The Risks of Post-Cold War Globalisation - Essay Example

The Risks of Post-Cold War Globalisation I Introduction Globalisation, according to one definition, is “a process by which technological, political, economic, and cultural dimensions interconnects individuals, governments, business firms across borders” (Wegren 2005 154). Globalisation is said to have began at the dawn of the last century although there were writers who argued that it began even before. The end of the Cold War however, had made globalisation the new world system substituting for the bygone era of bipolar system that the Cold War had brought. The end of the Cold War ushered in by the collapse of the former Union of the Soviet Socialist Republic (USSR) was not merely a geopolitical event. The Cold War, after all, albeit essentially a geopolitical divide spawned a great economic divide between two blocs that characterised the world set up since the end of the World War II until the late 1980s. Since the divide did not confine itself between the then two superpowers but spread throughout Europe, Asia Africa and Latin America the ensuing economic split was extensive and thorough throughout the globe. Economic competition was all-consuming between the two blocs and the trade between them and their allies was virtually reduced to barter and countertrade. Internal trade within each bloc however, grew during the Cold War as represented by such pacts and agreements as the Organisation for Economic Cooperation and Development (OECD) or the General Agreement on Tariffs and Trade (GATT) for the US bloc and the Council of Mutual Economic Assistance (COMECON) for the Soviet bloc (Aldonas 2009 29-30). With the end of the Cold War, economic changes far and wide ensued. Gone were the restrictions and barriers that characterized the economic and trade relations between countries belonging to the respective Soviet and US blocs. More significantly, it freed up the economic resources that were previously used to fund the excessive manufacture of weapons and armaments on both sides. Trade liberalisation unfettered by ideological constraints brought China’s entry into the World Trade Organisation (WTO) and saw the latter’s rise and emergence, along with India, as the new economic superpowers. The new economic freedom facilitated world economic growth that reached a new height in 2004 at 3.8 per cent, an economic development that exemplified the rapid economic growth that outpaced that of the last three decades combined (Aldonas 2009 29). Yet, along with the unprecedented rapid economic growth, the unification of the world market or globalisation in the post-Cold War had also brought with it new insecurities and risks that threaten workers, consumers and countries. Transnational crimes such as drug trafficking and other organised crimes crossed from one border to the next emerged parallel to the collapse of the USSR, feeding off the globalisation mechanisms. In addition, the gap between the rich and the poor, both internationally and intra-nationally, widened as evidenced by the uneven trade expansion between industrialised nations and some developing countries on the one hand, and the majority of the developing countries on the other hand. Even trade expansion grew unevenly globally and FDIs did not have the same uniform outcome and impact for all countries as far as labour and employment generation is concerned. The bottom line is that the impact of post-Cold War globalisation forces will depend entirely on the circumstances of each and every country. II Labour Globalisation in the post-Cold War era has brought about global productions systems driven by the increasing streams of FDIs, more particularly in developing countries, a development that had no parallel growth or adjustments in FDI multilateral rules. Multinational enterprises or MNEs, numbering around 65,000 have established 850,000 affiliates all over the globe. These are very prominent in labour intensive industries like textiles, garments and footwear and high-technology industries like electronics and semi-conductors. As far as high-technology industries are concerned, the subsidiaries of these MNEs located in developing countries, where labour is comparatively cheaper, carry out the manufacture of the basic parts of these industries whilst research and development (R&D) and other sophisticated aspects are being done in the industrialised countries. In labour-intensive industries, the design and specifications of the product are carried out by the MNE and their production is outsourced to developing countries, retaining quality and timing controls over them (WCSDG 2004 27, 29). The effect, however, of foreign investments is different in every country. Although FDIs necessarily increase capital, which can be capitalised on for the growth of employment and the benefit of the labour sector, it can also have the negative effect of crowding out small businesses, usually local, that do not have the capital to compete with the MNEs. Logically, the transfer of technology and skills should have affirmative impact on local labour productivity and income but studies reveal a non-uniform result. The countries of Singapore and Ireland follow the logical conclusion but other countries do not (WCSDG 2004 38, 39). The unpredictability of post-Cold War era globalisation is reflected in the International Labor Organisation report that open unemployment worldwide saw an unprecedented increase in 2003 and was then pegged at 188 million, although employment performance was not the same across regions as developing countries have steeper unemployment rates than industrialised ones. This data however was an increase of the unemployed 800 million reported by the United Nations in the 1990s (Scholte 2000 219). However, even within industrialised countries, unemployment rates are not the same as Japan experienced a steady decline in unemployment whilst Europe saw a sharp decline in the same period. Within this industrialised group, a more polarised income rate is growing with the top 1% top earners increasing their share of income in the last decade in the US, UK and Canada, contributing to the income inequality incidence in these places, a phenomenon attributed to the rise of the FDIs and the MNEs MNEs (2004 41-42). The labour