Why Globalisation Happened?

There is this narrative that is often used to prop up the idea that globalisation was a result of a highly interconnected world. A world where faster and better modes of transport and communication found wider adoption. The advent of the internet poured oil into the fire that was already burning.

Nope!

Multinational companies have existed since 1500 and mostly were engaged in the business of ‘robbery’, to put it mildly. The Spanish companies in South America, the Portuguese companies in India, the French and the English. The French and the British in North America. The Dutch, Germans and French across Africa. For 400 years they built these companies before the European Wars a.k.a. World Wars broke out and rearranged the contours of their ownership.

The Europeans had been engaged in only one thing since the beginning of time — fighting. It is why the Neanderthals are extinct, it is why Greek and Roman civilisations fell and it is also why they have some of the most advanced weapons.

Their military capabilities improved. Because they got a lot of practice. You got paid more to come up with ways to kill other human beings than to paint or create a sculpture. The Europeans call the period from the 5th century until the 14th century the Dark Ages or the Middle Ages. As if they were all sitting in a circle playing the harp before and after that.

Even Leonardo da Vinci who is today known for his paintings spent quite a lot of time inventing killing machines. When those machines did their jobs, as a reward he was allowed to paint some.

They found lands beyond Europe and brought with them the only skill that they had — waging wars. It served them well. This period is termed in Europe as the Renaissance. They just exported all the negative elements in their society to the Americas and Asia. Europe therefore became more peaceful. Starting with Christopher Columbus, Europe’s exported louts grew rich in the new lands that they terrorised.

They were all proponents of what they liked to call “Free Trade”.

Where the goods and labour are taken for free!

Obviously, ‘Trade’ flourished.

The term Multinational Company was coined in 1991 in Business Week. By then many American businesses were based out of multiple geographies and catered to multiple markets.

Until the Second World War broke out, colonialism was still the order of the day. During the first half of the 20th century, you would have been hard-pressed to find a more protectionist country than the United States of America. They were not at the forefront of technology or innovation at the time. You see, the only people migrating to America were people suffering religious persecution in Europe. They wanted churches, not factories.

They were not even the paragons of intellectual property that they claim to be today. Wilbur Wright of the Wright Brothers fame died of heartbreak fighting a patent case against Glenn Curtiss who he believed had stolen their innovation. Such was the country’s treatment of its most revered innovators.

But the two World Wars were a gift from the heavens. Without really having to see blood spilt on their soil, they were able to get Britain indebted beyond words during those 35 years.

Apart from money, America was the biggest supplier of arms to the war effort. They were proud of their production capabilities. Nothing better epitomises this than Rosie the Riveter.

Source: Britannica

America mobilised every able-bodied man to die in the meat grinders of Europe and every woman to contribute to the production effort required to overpower the German war machine.

Source: Click Americana

Being able to produce everything that was needed during and after the war was the source of the American rise. America became a production powerhouse. They were the China of the 1950s.

Since they were selling most of the things needed in war-ravaged Europe, it was easy to make an argument to turn the Dollar into the central peg of the global economy at Breton Woods.

American companies that had been making bombs and planes quickly reoriented themselves to produce daily consumption goods. Goods that had been unheard of before the Second World War started to become commonplace after it.

The chemical plants that were making bombs declared war on the food that we consume. They started by making insecticides and fertilisers. Eventually even making food colours, emulsifying agents, preservative agents and so on. Insecticides in fields became a common thing and so did fertilisers. If you wanted to buy soap, you got detergents that were branded as soaps. If you wanted to quench your thirst, you got phosphoric acid doused in caffeine and sugar, branded Coke.

For a decade, the going was good. The fifties were a decade the likes of which had never been seen before or since. Every person in the country was engaged in making something and since the production capacities in Europe had been decimated there was a huge market to sell into.

America was the last country seeking to give up on production superiority. Then a few things happened that changed their worldview.

The Genesis

Although the American colony declared itself independent in 1776 because of the British threat there was no capital city per se. It kept moving around every few months. Half a dozen cities including Annapolis, Maryland; New York City; York, Pennsylvania and Princeton, New Jersey served as the capital.

In 1790, congress passed the Residence Act that approved the creation of a city on the Potomac River. This location was picked because it was close to the estates of George Washington and Thomas Jefferson since travelling to New York was so hard! It was put together in such a way that the city is not part of any state and itself isn’t a state either.

If you visit the city of Washington DC today, your plane will land at the Dulles International Airport which is located in Virginia. The airport is named after John Foster Dulles who served as the Secretary of State from 1953 to 1959. Incidentally, his brother Allen Dulles was the CIA Director during the same period.

John Forster Dulles was appropriately named because his diplomatic skills were quite dull. He could not accomplish anything diplomatically and turned to his brother time and again. One came up with criminal ideas and there other executed it.

