Relevance: GS-1: Effects of globalization on Indian society./GS-3: Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth.

Key phrases: The Economist, global village, Oxfam report, Multilaterals vs Mini-laterals, Belt and Road initiative, international tax havens

Context:

• Even before Covid struck the world, the idea of globalisation change was gaining ground that the phase of ‘hyper-globalisation’ (roughly the period starting in 1990 and ending with the onset of the Great Recession in 2008-09) was coming to an end.
• According to an oft-quoted article in The Economist, in the post 2008-09 period, “cross-border investment, trade, bank loans and supply chains have all been shrinking or stagnating relative to world GDP.”

What is Globalisation ?

• Globalization describes a process by which regional economies, societies, and cultures have become integrated through a global network of communication, transportation, and trade.
• Globalization envisages a borderless world or seeks the world as a global village. It may be attributed to the accelerated flow of goods, people, capital, information, and energy across borders, often enabled by technological developments.

Several factors - technological, economic and political - can be held responsible for Anti-Globalization trends:

1. Transport and Communication revolution : The huge impact of transport and communication (in particular, advent of wide-bodied jets and container ships, and the cost-less global flow of information due to Internet and IT revolution) has reduced information asymmetry.
2. The scope for global consensus, after many rounds of multilateral talks under the auspices of GATT/WTO, is getting narrower.
3. MNCs vs Local companies: Multinational companies spreading their operations by building an intricate web of global supply chains spread over distant parts of the globe are finding it harder to compete with quick-learning local competitors often enjoying state patronage in various forms.
4. Growing dissatisfaction against globalisation
   • The risks of financial globalisation have come to the surface in the form of periodic bouts of financial crises in many countries.
   • Even if analysts may hold technological changes, rather than trade, to be the major culprit here — that globalisation was causing loss of jobs, especially low-skill jobs.
   • Contributing to sharply increasing inequality of income distribution in many countries( Oxfam report).
   • The popular dissatisfaction with globalisation was further fuelled by the growth of international tax havens enabling the super-rich to evade taxes.
   • Populist political leaders (like Trump in the US and pro-Brexit leaders in the UK) increasingly played on the theme of globalisation (including foreign workers) causing misery of the national working class and won elections.
   • Global warming at an alarming pace is further discouraging long-distance transportation of goods by burning fossil fuels.
5. Geopolitical issues
   • The fear in the western world of the rising economic power of China (first taking away manufacturing jobs and then increasingly treading into high-tech strategic areas)
   • Russia (specially as a competing exporter of sophisticated military hardware and a major supplier of natural gas to Western Europe) further strengthened the forces of anti-globalisation in the developed world.
   • China keeping global inflation low for decades by supplying mass consumer goods at low cost to the rest of the world
   • Lending to the US (and other countries) the foreign exchange earned through huge trade surpluses to help them maintain an artificially high standard of living with borrowed money.
   • The increasing focus by politicians on national (often religious and ethnic) identity and culture being diluted by ‘foreigners’.
6. Multilaterals vs Mini-laterals :
   • The heightening of the ‘new Cold War’ between US, Japan and Western powers on one side and China and Russia on the other are contributing to forming blocks along political/national security lines.
   • The breakdown of WTO talks is leading to new bilateral and mini-lateral FTAs replacing multilateral globalisation, for example RCEP, BRICS
   • At the same time, mini-lateral arrangements are making possible deeper economic integration covering new areas like investment, labour and environment standards while involving shorter regional supply chains.
   • China, using its huge stock of national savings, foreign exchange reserves and surplus production capacity, is spreading its economic and strategic influence in many countries in Asia and Africa under the so-called ‘Belt and Road’ initiative.
7. Emerging new challenges :
   • Increasing importance of international e-commerce, considerations like cybercrime and data privacy are working against unregulated international transmission of data and information.
   • Whether all these developments would be considered a part of ‘slobalisation’, or the emergence of a new form of globalisation, is largely a matter of semantics.
   • Labour-saving technological advances (like use of robotic arms in cutting and sewing, 3-D manufacturing) are making it possible to ‘re-shore’ or ‘near-shore’ some of the traditional labour-intensive industries, would be working against poor low-wage countries and further eroding the economic and political attraction of globalisation in such countries.

Other side of the coin: Globalisation Positives

• Globalisation given a boost to technological factors reducing costs of movement of goods, services, capital and technology.
• Boosting political developments like the formation of NAFTA, EU, RCEP and the opening of emerging economies to the outside world
• Policy factors like reduction in tariffs and other trade barriers under GATT/WTO.
• The advent of newer (replacing the older) ideas like the benefits of export-led economic strategy which drew on the success stories of the ‘East and South-east Asian tigers’ (Japan, South Korea, Taiwan, Singapore, Hong Kong and finally mainland China).

Conclusion

• There is nothing inexorable about the forces of globalization. The earlier waves of globalisation were too halted by
• Political rivalries like world wars
• Economic events like the Great Depression
• The emergence of new ‘ideas’ like the benefits of import-substituting industrialisation for the newly independent less developed countries.
• The ongoing Covid pandemic is making the world realise the risks of over-specialisation and the benefits of diversifying away from a single country (China) centric global supply chain.
• Alongside, international specialisation and cooperation have made possible the development of Covid vaccines in record time.
• Thus, the future course and forms of globalisation would depend on such diverse and conflicting forces as they unfold over time.

Source: The Hindu BL

Mains Question:

Q. Globalisation, as an inevitable force of the Post-Fordism era, will hold value only as long as it remains inclusive to local concerns. Comment. Also highlight the challenges to globalisation in the post-covid world. (15 marks)

Note: Post-Fordism is the dominant system of economic production, consumption, and associated socio-economic phenomena in most industrialized countries since the late 20th century.