GLOBALISATION I

James R. Wilson

Competitive Territories in the Global EconomySessions 1 & 2

Email: jwilson@orkestra.deusto.esTwitter: jamierwilson

Web: jamierwilson.wordpress.comSlideshare: slideshare.net/jamierwilson

• Trade has taken place for many centuries– Regional trade in the Roman empire, for example– Marco Polo– The search for sea routes between Europe and the East– But not all ‘Euro-centric’: Chinese trading links?

• The commercialisation of trade– Exploration and the development of modern financing– The ‘India’ companies– The significance of the industrial revolution

ORIGINS OF A GLOBAL ECONOMY …

• Transnational firm: One that controls and manages production in at least two countries

• Embryonic transnational firms must have been found in the ancient trading cultures of China, Europe, the Middle East, the Americas …

• But the modern transnational really emerged with the industrial revolution– Initially, mostly European based (e.g. British American Tobacco,

Lever Brothers, Michelin, Nestlé)– But, the ‘American Challenge’ from the 1950s– And most recently, acknowledgement that TNCs can take different

forms (e.g. Japanese)• Also rise of Indian, Chinese, Latin American, South African TNCs

EMERGENCE OF ‘TRANSNATIONAL FIRMS’

• Pre-WW2: Simple ‘core and periphery’ structure– Core: Production of manufactured goods– Periphery: Raw materials, foodstuffs, market for manufactures– 71% of world manufacturing output in 4 countries, 90% in 11– Core also absorbed 80% of periphery’s primary products

• This structure was shattered by WW2, which devastated the global economy– Post-1945 therefore a ‘new beginning’– The US in a position to play a particularly dominant role …– A new set of institutions set up at the Bretton Woods conference

• New divide: Capitalist West, communist East, plus ‘third world’

SHAPING THE ECONOMY POST-WW2

• Rapid growth in world production– The world economy performed better in the last half century than at any

time in the past. – World GDP increased six-fold from 1950 to 1998 with an average growth

of 3.9% a year, compared with 1.6% from 1820 to 195, and 0.3% from 1500 to 1820.

• But it is not a story of consistent, predictable growth …– Post-WW2 ‘golden age’– Recession in the 1970s– Volatility in the 1980s and 1990s– Renewed rapid world growth post-2000 ... – Global recession from 2008, following financial crisis

• What is the current economic outlook?

RAPID GROWTH OF ECONOMIC ACTIVITY

• Trade has grown faster than production, however, signalling also greater interconnectedness in the global economy

• This interconnectedness is reflected in other trends:– Rapid increase in the quantity of foreign direct investment (FDI)– Rapid growth in cross-border mergers and acquisitions– Greater liberalisation of markets– More globally dispersed value chains

• All of this has combined to make the current economic downturn quite unique in its complexity ...

RAPID GROWTH OF ECONOMIC ACTIVITY

• What does the word ‘globalisation’ mean to you?

• There is general agreement that ‘something’ fundamental is happening … the world has been, and continues to be, undergoing profound changes in the way in which it is structured/organised

• However, the nature of these changes is contested– There is very little agreement on what, exactly, globalisation is, and on

what it implies …

… in spite of a deluge of publications on the subject, our analyses of globalisation tend to remain conceptually inexact, empirically thin, historically and culturally illiterate, normatively shallow and politically naïve Scholte, 2000

WHAT IS GLOBALISATION?

• Globalisation has now been a buzzword for several years– It was first used in a significant sense in 1983 by Theodore Levitt, to

refer to ‘the globalisation of markets’ …– But it was not until the mid 1990s that we began to see the term used

more widely …– And by the end of the 1990s there had been a dramatic ‘explosion’ in

the use of the word

• ‘Globalisation’ has passed into our language as a key word, and today it is used as a ‘catch-all’ term to refer to a whole range of phenomena … – Usage of ‘Globalisation’ today … ?

The world’s needs and desires have been irrevocably homogonised Levitt, 1983

BUT was he correct?

WHAT IS GLOBALISATION?

• “But cheap flights, globalisation and the mounting cost of train travel have made aviation by far the fastest growing source of carbon dioxide in the UK.” – From an article in The Guardian on aviation emissions, January 2007.

• “… a backlash against globalisation and a desire to help local communities had helped the rise of farmers' markets”– From an article in The Times on politics and shopping, January 2007.

• “It is unclear whether workers will continue to accept declines in their real living standards in the name of an unbalanced globalisation whose promised seem ever more elusive. In America one can feel the backlash mounting.”– From an article by Joseph Stiglitz in The Straits Times on world economic

prospects, January 2008.

