networks of production, management and distribution; the core economic activities are global – that is, they have the capacity to work as a unit in real time, or chosen time, on a planetary scale. (Castells 2001: 52)

This last idea runs through a lot of the discussion of globalization.

Globalization and de-localization. Many of the activities that previously involved face-to-face interaction, or that were local, are now conducted across great distances. There has been a significant de-localization in social and economic exchanges. Activities and relationships have been uprooted from local origins and cultures (Gray 1999: 57). One important element in this has been the separation of work from the home (and the classic move to the suburbs – see Putnam’s discussion of the impact on this on local social relations). But de-localization goes well beyond this. Increasingly people have to deal with distant systems in order that they may live their lives. Banking and retailing, for example, have adopted new technologies that involve people in less face-to-face interaction. Your contact at the bank is in a call centre many miles away; when you buy goods on the internet the only person you might speak to is the delivery driver. In this last example we move beyond simple notions of distance and territory into a new realm (and this is what Scholte is especially concerned with when he talks of globalization). When we buy books from an internet supplier like Amazon our communications pass through a large number of computers and routers and may well travel thousands of miles; the computers taking our orders can be on a different continent; and the books can be located anywhere in the world. The ‘spaces’ we inhabit when using the internet to buy things or to communicate (via things like chatrooms and bulletin boards) can allow us to develop a rather different sense of place and of the community to which we belong.

Not everything is global, of course. Most employment, for example, is local or regional – but ‘strategically crucial activities and economic factors are networked around a globalized system of inputs and outputs’ (Castells 2001: 52). What happens in local neighbourhoods is increasingly influenced by the activities of people and systems operating many miles away. For example, movements in the world commodity and money markets can have a very significant impact upon people’s lives across the globe. People and systems are increasingly interdependent.

[T]he starting point for understanding the world today is not the size of its GDP or the destructive power of its weapons systems, but the fact that it is so much more joined together than before. It may look like it is made up of separate and sovereign individuals, firms, nations or cities, but the deeper reality is one of multiple connections. (Mulgan 1998: 3)

Businesses are classic example of this. As Castells (2001) noted they are organized around networks of production, management and distribution. Those that are successful have to be able to respond quickly to change – both in the market and in production. Sophisticated information systems are essential in such globalization.

Globalization and the decline in power of national governments. It isn’t just individuals and neighbourhood institutions that have felt the impact of de-localization. A major causality of this process has been a decline in the power of national governments to direct and influence their economies (especially with regard to macroeconomic management). Shifts in economic activity in say, Japan or the United States, are felt in countries all over the globe. The internationalization of financial markets, of technology and of some manufacturing and services bring with them a new set of limitations upon the freedom of action of nation states. In addition, the emergence of institutions such as the World Bank, the European Union and the European Central Bank, involve new constraints and imperatives. Yet while the influence of nation states may have shrunk as part of the process of globalization it has not disappeared. Indeed, they remain, in Hirst and Thompson’s (1996: 170) words, ‘pivotal’ institutions, ‘especially in terms of creating the conditions for effective international governance’. However, we need to examine the way in which national governments frame their thinking about policy. There is a strong argument that the impact of globalization is most felt through the extent to which politics everywhere are now essentially market-driven. ‘It is not just that governments can no longer “manage” their national economies’, Colin Leys (2001: 1) comments, ‘to survive in office they must increasingly “manage” national politics in such a ways as to adapt them to the pressures of trans-national market forces’.

The initiation, or acceleration, of the commodification of public services was… a logical result of government’s increasingly deferential attitude towards market forces in the era of the globalized economy… A good deal of what was needed [for the conversion of non-market spheres into profitable fields for investment] was accomplished by market forces themselves, with only periodic interventions by the state, which then appeared as rational responses to previous changes. (Leys 2001: 214)

In other words, the impact of globalization is less about the direct way in which specific policy choices are made, as the shaping and reshaping of social relations within all countries.

