Clay Butler

Meanwhile...at the global marketplace: a cartoon about globalisation, which appeared in Z magazine in 1998.

The term "globalisation," ugly though it is, has now become very, very familiar. But you only have to go back about ten years or so to see that hardly anyone used it. I wrote a book about 12 years ago, in which I was one of the first people to make quite extensive use of the notion of globalisation. At that time, people did not really use it in academic life, they certainly did not use it in the newspapers -- they did not use it even in business discourse.

Over the past 10 or 12 years, the term globalisation has gone from nowhere to be everywhere. You cannot open a newspaper, you cannot listen to a political speech, whether it is Mr. Bush or Mr. Gore or Bill Clinton or Tony Blair, you can not read the writings of a business guru, you can not start an enterprise like fathom.com without encountering the notion of globalisation.

Now when a term comes from nowhere to be everywhere, you can be sure that it will provoke controversy. There is an extraordinary debate going on across the world about what globalisation is and about what its consequences are, and indeed about whether it exists at all.

What's new about globalisation?

On the one hand, there are those who are skeptical of the term globalisation. The skeptics say that, if you look back a hundred years to the late nineteenth century, there was already a good deal of trading across the world. At that time, there was also mass migration, as everyone who knows American history will be very conscious of. So the skeptics say essentially, "What is new?"

You could call this view a nothing-new-under-the-sun kind of position. The old left, the traditional leftist parties across the world, including sectors of the Democrat Party in the US, tend to like this skeptical position. If you do not believe that too much is actually changing in the world, you do not have to make too many political changes, either. For example, you can keep existing welfare institutions intact. That is one side of the great globalisation debate.

On the other side are what I call the hyper-globalisers. They say not only are there fundamental changes going on, but they are so fundamental they have already transformed most of the basic systems and structures of the world.

To my mind, there is no doubt that the truth is closer to the hyper-globalisers' version. There are fundamental changes going on in the world economy which differentiate it from previous periods. Recent research shows that the volume of trade in physical commodities is much, much higher than it was 100 years ago, and a lot higher than it was 30 or 40 years ago. The most important development in the global economy is not, of course, trade in physical commodities, it is trade in information and trade in currency.

	Ready Reference
	information society The Social Science Encyclopedia

However, I think it is also fundamentally wrong to suppose that globalisation is solely or even primarily about economic factors. Globalisation is not just economic; it is social, cultural, and political. If you want to look for the prime driving force of globalisation, it is not, I think, primarily in the marketplace. The main driving force of globalisation over the past 20 or 30 years has been the revolution in communications.

You can say that the global communications revolution essentially dates from the late '60s and early '70s--the time at which the first commercial satellite was put up above the earth, making it possible to have instantaneous communication from one side of the world to the other. Without this marriage of global communications and computer technology, many of the institutions which we have now become familiar with would not exist, including global money markets.

Is the nation state obsolete?

In his book The End of the Nation State, Japanese business guru Kenichi Ohmae speaks of a borderless economy. He argues that, in the future, you might have several hundred city states which will replace nation states. If you consider Hong Kong, for example, as an illustration, or Barcelona, or London, or indeed New York. These are global cities; they point outwards into the global marketplace. They do not have that much to do with the hinterland, the nation of which they are a part.

But globalisation does not signal the end of the nation state. The hyper-globalisers I think are plainly wrong about that. In my view, nation states still remain more powerful than corporations. Some people say this freed-up, liberalised marketplace is dominated by big corporations. But that is not the case. I think nation states remain and will remain for the foreseeable future more powerful than even the biggest corporations.

	Thinking Point
	Do you agree with Leslie Sklair's view that the unit of analysis in globalisation "is not the nation-state"?

Nation states control territory; corporations do not. Nation states acting individually or collectively control an apparatus of law; corporations do not. Individually or collectively, nation states control military power; corporations do not. So when you see the battle between the US Government and Microsoft, I do not think that is really a battle between equals.

