The old form of globalisation was facilitated for the most part by advances in technology such as mobile phones, the Internet, faster and more frequent air travel have made the growth of transport and communication networks possible. This meant that people can and countries can exchange information and goods more quickly and in a less complicated way. This, together with international organisations like the World Trade Organisation, the International Trade Organisation, GATT, The European Union with their single currency, OPEC, and a more streamlined financial system facilitated by the IMF, the World Bank, the Bank for International Settlements in Basel, Switzerland and the SWIFT bank and interbank coding system has accelerated global trade of goods and services, thus the term globalisation entered into our lexicon.
At first, it was just a matter of the exchange of goods and services, but by the late 1990s countries like America and the European Union began exporting whole factories, manufacturing and even jobs to countries that could produce it at more competitive prices, with the goods being shipped back home and sold as if it was produced in the country of origin. So countries and companies have learnt that ownership of the manufacturing processes isn’t as important as owning the intellectual property rights to the products, their tag lines, mottos, colours and symbols associated with the goods. Branding became almost as important than the product itself, arguably the counterintuitive side effects of globalisation. The other is that the factories typically situated in the Far East and China pay their workers so little that the individual produces of the goods cannot afford to wear them.
To be clear, we have to understand that globalisation is a process and not an event. This process adapts itself all the time, is dynamic and receives outside interventions from the managers of factories. The OECD defines globalisation as “the geographic dispersion of industrial and service activities, for example, research and development, sourcing of inputs, production and distribution, and the cross-border networking of companies, for example through joint ventures and the sharing of assets.” Some economists have described globalisation as “the death of distance and the shortening of time frames.”
So the phenomenon of globalisation has accelerated both the birth and the growth of what we today call “transnational corporations,” these mega international companies have multiple domiciles, are listed on more than one bourse, often have their operations divided between several countries, but their primary listing and assets invariably stay in the country of origin.
So let’s look at the effects of globalisation and ask ourselves; has it been the trading, skills sharing and poverty alleviation tool as it was originally touted? The answers to these are a bit more complicated than it appears so here goes:
1. The mass, frenetic production of goods has had an almost irreversible effect on our environment.
2. It has created sweatshops reminiscent of the start of the industrial revolution, filled with underpaid people locked in a badly constructed building working around the clock to produce goods for a store on the other side of the world.
3. It continues to strip countries in Africa of its valuable resources for exportation at just above costs prices which devastates the local economies.
4. Economics dictates that 1st world countries disproportionately benefits over developing countries with more dollar going out than dollars coming into the origin of manufacture or production of the goods.
If anything, globalisation has actually exacerbated poverty because of the speed with which it consumes raw materials, local labour and the inherent destruction of the environment that the other locals depend on to make a living.
One can argue that “globalisation” is an oxymoron in so far as it spreads the workload, but not the profits, those get remitted straight back to the country of origin of the brand. Remember, the brand, trademark and copyright has become more important and more valuable than the goods.
This one-sided accumulation of wealth has become so obvious, it has encouraged the financial institutions in the countries of origin to turn to greater financialisation of their economies, with ever more complex invest instruments for sale and trade. Arguably there has been a crystallisation and concentration of excessive wealth in the countries of origin witnessed by the exponential growth of their home bourses and the prices of their homes and properties. Companies have resorted to merging or acquiring other company at such a frenzied rate that the world, viewed as a pyramid is rapidly becoming more and more obtuse.
So what’s next for globalisation and how if at all can it save itself from self-cannibalization?
Part II, the rise of TiSA, The Trade in Service Agreement…