Risk, technological innovation and globalization

As we have already noted, a particular feature of ‘globalization’ is the momentum and power of the change involved. ‘It is the interaction of extraordinary technological innovation combined with world-wide reach that gives today’s change its particular complexion’ (Hutton and Giddens 2001: vii). Developments in the life sciences, and in digital technology and the like, have opened up vast, new possibilities for production and exchange. Innovations like the internet have made it possible to access information and resources across the world – and to coordinate activities in real time.

Globalization and the knowledge economy. Earlier we saw Castells making the point that productivity and competitiveness are, by and large, a function of knowledge generation and information processing. This has involved a major shift – and entails a different way of thinking about economies.

For countries in the vanguard of the world economy, the balance between knowledge and resources has shifted so far towards the former that knowledge has become perhaps the most important factor determining the standard of living – more than land, than tools, than labour. Today’s most technologically advanced economies are truly knowledge-based. (World Bank 1998)

The rise of the so-called ‘knowledge economy’ has meant that economists have been challenged to look beyond labour and capital as the central factors of production. Paul Romer and others have argued that technology (and the knowledge on which it is based) has to be viewed as a third factor in leading economies. (Romer, 1986; 1990). Global finance, thus, becomes just one force driving economies. Knowledge capitalism: ‘the drive to generate new ideas and turn them into commercial products and services which consumers want’ is now just as pervasive and powerful (Leadbeater 2000: 8). Inevitably this leads onto questions around the generation and exploitation of knowledge. There is already a gaping divide between rich and poor nations – and this appears to be accelerating under ‘knowledge capitalism’. There is also a growing gap within societies (see, for example, Stiglitz 2013). Commentators like Charles Leadbeater have argued for the need to ‘innovate and include’ and for a recognition that successful knowledge economies have to take a democratic approach to the spread of knowledge: ‘We must breed an open, inquisitive, challenging and ambitious society’ (Leadbeater 2000: 235, 237). However, there are powerful counter-forces to this ideal. In recent years we have witnessed a significant growth in attempts by large corporations to claim intellectual rights over new discoveries, for example in relation to genetic research, and to reap large profits from licensing use of this ‘knowledge’ to others. There are also significant doubts as to whether ‘modern economies’ are, indeed, ‘knowledge economies’. It doesn’t follow, for example, that only those nations committed to lifelong learning and to creating a learning society will thrive (see Wolf 2002: 13-55).

Globalization and risk. As well as opening up considerable possibility, the employment of new technologies, when combined with the desire for profit and this ‘world-wide’ reach, brings with it particular risks. Indeed, writers like Ulrich Beck (1992: 13) have argued that the gain in power from the ‘techno-economic progress’ is quickly being overshadowed by the production of risks. (Risks in this sense can be viewed as the probability of harm arising from technological and economic change). Hazards linked to industrial production, for example, can quickly spread beyond the immediate context in which they are generated. In other words, risks become globalized.

[Modernization risks] possess an inherent tendency towards globalization. A universalization of hazards accompanies industrial production, independent of the place where they are produced: food chains connect practically everyone on earth to everyone else. They dip under borders. (Beck 1992: 39)

As Beck (1992: 37) has argued there is a boomerang effect in globalization of this kind. Risks can catch up with those who profit or produce from them.

The basic insight lying behind all this is as simple as possible: everything which threatens life on this Earth also threatens the property and commercial interests of those who live from the commodification of life and its requisites. In this way a genuine and systematically intensifying contradiction arises between the profit and property interests that advance the industrialization process and its frequently threatening consequences, which endanger and expropriate possessions and profits (not to mention the possession and profit of life) (Beck 1992: 39).

Here we have one of the central paradoxes of what Beck has termed ‘the risk society’. As knowledge has grown, so has risk. Indeed, it could be argued that the social relationships, institutions and dynamics within which knowledge is produced have accentuated the risks involved. Risk has been globalized.

Globalization and the rise of multinational corporations and branding

A further, crucial aspect of globalization is the nature and power of multinational corporations. Such companies now account for over 33 per cent of world output, and 66 per cent of world trade (Gray 1999: 62). Significantly, something like a quarter of world trade occurs within multinational corporations (op. cit). This last point is well illustrated by the operations of car manufacturers who typically source their components from plants situated in different countries. However, it is important not to run away with the idea that the sort of globalization we have been discussing involves multinationals turning, on any large scale, to transnationals:

International businesses are still largely confined to their home territory in terms of their overall business activity; they remain heavily ‘nationally embedded’ and continue to be multinational, rather than transnational, corporations. (Hirst and Thompson 1996: 98).