A GENERALLY ACCEPTED STATE OF THE WORLD

• An Economist– “a dynamic process of growing liberty and world integration in the markets

for labour, goods, services, technology and capital.” (De la Dehesa, 2000)• A Sociologist

– “the compression of the world and the intensification of the consciousness of the world as a whole.” (Waters, 2000)

• A Geographer– “a reterritorialisation of both socioeconomic and political-institutional

spaces that unfolds simultaneously upon multiple, superimposed, geographical scales.” (Brenner, 1999)

• A Politician – “Nations act in their own self interest. But … our self-interest and our

mutual interests are today inextricably woven together. This is the politics of globalisation.” (Tony Blair, 2nd October 2001)

CATEGORIES OF GLOBALISATION

• Last session we introduced the concept of globalisation– Traced the evolution of a global economy from hundreds of years ago– Analysed the emergence and evolution of transnational firms– Looked at the key roles of the industrial revolution and WW2 in shaping

a global economy– Saw the rapid growth of the global economy and of its

interconnectedness during the last 60 years– Tried to define the term ‘globalisation’– Showed that globalisation as a term has many facets and many meanings

• Today we will continue to explore the phenomenon of globalisation as a key context in which individual territories seek to be ‘competitive’

RECAP

• ‘Globalisation’ cannot be confined to one discipline– “globalisation has been a prominent topic among geographers and

sociologists as well as economists and political scientists, and is studied within every paradigm…” (Radice, 2000)

• It is also characterised by “opposing tendencies”– Homogenisation versus Differentiation– Integration versus Fragmentation– Globalisation ALONGSIDE Regionalisation … etc.

GLOCALISATION?

A COMPLEX, MULTI-FACETED PHENOMENON

• The hyperglobalists see globalisation as the new economic, political, social, cultural order in which we live, where our lives are dominated by global forces …

• Their view is essentially of a borderless world– One where transnational firms dominate, and cultural differences are

seen simply as variations in consumer preferences– “The nation state is just about through as an economic unit”

(Kindleberger, in 1969)– More recently these views are associated with commentators such as

Ohmae, Friedman, Reich and Giddens

• This hyperglobalist view forms the basis for much of the debate between the ‘neo-liberal right’ and the ‘anti-globalisation left’ …

But there is also an alternative perspective ...

A CONTESTED PHENOMENON: HYPERGLOBALISTS

• The sceptics argue that the nation state remains highly significant, as we live in an international world– Internationalism is built around nationalism (Bucharin, in 1918)– So how ‘new’ is ‘globalisation’?– What might be called “progressive nationalism” is associated with

commentators such as Hirst and Thompson, Ruigrok and van Tulder, and Radice

• Where do you stand in this debate?– Is the world becoming borderless? – Or will nation states remain important?

A CONTESTED PHENOMENON: GLOBALISATION SCEPTICS

• While the world economy has arguably been as ‘open’ at other times in history, there is something qualitatively different about current ‘globalisation’– Deep integration has replaced shallow integration– A new “turbocharged” era of globalisation (Friedman, 2000)– This is impacting in different ways on the economic, political, social,

cultural and natural environments

• However, while such ‘globalising forces’ clearly exist, we have not reached an ‘end-state’ in which local and national factors cease to be significant– Moreover, we can’t predict that we will reach this state, as globalisation

involves a complex set of intermittent, uneven processes that are inherently unpredictable

– Consider, for example, Dicken’s analysis …

MIDDLE GROUND … ?

• New, more integrated, global markets• New global (and local) actors• New rules and norms

1. Changing territory2. Changing technologies3. Spread of forms of market capitalism

Associated with these characteristics, we can identify three key components to ‘globalisation’

SUMMARY: CHARACTERISTICS OF GLOBALISATION

• Scholte (2000) argues that globalisation is a new and distinctive phenomenon only when seen in terms of ‘deterritorialisation’– Social geography is no longer entirely territorial– Territory still matters, but it no longer constitutes the whole of our

geography– While production used to be organised within national boundaries, for

example, this is no longer the case

• Space is shrinking, and borders are becoming less significant

1. CHANGING TERRITORY

• Changing spatial relations are intimately associated with changes in transport, information, and communication technologies– Faster and cheaper air, sea, rail travel– Cheaper and better phone connections– Fax– Mobile phones– Internet and other electronic communications– Etc.

• These have facilitated emerging ‘global’ economic, social, cultural and political relationships

2. CHANGING TECHNOLOGIES

• The process of ‘globalisation’ that we see around us cannot be separated from the capitalist context in which it has emerged– Liberalisation of markets– Privatisation and the reduction of the role of governments– The role of the IMF and World Bank in these processes– The increasing significance of transnational corporations– New ‘global’ division of labour and ‘global’ production chains

• The current form of globalisation is heavily influenced by this context– See Friedman (2000) and Stiglitz (2002)– ‘Washington consensus’ globalisation (Sugden and Wilson, 2005)

3. SPREAD OF MARKET CAPITALISM

• It is a complex, multifaceted phenomenon, incorporating changes in economic, political, cultural, social relationships

• In particular, globalisation refers to the changes in these relationships as new technologies combine with the dominant capitalist context in reducing the significance of territory

• As markets and production chains become ‘global’, there are clearly economic, political, cultural and social implications for different actors …

What are the implications of ‘globalisation’ for business?