Both of them oversaw some of the worst of US manipulation including the Coup in Iran (removal of Mossadegh), the Coup in Guatemala, the Bay of Pigs fiasco, and countless attempts to foment trouble in East Germany and the USSR.

What happened in Guatemala laid the groundwork for American “Globalisation”.

United Fruit Company was a company that was producing and selling Bananas since the late 1800s. The company was doing what every good American enterprise does — paying their workers pittance to produce a good that they could then turn around and sell at a high value.

The democratically elected government in the country was against this practice and decided to take lands that the company was not cultivating and give them to the peasants so that they could earn their living. They were nationalising their lands. United was too eager to brand this communism. No sooner had they made the case, that Allen Dulles was ready to engineer a coup and place a military dictatorship in power.

So much for democracy and democratic values!

This is the incident that gives us the term Banana Republic.

For America, this served as a template. They now knew they could set up business in any country and if the policies were to turn sour, it was just a matter of disposing of the government and bringing a regime that would do America’s bidding.

With that confidence, American businesses began “globalising”. As the Dulles brothers were leaving office, another thing happened.

The Environment

In September 1962, Rachel Carson published a book called Silent Spring. She was undergoing treatment for Cancer when the book was finally released. The book echoed the zeitgeist of the times. The country was roiled in war, hippy culture was at its peak, anti-war protests were à la mode and the environment was turning to shit.

For example, here is what happened to Onondaga Lake in New York

Mercury contamination has been a major pollution issue. Between 1946 and 1970, 165,000 pounds (75,000 kg) of mercury was discharged into Onondaga Lake by Allied Chemical and Dye Corporation. In 2002, the findings from the remedial investigation conducted by successor Honeywell, Inc., with the supervision of the New York State Department of Environmental Conservation (NYSDEC), reported that mercury contamination was found throughout the lake: the most elevated concentrations were in the sediments of the Ninemile Creek delta and of the southwestern portion of the lake. A fishing ban was imposed in 1970 due to mercury contamination.

Source: Wikipedia

The book was not only a huge success but also woke many of the people up to the damage that was being caused by the wanton use of chemicals across their lives.

Consequences

The furore that the book caused eventually led to the creation of the Environmental Protection Agency (EPA). On the back of the EPA, another act called the Comprehensive Environmental Response, Compensation and Liabilities Act of 1980 was passed, CERCLA. The law later came to be known as Superfund and 1329 sites across the US were classified as Superfund Sites. Places that were hopelessly polluted by industrial activity.

New York alone has 116 sites and Onondaga Lake mentioned above is one of them.

This begins to explain why the millennials are the most short-changed generation in America. Things only got worse for the generations to follow.

The children born before that act were the last generation of Americans for whom their lives would be better than their parents. The last generation that could learn a trade and get a job. The last generation for whom the notion that “if you worked hard enough you will succeed”, was true.

They did not understand that their wealth was a result of robbing nature. The rich outsourced and concentrated the profits generated from the activity back to themselves. The not-so-rich were told that the only way to get ahead in life was by getting a good education. Then they were enrolled into a program that would keep them indebted for life — Student Loans.

The program meant to encourage students to get college degrees from 1965 was tweaked and tweaked to apply to as broad a segment as possible while removing the possibility of declaring bankruptcy. It was turned into a life sentence.

Let the outsourcing begin!

And like that, we arrived at the commencement of globalisation as we know it today. The slow departure of pollution-producing manufacturing to other countries that were ostensibly going to benefit from the “growth”.

American companies began to realise that the days of lax regulation and carefree use of processes that pollute the land, water and air were numbered. In the aftermath of the creation of the EPA, Richard Nixon was desperate to get China opened up. The change in China’s stance in the mid-70s led to a radical change in production supply chains.

The American politicians as well as industrialists knew that they could not move away from their well-worn ways that were supplying them with incredible profits. They just needed to find a way to continue to do the same in countries that had non-existent regulations and whose rivers and lands the American people did not care much about.

What followed was the first round of globalisation that moved a whole host of production including plastics and chemicals to foreign shores.

It started with the crappiest stuff — chemicals. In India, that round of outsourcing gave us the Bhopal Gas Tragedy.

Then garments, metal refineries, casting and the such followed. After that, entire widgets went out — automobiles, electronics, computers and everything except for food production ended up getting outsourced. Even the chips that powered the computers ended up being all outsourced.

The “hawks” in the West often criticise the decision to move chip manufacturing to Asia. Silicon in nature is available as SiO2 (silicon oxide). Chip manufacturing requires 100% pure silicon. A 3 nanometer process implies that transistors are printed at an atomic scale. 0.00001% of impurity can cause the chips to malfunction. SiO2 is turned into Si by heating it with Carbon to produce Carbon Dioxide and pure silicon. The miracle gas that delivers us global warming. This highly pollutive process needed to be moved out of the West. That is the reason chip supremacy was lost. To save the environment, not because people were shortsighted and stupid.