While full globalization in this organizational sense may not have occurred on a large scale, these large multinational corporations still have considerable economic and cultural power.

Globalization and the impact of multinationals on local communities. Multinationals can impact upon communities in very diverse places. First, they look to establish or contract operations (production, service and sales) in countries and regions where they can exploit cheaper labour and resources. While this can mean additional wealth flowing into those communities, this form of ‘globalization’ entails significant inequalities. It can also mean large scale unemployment in those communities where those industries were previously located. The wages paid in the new settings can be minimal, and worker’s rights and conditions poor. For example, a 1998 survey of special economic zones in China showed that manufacturers for companies like Ralph Lauren, Adidas and Nike were paying as little as 13 cents per hour (a ‘living wage’ in that area is around 87 cents per hour). In the United States workers doing similar jobs might expect US$10 per hour (Klein 2001: 212).

Second, multinationals constantly seek out new or under-exploited markets. They look to increase sales – often by trying to create new needs among different target groups. One example here has been the activities of tobacco companies in southern countries. Another has been the development of the markets predominantly populated by children and young people. In fact the child and youth market has grown into one the most profitable and influential sectors. ‘The young are not only prized not only for the influence they have over adult spending, but also for their own burgeoning spending power’ (Kenway and Bullen 2001: 90). There is increasing evidence that this is having a deep effect; that our view of childhood (especially in northern and ‘developed’ countries) is increasingly the product of ‘consumer-media’ culture. Furthermore, that culture:

… is underpinned in the sweated work of the ‘othered’ children of the so-called ‘Third World’. [W]ith the aid of various media, the commodity form has increasingly become central to the life of the young of the West, constructing their identities and relationships, their emotional and social worlds… [A]dults and schools have been negatively positioned in this matrix to the extent that youthful power and pleasure are constructed as that which happens elsewhere – away from adults and schools and mainly with the aid of commodities. (Kenway and Bullen 2001: 187).

Of course such commodification of everyday life is hardly new. Writers like Erich Fromm were commenting on the phenomenon in the early 1950s. However, there has been a significant acceleration and intensification (and globalization) with the rise of the brand (see below) and a heavier focus on seeking to condition children and young people to construct their identities around brands.

Third, and linked to the above, we have seen the erosion of public space by corporate activities. Significant areas of leisure, for example, have moved from more associational forms like clubs to privatized, commercialized activity. Giroux (2000: 10), for example, charts this with respect to young people

[Y]oung people are increasingly excluded from public spaces outside of schools that once offered them the opportunity to hang out with relative security, work with mentors, and develop their own talents and sense of self-worth. Like the concept of citizenship itself, recreational space is now privatized as commercial profit-making venture. Gone are the youth centers, city public parks, outdoor basketball courts or empty lots where kids call play stick ball. Play areas are now rented out to the highest bidder…

This movement has been well documented in the USA (particularly by Robert Putnam with respect to a decline in social capital and civic community – but did not examine in any depth the role corporations have taken). It has profound implications for the quality of life within communities and the sense of well-being that people experience.

Fourth, multinational companies can also have significant influence with regard to policy formation in many national governments and in transnational bodies such as the European Union and the World Bank (key actors within the globalization process). They have also profited from privatization and the opening up of services. As George Monbiot has argued with respect to Britain, for example: the provision of hospitals, roads and prisons… has been deliberately tailored to meet corporate demands rather than public need’ (2001: 4). He continues:

… biotechnology companies have sought to turn the food chain into a controllable commodity and [there is an] extraordinary web of influence linking them to government ministers and government agencies…. [C]orporations have come to govern key decision-making processes within the European Union and, with the British government’s blessing, begun to develop a transatlantic single market, controlled and run by corporate chief executives. (Monbiot 2001: 5)

While with globalization the power of national governments over macro-economic forces may have been limited in recent years, the services and support they provide for their citizens have been seen as a considerable opportunity for corporations. In addition, national governments still have considerable influence in international organizations – and have therefore become the target of multinationals for action in this arena.

