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Summary: "Globalisation once more" by Deepak Nayyar   Post comment Printer friendly versionMore notes

Summary: "Globalisation once more" by Deepak Nayyar
globalisation, migration, labour, capital
Thursday, September 19, 2002 01:45 GMT

Globalisation is not new: 1870-1914 was another phase of intense integration of world economy. What can we learn from historical parallel?

Striking parallels in the conditions which brought about both phases.

-- In C19 there were almost no restrictions on movement of goods, capital and labour across national boundaries. Since 1950s there has been progressive dismantling of barriers to international economic transactions once again.

-- Advent of new efficient and predictable modes of international travel and communication (steamship, railway and telegraph in C19).

-- Foundations for new kinds of internationally-integrated production (as opposed to craft economy). In C19-early C20: assembly lines developed by Ford and management techniques developed by Taylor.

-- Dominant political power (Britain) with currency that guaranteed international exchange (pound sterling). US and dollar of course have now taken this role.

But fundamental differences also. These lie in sphere of movements of people across borders. C19 - no restrictions. Passports seldom needed and immigrants granted citizenship with ease. 1870-1914 - 50 million people left Europe of whom 2/3 went to USA, remaining 1/3 to Canada, Australia, NZ, South Africa, Argentina and Brazil. This figure is 1/8 total population of Europe in 1900. Some countries gave up 20% of their population.

Movement around empire also enormous. Following abolition of slavery in British Empire, 50 million people left India and China to work as labourers on mines, plantations and construction in LatinAmerica, the Caribean, Southern Africa, Southeast Asia etc. The destinations were mostly British, French, Dutch and German colonies that combined European capital with Asian labour for profit.

In latter phase of globalisation, since early 1970s, labour flows have been reduced to trickle by immigration laws. The present phase of globalisation has found substittues for labour mobility in the form of trade flows and and investment flows.

Idealogues like Jeffrey Sachs see C19 globalisation as the catalyst for global development and period of 1914-1970 as wasted decades. Current globalisation is unlocking future of world again - particularly for developing and formerly communist world.

"It needs to be emphasised that this normative and prescriptive view of globalisation is driven in part by ideology and in part by hope. It is certainly not borne out by history. For those who recall the development experience of the late 19th century, it should be obvious that the process of globalisation will not reproduce or replicate United States everywhere just as it did not reproduce or replicate Britain everywhere a century earlier."

C19 - most of gains accrued to imperial centres that exported capital and imported commodities. Some other countries like USA and Canada also gained. Income gap between richest and poorest countries *within Europe* was 3:1 in 1820 and 11:1 in 1913. Experience for poorer countries still of course worse. In some of the most open economies of the world - India, China and Indonesia - there was industrial and economic regression during this period. These countries had some of the lowest tarrifs in the world and were the largest recipients of foreign investment.

The reality of this later phase of globalisation has been similar. 1970s-90s world economy diverged, not converged. Poverty is much greater problem than during the 'managed' period of capitalism - 1940s to 70s. Why?

-- Trade liberalisation made labour market more difficult for unskilled labour. Labour has lost share of capital nearly everywhere. Tax reforms and mobility of capital compared to labour emphasised this.

--Financial markets demand near-zero inflation. Fiscal policy is geared towards this at the expense of economic growth and employment.

-- Excess supply of labour depressing wages.

-- Consolidation of market power in hands of global firms.

--Competition between states for investment leading to 'race to the bottom'.

Late 1990s top 20% of world owned 86% of wealth; bottom 20% 1%. Wealth ratio was 32:1 in 1970s and 74:1 in 1997. Many countries have been entirely left out of the global market with no access to capital, markets etc while facing stiff competition from abroad.

In addition to these bare facts, the high visibility of the lifestyles of those who have enjoyed the fruits of this process creates additional stress for those who have not. Some seek to achieve a similar life through crime and violence. Some seek refuge in ethnic identities, cultural chauvinism or religious fundamentalism. Globalisation erodes social stability and thus provokes social tensions within countries in same way as in late C19.

"The fundamental objective should be to ensure decent living conditions for people - ordinary people - as the welfare of humankind is the essence of development. The quest for a more equitable distribution of income, wealth and power between countries will have to be an integral part of any attempt to move from a world economy to a world community."