sector, especially the skilled and professional ones, is the group most affected by the forces of globalisation in the post-Cold War era. The proliferation of the global production system has allowed the outsourcing of labour especially in software development to other countries where labour is relatively cheaper, whilst skilled professionals from developing countries are increasingly migrating out and into industrialised countries which have a need for their skills and abilities. This means the continued and aggravated marginalisation of the poor, uneducated, illiterate, the unskilled and people without capital. A special case is that of the indigenous people whose integration into the globalised system was not made with prior sufficient education and information, making them unaware of their rights. This is most true in extractive industries, mega-hydroelectric dams, plantations which either employed indigenous people or dislocated them from their natural habitation (WCSDG 2004 46). The ability of MNEs to outsource production and services or even transfer entire operations anywhere they like it constitutes one of the insecurities that globalisation has brought to labour especially in low-wage areas in the world. Even before the end of the Cold War, these relocating strategies had already cause the decrease of unskilled labour demand in the North by some six to twelve millions. In 1993, more than one-third of 10,000 firms surveyed were planning to move operations to Asia or Europe due to lower labour costs and lesser environmental standards (Scholte 2000 220). III Consumers Globalisation in the post-Cold War era necessarily implies consumer sovereignty. This means that consumer everywhere will have the benefit of buying the best products at the lowest prices as consumerism now comes unfettered by national boundaries. Goods are free to flow from one border to another and consumers can freely choose what and which to buy and at what price (Prakash & Hart 2000 75). Goods made in China at comparatively low prices now freely find themselves in US or European markets giving US or EU made products stiff competition and at the same time people in China now flock to McDonald’s to eat Big Mac and fries, a scenario unimaginable before the end of the Cold War. One of the problems of globalisation is it exposes vulnerable consumers as easy targets of profit-minded companies, which are capitalising on their lack of education. Tobacco companies, for example, have been criticised for exploiting underdeveloped countries and their citizens who many have been less informed of the health hazards of smoking. Other issues concerning consumers include the reproduction of consumerism by MNEs that sought to expand the markets of their products outside of their borders by creating the need for them on consumers of less developed countries with less purchasing power. Other issues include dislocation of production and consumption where the outsourcing of production may break the link between the consumer and the producer in accordance with the Fordist mode of economic relations. Globalisation weakened this principle by dislocating consumers from the production which takes place hundreds of miles away (Crane & Matted 336-337). IV Countries During Cold War, countries aligned either with the US or the Soviet enjoyed a certain kind of protection from the full impact of globalisation because of the economic policies imposed on them by treaties and pact within the blocs. The collapse of the Cold War, which had the effect of totally removing barriers and constraints, left these countries virtually on their own without the benefit of the insulation provided them by their respective alignments. They are left to fend for their own, their entire economic system left defenseless and exposed to the onslaught of the penetrating mechanisms of globalisation. Such an onslaught will cause insecurities especially for states that have inherent weaknesses in their political and economic systems, especially those with weak sovereignty. This is because the full impact of globalisation can be countered only by the ability of a state to defend itself and this means consolidating its sovereignty to put up mechanisms that will fortify its position against the state-sapping capacity of globalisation (Till et al 2009 45-46). Thus, states like Somalia, Afghanistan and the former Yugoslavia found themselves in a state of near collapse as transnational terrorism and crimes, internal conflicts brought about by ethnic wars and religious extremism were stirred and generated by the onslaught of post-Cold War globalisation. The fact that these countries had weak sovereignty and therefore unable to put up effective control to protect themselves from the onslaught of trans-border flow of globalisation elements had made them victims instead of gaining from globalisation. The lesson here is that one of the effects of globalisation is its attack on a state’s sovereignty because it tends to impose itself on a state’s system thereby challenging the latter’s sovereignty. A state which cannot effectively put up protective mechanisms to counter the ill effects of full globalisation brought about by the end of the Cold War because of its inherent lack of ability to consolidate its resources brought about by a weak sovereignty will suffer gravely whilst states that have strong sovereign systems will be able not only to deflect its ill effects but also harness its benefits. Globalisation therefore, the kind brought about by the post-Cold War era, have the following effects on states: it can bring about extensive economic associations with other states and supranational organisations, and; its economic forces can either add or detract to a state’s sovereignty with the possibility, in the latter case, to generate conflict (Till et al 2009 46). For instance, one of the after-effects of the Cold War is the rise of transnational crimes like drug trafficking, money laundering, black markets and trafficking women for commercial sex. These crimes pose a threat to national security. Transnational crimes can be defined as a “third group of crimes, distinguishable from the group of international crimes and the group of national crimes with an international element […] and must meet the following