Branding and globalization. The growth of multinationals and the globalization of their impact is wrapped up with the rise of the brand.

The astronomical growth in the wealth and cultural influence of multi-national corporations over the last fifteen years can arguably be traced back to a single, seemingly innocuous idea developed by management theorists in the mid-1980s: that successful corporations must primarily produce brands, as opposed to products. (Klein 2001: 3)

As Naomi Klein (2001: 196) has suggested, ‘brand builders are the new primary producers in our so-called knowledge economy’. One of the key elements that keeps companies as multinationals rather than transnationals is the extent to which they look to ‘outsource’ products, components and services. The logic underlying this runs something like the following:

…. corporations should not expend their finite resources on factories that will demand physical upkeep, on machines that will corrode or on employees who will certainly age and die. Instead, they should concentrate those resources in the virtual brick and mortar used to build their brands

Nike, Levi, Coca Cola and other major companies spend huge sums of money in promoting and sustaining their brands. One strategy is to try and establish particular brands as an integral part of the way people understand, or would like to see, themselves. As we have already seen with respect the operation of multinationals this has had a particular impact on children and young people (and education). There is an attempt ‘to get them young’.

Significantly, the focus on brand rather than the inherent qualities of the product as well as advantaging multinationals in terms of market development also has an Achilles heel. Damage to the brand can do disproportionate harm to sales and profitability. If a brand becomes associated with failure or disgrace (for example where a sports star they use to advertise their brand is exposed as a drug-taker; or where the brand becomes associated in the public’s mind with the exploitation of children – as for example has happened with some of the main trainer makers) then it can face major problems in the marketplace.

Globalization and the multinationals. While there is no doubting the growth in scale and scope of multinational corporations – the degree of control they have over the central dynamics of globalization remains limited.

In reality, they are often weak and amorphous organizations. They display the loss of authority and erosion of common values that afflicts practically all late modern social institutions. The global market is not spawning corporations which assume the past functions of sovereign states. Rather, it has weakened and hollowed out both institutions. (Gray 1999: 63)

While multinationals have played a very significant role in the growth of globalization, it is important not to overplay the degree of control they have had over the central dynamics.

Capitalism, free markets, instability and division

Amartya Sen (2002) has argued that ‘the market economy does not work by itself in global relations–indeed, it cannot operate alone even within a given country’. Yet, for some proponents of globalization the aim is to expand market relations, push back state and interstate interference, and create a global free market. This political project can be seen at work in the activities of transnational organizations like the World Trade Organization (WTO), the International Monetary Fund (IMF), and the Organization for Economic Cooperation and Development (OECD), and has been a significant objective of United States intervention. Part of the impetus for this project was the limited success of corporate/state structures in planning and organizing economies. However, even more significant was the growth in influence of neo-liberal ideologies and their promotion by powerful politicians like Reagan in the USA and Thatcher in the UK.

A new orthodoxy became ascendant. In the USA a Democrat President renounced ‘big government’; in Britain, the Labour Party abandoned its commitment to social ownership. The ‘markets were in command’ (Frank 2002: xv). The basic formula ran something like the following:

Privatization + Deregulation + Globalization = Turbo-capitalism = Prosperity

(Luttwak quoted by Frank 2002: 17)

As various commentators have pointed out, the push toward deregulation and ‘setting markets free’ that so dominated political rhetoric in many northern countries during the 1980s and 1990s was deeply flawed. For example, the central tenet of free market economics – that unregulated markets ‘will of their own accord find unimprovable results for all participants’ has, according to Will Hutton (1995: 237), ‘now proved to be a nonsense. It does not hold in theory. It is not true’. Historically, free markets have been dependent upon state power. For markets to function over time they require a reasonable degree of political stability, a solid legal framework and a significant amount of social capital. The push to engineer free markets has contained within it the seeds of its own destruction.