Similarly, the manufacture of clothes was moved out of the West almost completely by the 90s and this saw the rise of Bangladesh into an economy that could stand on its own feet. It is one of the most densely populated nations that is at the receiving end of a conveyor belt of cyclones from the Bay of Bengal. It has almost no resources and the cyclones reset all the development in their coastal areas every other year. Without the textile industry, the country would have remained poor.

After showering Vietnam with herbicides for a decade; manufacturing was moved to the country this century further degrading the environment that was spared.

The whole time, this was pitched as development to nations in Asia.

The Wall Fell

India for the most part stayed relatively immune from this until the 1990s because of its alignment with the USSR. Except for Bhopal which turned into a Superfund site.

After the fall of the Berlin Wall, equations began to change. India is often painted as a service industry miracle. But a lot of production, especially garment and leather production moved to India. Cities such as Surat and Tiruppur are known for that very reason.

As the 20th century progressed the option of using the CIA was not proving to be viable. On the one hand, countries were wisening up to the machinations of the US. On the other hand, how many military dictatorships would a country put in power? Also, what happens when that dictatorship turns against you? What happens when a country does not even have a functioning government like in Afghanistan in the 90s?

One of the people the CIA supported during that time was Osama Bin Laden. It was all fine till his ire was directed towards the Russians invading Afghanistan. Then the Russians went away and his attention turned.

So they created the WTO in 1995. A rubber stamp organisation, just like the UN, which declares protectionism by any other country as a crime while offering carte blanche to the US.

You know how Facebook operating in any other country is a matter of ‘Free Market’ but TikTok operating in the US is about ‘National Security’?

Taking pollution back

In 2020, the black swan of all black swan events laid bare how vulnerable the US was.

In a skit in the 90s, George Carlin said:

“Can’t build a decent car, can’t make a TV set or a VCR worth a fuck, got no steel industry left, can’t educate our young people, can’t get health care to our old people, but we can bomb the shit out of your country all right! Huh? Especially if your country is full of brown people — oh we like that don’t we? That’s our hobby! That’s our new job in the world: bombing brown people. Iraq, Panama, Grenada, Libya, you got some brown people in your country, tell them to watch the fuck out or we’ll goddamn bomb them!”
Source: Milwaukee Independent

When the Vietnam War took place, 9 out of 10 bombs fell off target. One of the critical targets, the Thanh Hóa Bridge in Vietnam was bombed by 79 aircraft. Despite the use of that much firepower, they were unable to bring it down.

This was 1965.

There was a company that promised it could supply chips that turned these dumb bombs into smart bombs.

Texas Instruments.

When was the last time you heard of a product made by Texas Instruments? This is a company that has almost exclusively been kept alive by the Pentagon. Another government organisation called NASA provided generous contracts to another startup called Integrated Electronics.

TI made the American bombs more precise. They would improve the accuracy rate from 1/10 to 9/10.

The foundation of American chip dominance was government subsidies!

This would be questioned if another nation did it but since it was the US, the relationship was just described as a “subcontract”. The rise of Texas Instruments and Intel was entirely a result of government support.

How many governments would subcontract a product to a company that still does not know how to make it? Just imagine the terms of that tendering process!

As the 90s progressed and the collapse of the Soviet Union was final, piece by piece the entire chip production ecosystem was moved out of the US — To keep their air clean, of course.

As 2020 progressed the US began to realise how laughably fragile their defence supremacy is. If China were to blow up the western coast of Taiwan and make it possible for the North Koreans to march into South Korea — American defence supremacy would be finished! Not dented — Finished.

Hence the Chips Act and the billions being lavished on TSMC to bring this critical production back into the US. The plant will be located in Arizona so that the elites in the Northeast do not have to suffer the pollution it would eventually cause. They are also starting to bring back rare earth metal production back into the US. Rare earth magnets are critical to the functioning of most modern weapons. It is from defence research that these products have found their way into Apple products and allow you to stick your Apple Pencil on the side of the iPad.

China could refuse to export these magnets. Hence the metal extraction ecosystem needs to be brought home. The pollution goes back to the land that utilises the products of the pollution.

So the American leadership has been left with the choice of keeping its land, air and water clean AND having a potent defence establishment. Obviously, the environment comes second.

I am uncertain they will take back low value production such as plastics and garments back to the US. Having said that, most of these industries operate at scale and can be spotted and with some local action laws can be put in place that curb their pollution. But rare earth metals purification and high tech products which pollute without our knowledge. They are small operations and often undertaken behind a veil of secrecy. The environment of the country that inherits these processes will die a silent death

That is the short story of the rise and fall of American globalisation.