Globalization: Languishing in the wake of selfish capitalism

It is difficult to trace the exact roots of globalization. It is possible that the phenomenon has existed as long as man has known travel, trade and migration. However, organized globalization, or the one we know of, has probably caught on since the ‘60s when containerization took international trade by storm. Bolstered by the eventual propagation of the internet, the world witnessed how “distance” started to disappear, both literally and metaphorically.

If GDP per capita is to be taken as as a measure of how an economy is performing — and I am wary that it is perhaps not the best measure but more on that later — the general trend is to see whether an economy has played ‘catch-up’ to the best performers. Asia, particularly, the Far and the South East, has clearly flourished. Trade is what helps economies grow, to the extent that some economists might even suggest that a country can’t grow on domestic consumption alone.

Cities and urban centers started to become more and more alike. People started wearing the same kinds of clothes, eating the same kind of food and listening to the same kind of music. It is easy to forget how bringing technology, banking, education and medicines enabled prosperity to reach the farthest corners of the world. However, this dissolution of distances and boundaries, was not taken to kindly by everyone. Some saw it as an invasion, an onslaught aimed at ending the concept of countries and nation-states. A new narrative started to take shape: “There’s a new order that intends to redefine culture and religion” — a narrative that made the whole debate, perhaps, even about identity and association. Despite its many gains, globalization had been made the scapegoat.

I would like to argue that this shaping of the narrative was not a one-sided ploy; that the proponents of globalization, by myopic incompetence or by deliberate apathy, are equally to blame for the debate to take the shape that it has.

Leading political economy professor Dani Rodrik summarizes it best with an excellent analogy. Take a look at soccer — perhaps the world’s truly global sport. Many of the top clubs in the Barclays Premier League feature foreign players. It can be argued that the Asian, African and Latin American players who move to Europe because of the money involved, might make choices that hurt their national teams when there are scheduling conflicts. Similarly, the quality of soccer of the European national teams can also suffer because local talent does not qualify for the best domestic clubs and hence are not able to develop their skills beyond a certain level. No matter what, the leagues and their rich owners never lose.

In a similar fashion, the rich have outsourced shared services to reduce costs and to eliminate jobs at home or worse still, import talent that was ready to serve at much lower wages. Unfortunately, the common man thought it was the immigrant and not the wealth accumulating capitalist who was part of the problem. Where one set of countries faces a brain drain, the other stares at a vanishing middle class which feels that immigrants are taking over their jobs and should “go back home.” The 1% lobby tooth and nail to keep taxes low and/or exploit international tax havens.

Capitalism needs a massive overhaul in terms of regulation and wealth redistribution mechanisms.

Generation after generation of blue collar workers are fed up of being told that they and their fathers before them did not hustle hard enough, otherwise, they would also have some skyscraper named after them. Obviously, they would feel that the game is rigged.

This leads me back to using average GDP/capita as a measure of growth. The problem with averages is: they are just that. Without talking about dispersion and standard deviation, what we see, can well be a concocted picture. Is it the rich or the poor, who are the outliers within an economy? The same also applies across countries when a world GDP view is taken. There are countries that have benefited more from globalization and increasing trade than others have.

It is particularly helpful to look at Antonio Fatas’ and Ilian Mihov’s 4Is of economic growth to understand what drive’s a country’s growth.

• Innovation (both technological advancements and improvements in current production processes)
• Initial Conditions — a country’s unique history — is it torn by strife/disease — geographic situation (landlocked/with access to sea) etc.
• Investment and
• Institutions (rule of law, contract enforcement, taxation, procedures, ease of doing business etc.)

Like people, countries have no control over their initial conditions. Sometimes, like people, they need a little bit of help; that one cash injection; that portion of charity, which can pull them out of the cyclical poverty vortex.

So the question is: If the privileged wouldn’t lend their hand, who would lead?

Whose responsibility is it to make globalization more inclusive as a concept? Is it a country’s fault if it’s landlocked? That it has a low population hence does not have sufficient internal demand that could drive consumption? These globalization have-nots did not ask to be created. They only need a spark from an ideologue to lose their sanity and their humanity, Thanks to the media, they can now witness (ironically, courtesy globalization), the apathy and nonchalance of the rich, which they see as arrogance and possibly contempt; fueling anger and resentment, provoking fear that we see manifest itself as mindless violence, almost every other day.

Apparently, all poor people aren’t created poor equally. We had heard these voices before, during the Arab Spring. We had heard people cry over income and wealth inequality before. It is a pity that these concerns are being voiced more vocally only now — now, that we see the the far right parties in UK, France, Germany and Italy; the Marine Le Pens alongside the Trumps; Brexit and the scare of similar referendums to follow — that we have started to take this anti-establishment tone seriously. Previously, it was okay to see it through the lens of some disillusioned fundamentalist in a far off land who has a “misplaced, inherent mistrust of civilization and envy for our way of life.” Make no mistake, at its heart, this is an economic struggle.

Irresponsible and unregulated capitalism has used globalization as its shield for far too long.

The aim of globalization was simple — to allow interdependence and exchange of trade/capital/labor/ideas/information, in a way that leaves everyone better off. Unless the key word in that last sentence is “everyone”, globalization would have defeated its purpose. Let’s take it back to those roots.