The central paradox of our time can be stated thus: economic globalization does not strengthen the current regime of global laissez-faire. It works to undermine it. There is nothing in today’s global market that buffers it against the social strains arising from high uneven economic development within and between the world’s diverse societies. The swift waxing and waning of industries and livelihoods, the sudden shifts of production and capital, the casino of currency speculation – these conditions trigger political counter-movements that challenge the very ground rules of the global free market. (Gray 1999: 7)

Capitalism is essentially disruptive and ever-changing – and takes very different forms across the world. While it produces wealth for significant numbers of people, many others have suffered. The gap between rich and poor has widened as global capitalism has expanded. For example, David Landes (1999: xx) has calculated that the difference in income per head between the richest nation (he cited Switzerland) and the poorest non-industrial country, Mozambique, is now about 400 to 1. ‘Two hundred and fifty years ago, the gap between richest and poorest was perhaps 5 to 1, and the difference between Europe and, say, East or South Asia (China or India) was around 1.5 or 2 to 1’ (op. cit.).

The development of markets, the expansion of economic activity, and the extent to which growing prosperity is experienced by populations as a whole has been, and remains, deeply influenced by public policies around, for example, education, land reform and the legal framework for activity. Economists like Amartya Sen have argued that ‘public action that can radically alter the outcome of local and global economic relations’. For him the:

… central issue of contention is not globalization itself, nor is it the use of the market as an institution, but the inequity in the overall balance of institutional arrangements–which produces very unequal sharing of the benefits of globalization. The question is not just whether the poor, too, gain something from globalization, but whether they get a fair share and a fair opportunity. (Sen 2002)

Strong markets require significant state and transnational intervention. To be sustained across time they also require stable social relationships and an environment of trust. Moreover, they can be organized and framed so that people throughout different societies can benefit.

Conclusion

One commentator has argued that there is a very serious case not against ‘globalization’,

… but against the particular version of it imposed by the world’s financial elites. The brand currently ascendant needlessly widens gaps of wealth and poverty, erodes democracy, seeds instability, and fails even its own test of maximizing sustainable economic growth. (Kuttner 2002)

The gap between rich and poor countries has widened considerably. However, as Sen (2002) has commented, to ‘see globalization as merely Western imperialism of ideas and beliefs (as the rhetoric often suggests) would be a serious and costly error’. He continues:

Of course, there are issues related to globalization that do connect with imperialism (the history of conquests, colonialism, and alien rule remains relevant today in many ways), and a postcolonial understanding of the world has its merits. But it would be a great mistake to see globalization primarily as a feature of imperialism. It is much bigger–much greater–than that.

For example, while the reach and power of multinationals appears to have grown significantly, neither they, nor individual national governments, have the control over macro-economic forces that they would like. Ecological and technological risks have multiplied. Globalization in the sense of connectivity in economic and cultural life across the world, is of a different order to what has gone before. As we said at the start, the speed of communication and exchange, the complexity and size of the networks involved, and the sheer volume of trade, interaction and risk give what we now label as ‘globalization’ a peculiar force.

All this raises particular questions for educators. Has the process of globalization eroded the autonomy of national education systems? How has it impacted on the forms that education now takes? What is the effect of an increased corporate presence and branding in education? What response should educators make? We examine these and other issues in globalization and the incorporation of education.

References

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Links

The American Prospect – special segment on globalization: helpful collection of articles and links.

Development Gateway Foundation: Useful set of pages on the knowledge economy + plenty of other resources.

Global Policy Forum. Useful set of resources and links that explore the nature of globalization.

No Logo: website linked to Klein’s book with bulletin board and various resources.

World Bank Research on Globalization. Collection of topic papers and reports.

Acknowledgement: Photograph – ‘Globalization’ is by Frederic Poirot – reproduced under a Creative Copmmons – Attribution-Non-Commercial-No Derivative Works 2.0 Generic licence | [http://www.flickr.com/photos/fredarmitage/3544394623/].

To cite this article: Smith, M. K. and Doyle M. (2002) ‘Globalization’ the encyclopedia of informal education, www.infed.org/biblio/globalization.htm.