criteria: a certain level of organisation is needed to commit these crimes but not necessarily an organised crime group; it affects the interest of more than one state because citizens of more than one state are involved (or part of) the crime took place in more than one state; the fact that more than one states are involved aggravates the problems involved in the prosecution of these crimes, and; effective solutions of these crimes are sought beyond national borders” (Rijken 2003 49). A scrutiny of the causes that led to the rise of transnational crimes beginning in 1990s reveals that the end of the Cold War chiefly contributed to it. This is because the collapse of the USSR also meant loss of control of international endemic crimes within its borders allowing them to expand outside and beyond with new opportunities for unification of world economic markets, and previous constraints were lifted, providing a perfect cover–up for their covert dispersion outside their original situ. Thus, not only legal goods and services flowed in and out of borders but also illegal ones. Thus, whilst women illegally trafficked for commercial sex, nuclear materials, criminal proceeds and capital flight went out the Russian, stolen cars, drugs and dirty money came in. Italian criminal organisations, like the Sicilian Mafia and the ‘Ndrangheta, expanded their operations by resourcefully forming a triangulated alliance with criminal syndicates in Russia and Colombia (Held & McGrew 2002 129-130). Although the impact of globalisation permeated all over the world and had taken a toll on countries with weak sovereignty to the point of fracturing them, trade expansion and the ensuing wealth benefits gained from it did not uniformly occur. Only the highly industrialised countries and some 12 developing countries were seen to have benefited from FDIs substantially as opposed to 176 developing countries and territories which had collectively taken only 25.3 % of the entire share. Among the developing countries which significantly benefited from FDIs are: China, 23.7%; Brazil, 8.3%; Mexico, 8.1%; China, HK SAR, 7.5%; Singapore, 6%; Argentina, 5.6%; Malaysia, 4.0%; Bermuda, 2.7%; Chile, 2.7%; Thailand, 2. 2%; Republic of Korea, 2.1%, and; Venezuela, 1.7%. The implication of this is that whilst all countries, industrialised and developing alike, are subjected to the same onslaught of economic forces of globalisation not all enjoy the same kind of benefit from it (WCSDG 2004 27, 29). The uneven trade expansion among states, both industrialised and developing, unsurprisingly yielded to unequal and uneven economic growth in those countries. Thus only 16 of the developing countries reflected a 3% a year growth from 1985 to 2000, 55 developing countries made less than 2% economic growth for the same period whilst 23 countries experienced negative growth, whilst the income gap between the richest and poorest country rapidly expanded. Aside from the phenomenal cases of China and India, it is actually only the industrialised countries which have clearly substantially reaped the benefits of globalisation in the post-Cold War era because of the strong economic base, capital and skill, technological advancement that initially took them ahead of step. Globalisation provided these countries with new outlets for their exports whilst the global production systems and liberalized rules allowed their MNEs to expand overseas thus increasing their market power. The bottom line is that the uneven impact of globalisation proves that the relationship of trade liberalisation and growth will depend on the circumstances of the host country (WCSDG 2004 37-39). V Conclusion The World Commission on the Social Dimension of Globalization (WCSDG) issued its own report on globalisation in 2004 and one of its observations is that globalisation has created a greater imbalance between the wealthy and the poor, both intra-nationally and internationally, albeit recognising globalisation’s vast potential for good. Globalisation post-Cold War may have created unprecedented wealth, according to it, but that wealth is confined in the hands of a few creating injustice and a potential for more conflict. In addition, the process of shaping the phenomenon is likewise not shared by all confining itself to the more powerful nations of the world. This imbalance exists not only in poor countries but even in wealthy ones benefiting from globalisation where it had adversely affected many workers and communities. In crafting its recommendation to plug the holes that contributes to these imbalances, the WCSDG focuses on the national state rather than at the global level although admitting that the latter needs to be addressed as well. However, the nation State forms the basic unit of the global stage and therefore reforms must begin with it. The WCSDG recommends for reforms in the following areas: political governance on the basis of rule of law, human rights, democratic system and social equality; raising the citizens’ capabilities through education and other social services; fostering stability and growth in the economy; development of a civil society that enjoys the freedom of association and free expression, and; the development of strong employers and workers groups. On the global level, the WCDFG makes the following recommendations, among others: allowance of policy freedom for developing countries; the enactment of fair rules for cross-border people movement to complement trade and capital flows policies; new Foreign Investment Rule (FDI) that are more friendly to development; deference to ILIO core labour rules; reduction of unfair market barriers of goods of which developing countries have advantage; assistance to displaced workers as part of social protection (2004). References Aldonas, G.D. (2009). Globalization and the American Worker: Negotiating a New Social Contract. CSIS. Aswini, R. (2002). Globalization and Democratic Guidance. Globalization and Democratization in Asia: The Construction of Identity by Kinnvall, C. & Jønsson, K. Routledge. Crane, A. & Matten, D. (2007). Business Ethics: Managing Corporate Citizenship and Sustainability in the Age of Globalization, 2nd Edition. Oxford University Press. Held, D. & McGrew, A.G. (2002). 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