Globalisation pulls away from the nation, but globalisation pushes down as well. It creates new forces for local autonomy, new pressures for local cultural identity. It is behind the revival of local nationalisms across the world from Quebec to Catalonia to Scotland to Kashmir. In lots of parts of the world you have these new regions developing, which is sometimes a source of important democratic transition, and which other times has produced ethnic violence.

Globalisation from below

When most people talk about globalisation, they talk about globalisation of markets. They ignore fundamental further aspects of globalisation, which I call "globalisation from below." Globalisation from below is the way in which interest groups, self-help groups, third sector groups, and volunteer associations themselves draw upon international communication systems to establish themselves in the global arena.

This is indeed what happened with the protests at the World Trade Organization meeting in Seattle. Everybody knows that the protesters who assembled in Seattle did so by using the Internet. There was a very funny poster that some guy was holding in Seattle that said, "Join the worldwide movement against globalisation."

If you go back 30 years, you only had about 1000 non-governmental groups in the world, groups like Greenpeace and so forth. Now you have by some estimates 30,000 such groups, many of them operating at a global level, many of them fairly well resourced.

One of the themes of the Seattle protests was corporate power. My view is that the power of corporations can be readily exaggerated. You only have to consider the humbling of the Monsanto Corporation to see that, no matter how powerful you are as a corporation, you can be brought to your knees pretty quickly. At one moment, Monsanto seemed to have everything going for them in the area of genetic technology. But they underestimated the power of consumer groups, which play a crucial role in global society, especially in Europe.

If you are running a corporation, you ignore these forces at your peril. No matter what you are doing, in whatever part of the world, you will be watched. So corporations flirt with disaster if they ignore the leverage that the counter-power which globalisation from below is promoting in the world.

Economic inequality: is globalisation the culprit?

The Seattle protests raised another crucial question: is globalisation the cause of increasing inequalities through the world? Most of the protesters would say "yes." But when you look at the phenomenon, I do not think you can actually agree with them.

Many people say that inequality is increasing through the world. If you look only at the bluntest measures of economic inequality, this is true. The poorer countries are falling behind the richer countries every day of every year. But you can also take a richer notion of inequality, the kind of notion introduced by the economist and Nobel Prize winner Amartya Sen from Trinity College, Cambridge. Sen says a proper measure of poverty should include education, access to health care, and access to basic non-material features of life that make life worth living. And I think this is correct.

If you look at those measures, inequality has actually been declining rather than increasing across the world. The poorer countries have improved in respect to the broader conception of inequality. But the inequalities are nevertheless very big.

Globalisation is not the prime cause of increasing inequality. Income inequality in the US increased for a period of some 30 years until a few years ago. But the best study we have of that seems to indicate that trade liberalization accounts for only about five percent of that. Maybe 15 percent of it is accounted for by new technologies, especially the growth of the knowledge economy, the impact of information technology essentially makes large numbers of unskilled workers redundant -- you do not need unskilled workers in a knowledge economy.

	Thinking Points
	How do you think globalisation affects inequality and developing countries? Think of concrete examples, which illustrate the effects of globalisation in these arenas.

But a very big structural force in the US is actually changes in the sphere of the family, especially the emergence of large numbers of one-parent families in a society that does not have a developed welfare state. So you cannot really blame globalisation for expanding inequality in the US. And actually, economic inequality in the US has dropped. Blacks and Hispanics are doing much better in the economy than they have done for some 30 or 40 years. The lowest 20 percent have shifted up their share of income quite substantially.

Developing countries and the global marketplace

Is it true that globalisation is the cause of the impoverishment of the poor countries of the world? Again, by and large, you have to say no, I think. When you expand free trade, there is no doubt that it can have disruptive consequences for some poorer countries, when those countries are not prepared to engage with the economic forces that are released.

However if you look at the statistics, you can show that engagement with the global economy is actually the condition of the economic development of poorer countries. No country which has sought to disengage from the global economy has prospered: countries like Burma or North Korea which try to isolate themselves from the world system are among the poorest countries in the world.

