SOME PROBLEMS WITH GLOBALIZATION

 

Globalization may be defined as the world-wide integration of government policies, cultures, social movements, and financial markets through trade and the exchange of ideas. The British sociologist Anthony Giddens defines it as “intensification of worldwide relationships which link distant localities in such a way that local happenings are shaped by events occurring many miles away and vice versa” (as quoted in “Globalization,” n.d.).

 

Although generally seen as downright ‘good’ especially by many economists, globalization unfortunately has a dark side. Author Gail Tverberg enumerates some reasons why globalization is not living up to what was ideally expected of it, and is, in fact, our very major problem today. The following is a summarized version of his online article, “Twelve Reasons Why Globalization is a Huge Problem” (Tverberg, 2013):

 

1. Globalization uses up finite resources more quickly.

As an example, China joined the world trade organization in December 2001. In 2002, its coal use began rising rapidly. In fact, there is also a huge increase in world coal consumption. India’s consumption is increasing as well, but from a smaller base.

 

2. Globalization increases world carbon dioxide emissions.

If the world burns its coal more quickly, and does not cut back on other fossil fuel use, carbon dioxide emissions increase.

 

3. Globalization makes it virtually impossible for regulators in one country to foresee the worldwide implications of their actions.

Actions which would seem to reduce emissions for an individual country may indirectly encourage world trade, ramp up manufacturing in coal-producing areas, and increase emissions over all.

 

4. Globalization acts to increase world oil prices.

Oil supply is not growing very much, due to limits we are reaching, and partly because demand is exploding due to globalization. If we look at world oil supply, it is virtually flat. Part of our problem now is that with globalization, world oil demand is rising very rapidly. Chinese buyers purchased more cars in 2012 than did European buyers. Rapidly rising world demand, together with oil supply which is barely rising, pushes world prices upward. The East has sufficient pent-up demand that it will make use of any oil that is made available to the market.

 

5. Globalization transfers consumption of limited oil supply from developed countries to developing countries.

If world oil supply isn’t growing by very much, and demand is growing rapidly in developing countries, oil to meet this rising demand must come from somewhere. The way this transfer takes place is through the mechanism of high oil prices. High oil prices are particularly a problem for major oil importing countries, such as the United States, many European countries, and Japan. Because oil is used in growing food and for commuting, a rise in oil price tends to lead to a cutback in discretionary spending, recession, and lower oil use in these countries.

 

Developing countries are better able to use higher-priced oil than developed countries.  In some cases (particularly in oil-producing countries) subsidies play a role. In addition, the shift of manufacturing to less developed countries increases the number of workers who can afford a motorcycle or car. Job loss plays a role in the loss of oil consumption from developed countries.

 

6. Globalization transfers jobs from developed countries to less developed countries.

Globalization levels the playing field, in a way that makes it hard for developed countries to compete. A country with a lower cost structure (lower wages and benefits for workers, more inexpensive coal in its energy mix, and more lenient rules on pollution) is able to out-compete a typical OECD (Organisation for Economic Cooperation and Development) country. In the United States, the percentage of US citizens with jobs started dropping about the time China joined the World Trade Organization in 2001.

 

7. Globalization transfers investment spending from developed countries to less developed countries.

If an investor has a chance to choose between a country with a competitive advantage and a country with a competitive disadvantage, which will the investor choose? A shift in investment shouldn’t be too surprising.

 

In recent years, the US domestic investment has dropped off and is now close to consumption of assets (similar to depreciation, but includes other removals from service, such as removals because manufacturing has moved overseas). The assets in question include all types of capital assets, including government-owned assets (schools, roads), business owned assets (factories, stores), and individual homes. A similar pattern applies to business investment viewed separately.

 

8. With the dollar as the world’s reserve currency, globalization leads to huge US balance of trade deficits and other imbalances.

With increased globalization and the rising price of oil since 2002, the US trade deficit has soared. A major reason for this is the fact that the US dollar is the world’s “reserve currency.” With the current working mechanism, the result is that the US can run deficits year after year, and the rest of the world will take their surpluses, and use it to buy US debt. With this arrangement, the rest of the world funds the United States’ continued overspending.

 

High oil prices together with globalization have led to huge US deficit spending since 2008. This has occurred partly because a smaller portion of the population is working (and thus paying taxes), and partly because US spending for unemployment benefits and stimulus has risen. The result is a mismatch between government income and spending.

 

9. Globalization tends to move taxation away from corporations, and onto individual citizens.

Corporations have the ability to move to locations where the tax rate is lowest. Individual citizens have much less ability to make such a change. Also, with today’s lack of jobs, each community competes with other communities with respect to how many tax breaks it can give to prospective employers.

 

High oil prices seem to lead to depressed US wages. If wages are low at the same time that wage-earners are being asked to shoulder an increasing share of rising government costs,  this creates a mismatch that wage-earners are not really able to handle.

 

10. Globalization sets up a currency “race to the bottom,” with each country trying to get an export advantage by dropping the value of its currency.

Because of the competitive nature of the world economy or globalization economy, each country needs to sell its goods and services at as low a price as possible. This can be done in various ways–pay its workers lower wages; allow more pollution; use cheaper more polluting fuels; or debase the currency by Quantitative Easing (also known as “printing money,”) in the hope that this will produce inflation and lower the value of the currency relative to other currencies.

 

There is no way this race to the bottom can end well. Prices of imports become very high in a debased currency–this becomes a problem. In addition, the supply of money is increasingly out of balance with real goods and services. This produces asset bubbles, such as artificially high stock market prices, and artificially high bond prices (because the interest rates on bonds are so low). These assets bubbles lead to investment crashes. Also, if the printing ever stops (and perhaps even if it doesn’t), interest rates will rise, greatly raising cost to governments, corporations, and individual citizens.

 

11. Globalization encourages dependence on other countries for essential goods and services.

With globalization, goods can often be obtained cheaply from elsewhere. A country may come to believe that there is no point in producing its own food or clothing. It becomes easy to depend on imports and specialize in something like financial services or high-priced medical care–services that are not as oil-dependent.

 

As long as the system stays together, this arrangement works, more or less. However, if the built-in instabilities in the system become too great, and the system stops working, there is suddenly a very large problem. Even if the dependence is not on food, but is instead on computers and replacement parts for machinery, there can still be a big problem if imports are interrupted.

 

12. Globalization ties countries together, so that if one country collapses, the collapse is likely to ripple through the system, pulling many other countries with it.

History includes many examples of civilizations that started from a small base, gradually grew to over-utilize their resource base, and then collapsed. We are now dealing with a world situation which is not too different. The big difference this time is that a large number of countries is involved, and these countries are increasingly interdependent.

 

There are significant parallels between financial dislocations now happening in the United States and the types of changes which happened in other societies, prior to collapse. It is not just the United States that is in perilous financial condition. Many European countries and Japan are in similarly poor condition. The failure of one country has the potential to pull many others down, and with it much of the system. The only countries that remain safe are the ones that have not grown to depend on globalization, of which there are probably not many today–perhaps landlocked countries of Africa. (© 2014 by Jensen DG. Mañebog)

 

Read: 

*Libreng lektura para sa isang MELC: Nasusuri ang dahilan, dimensyon at epekto ng ng globalisasyon

• Ang Epekto Ng Mga Suliraning Teritoryal At Hangganan (Territorial And Border Conflicts)

 

Try to defend globalization against any of the arguments in the article (2 to 3 sentences). Use hashtags: #MayTamaSaGlobalization #TCW #JensEnismo #[YourSchool]