SO WHAT IS GLOBALISATION?

• How fast is your company?• Is your company harvesting its knowledge?• How much does your company weigh?• Does your company dare to be open on the outside?• Does your company dare to be open on the inside?• Does the management ‘get it’? And can you change the

management if they don’t ‘get it’?• Is your company willing to shoot its wounded and suckle the

survivors?• How good is your company at making friends?• How good is your company’s brand?

THOMAS FRIEDMAN’S NINE QUESTIONS

• Businesses need to recognise that increasingly they are operating in global market places– This presents both threats and opportunities

• Perhaps most crucially, businesses need to understand that globalisation is inextricably linked with the creation and communication of knowledge and information– Success means staying one step ahead

• There is also a need to recognise and respond to some of the ‘opposing tendencies’ and be aware of ‘backlash’– For example, regionalisation and localisation are important counter

forces to global markets– This is a BIG factor in Europe, for example

• Global businesses able to respond to local markets?• Local businesses able to project themselves globally?

SOME IMPLICATIONS FOR BUSINESS

• Many of the implications that we have identified for firms can also be applied to societies more generally– Freidman’s nine questions apply to countries as well as companies– This is not surprising, given that societies are built around institutions,

including firms– All institutions will be influenced by processes of globalisation

• There are economic, social, cultural, political implications for countries and regions as the world becomes more deeply inter-connected– Again, threats and opportunities

• E.g. Car manufacturing industry in the West Midlands• E.g. Paper industry in the Basque Country• E.g. Ongoing attempts to postion the Basque Country as an innovation-

driven economy

GLOBALISATION: IMPLICATIONS FOR SOCIETIES

• Some would say ‘yes’:– Wealth spreading around the world through the globalisation of trade

and production

• However, some would say ‘no’– There is an ‘anti-globalisation movement’

• First coming to prominence in Seattle in 1999– This ‘movement’ incorporates many diverse groups, with different

agendas– But they are linked by a belief that ‘globalisation’ is threatening certain

things: culture, economy, environment etc.

• In many ways, this is an extension of concern with inequalities and tensions created by capitalism …

IS GLOBALISATION WORKING?

• Given these concerns, and given your own concerns, do you think there are alternatives to ‘globalisation’?

• Is ‘globalisation’ irreversible?• Would it be desirable to reverse it in any case?

• It may be possible to reverse or stifle such trends by re-implementing borders etc., and to some extent this may even be starting to happen ... ?

• But my personal view is that this is not the way forward:– The problems, and the frustrations, are not with ‘increasing and

deepening global relationships’ per se, but with the current forms of capitalist organisation

• Tendency to widen divisions between ‘winners’ and ‘losers’

We must ask, therefore, if there are alternative forms of globalisation?

IS GLOBALISATION WORKING?

• Current ‘Washington consensus’ globalisation might be characterised as elite (Sugden and Wilson, 2005)– It is structured around powerful transnational firms, where decision-

making is concentrated– This is despite the language of freedom and democracy that are often

used when talking about ‘globalisation’ (e.g. Freidman)

If after sufficient terror, intimidation, destruction of popular organisations and so on, you can ensure that power stays in the hands of the right power groups, the ones linked up to US corporations and banking institutions and the others who basically run this society, then that is democracy and everybody is happy and we praise ourselves for our glory

Chomsky, 2003

ELITE GLOBALISATION

• Is it possible to alter current globalisation, so that it becomes more ‘democratic’?

• This would imply fundamental concern with governance– Governance of firms, networks of firms, governments, international

institutions ...

• With such a focus it is possible that many of the concerns of the anti-globalisation ‘movement’ might be addressed: – Is this movement really anti ‘globalisation’?

• Business cannot afford to ignore these concerns– Reflected in increasing concern with ‘ethical business’, ‘corporate and

social responsibility’ and ‘good governance’

Economic globalisation is not some kind of immutable inevitability, but a set of processes that is socially constructed, and therefore can be encouraged or resisted by actors/institutions at various scales Coe and Yeung, 2001

DEMOCRATIC GLOBALISATION

• We have seen that globalisation is a complex phenomenon!– It is multi-faceted and highly contested– There is some middle ground however, which sees something

fundamental happening to the economic, social, political and cultural relationships around which the world is organised

– These changes are influenced particularly by changing geography, changing technology, and the capitalist context

– In turn there are implications for business, and for societies, around the world

– But questions remain as to how ‘globalisation’ can best be harnessed as a positive force, how we can make it work better

– The real issue today, for both firms and societies, is finding some solutions to these questions …

GLOBALISATION: SUMMARY

Next week we wil build on this context … We will explore what it means for territories to be competitive in a globalised and globalising economy