Poor countries which have kept fairly closed economies have only had a .04 growth rate, that is virtually no growth rate, over the past fifteen years. Poor economies that have been more open have had an average 4.5 percent growth rate over that period. So you cannot blame globalisation for these inequalities.

The key question concerning economic development is really under what conditions can poorer countries engage with globalizing forces. And one should still remember, I think, that we have before us the most successful example of countries leveraging themselves out of poverty ever known, which is the East Asian economies. In spite of the crisis of 1997-98, there has never been an example in history of millions of people being leveraged out of poverty so quickly.

This happened over a period of some twenty-five or so years. In 1970, for example, Korea was poorer than Portugal. Now Korea is richer than Portugal per head of GDP. So there is a massive transformation, and these countries achieved it by engaging with the global economy, not by disengaging from it.

Governments still have a role to play

In order to produce a more egalitarian world and help the poorer countries to become richer, you cannot simply leave everything to the global marketplace. Market forces often tend to accentuate inequalities, rather than reduce them.

That means what you are looking for is a new kind of relationship between governments and markets. Some of the best writing on this is by Joe Stiglitz, who was a famous economist at The World Bank. He wrote a series of articles about the International Monetary Fund, criticizing what he calls the "Washington Consensus." Stiglitz argues that you need a certain measure of government involvement in order to facilitate economic development. He says that there is no known example of successful economic development where a government has not been involved, including the United States in its early years, the UK in its early years, European countries, Japan, the Asian economies, and so on.

Stiglitz essentially argues for a "third way" in development studies, although he does not use that term. He says that, in the period after the Second World War, many people thought that the state was the main medium of economic development. And that failed. Countries that tried to develop through expansion of state institutions, like Tanzania or India, had abysmal economic records.

As a result, many people thought, "Ha, ha; well, if the state cannot do it, then we must turn toward the market, liberalize the market and everything will suddenly come right." Stiglitz says this does not work, either, and I believe this to be correct. You need a kind of partnership between government and market institutions. And I think Stiglitz is quite right in some of the subtle and acute observations he makes.

For example, he says that it has proved to be much, much harder to establish market institutions than we ever imagined in countries that do not have them. The reason is that it is very hard to establish an appropriate legal system, very hard to establish appropriate norms of a cultural kind that underlie markets. You cannot have a successful market economy unless you have a successful civic culture. Having a successful civic culture is also the condition of democracy. Anyone who has studied recent events in Russia will know this.

In Russia, what you had under the Soviet system was essentially an economy of favours. The way in which you got things done was not through the use of money, because that would not get you anywhere, it was through the use of favors. You would have to ring someone if you needed something, like getting a telephone quickly without waiting years for it. Out of this economy of favors has come a kind of corrupt gangster-style attempt at capitalism, which lacks the basic institutions out of which a successful capitalist economy and a successful democratic society can be built.

Managing the forces of globalisation

The Economist

Handling the forces of globalisation is the next major challenge: such issues occupy the media as much as they tax governments.

In conclusion, I think you do need a role for effective government in the world. It must combine with the selective use of markets. You can hope to make a big dent in the problems which bring the protesters out in the streets in Seattle. And I feel that to the degree to which we make this successful, the degree to which we can effectively conquer global inequalities, is actually the condition of the twenty-first century looking different from the twentieth century.

If you look back to the beginning of the twentieth century, you could say that was the first age of globalisation, as I described earlier, the open markets and so forth. A lot of people thought well, there is going to be a period of economic prosperity and global cooperation, we can build a League of Nations, and so forth. And what happened was a century of warfare, 200 million people killed in warfare in the twentieth century.

I think we have an obligation to try again at the beginning of the twenty-first century. It is a much more intense age of globalisation. But if we do not effectively cope with issues, especially of expanding global inequalities, we will not be able to handle the forces which globalisation has released.

This session is taken from a lecture given at the New York law firm of Epstein, Becker and Green on June 12,2000. Copyright. The London School of Economics and Political Science.