In the preceding module, we explored the idea of globalization by differentiating it with
the terms closely related to it, namely: internationalization, liberalization,
universalization, westernization, globalism, and globality. Based on the definitions given
by scholars we defined globalization as "a historical process characterized of the
compression of the world, enlargement of world communication and world market,
intensification of social relations, and intensification of the consciousness of the world.”
We found out the globalization is a multi-faceted process which cannot be reduced into
simply an economic phenomenon.
In this module, we shall discuss about the ideological, political, and technological factors
that have intensified economic globalization. We shall also discuss about the
implications of economic globalization to the different countries in the world particularly
those located in the global south.b Towards the end, we shall consider its impact to the
marginalized sectors of the society.
Definition of Economic Globalization
“[E]conomic globalization,” according to the International Monetary Fund (IMF), “is a
historical process, the result of human innovation and technological progress. It refers to
the increasing integration of economies around the world, particularly through the
movement of goods, services, and capital across borders. The term sometimes also
refers to the movement of people (labor) and knowledge (technology) across
international borders.” (in Benczes 2014, 134; emphasis supplied
From the given definition, globalization is (a) a historical process (meaning, economic
globalization is a phenomenon that has roots in the past, that continues to happen at
present, and will continue to happen in the future—it is an on-going event) and (b) it is a
product of human innovation and technological progress. Note that the definition does
not include the growth of capitalism as a precursor of globalization, unless we consider
the growth of capitalism as one of human innovations, broadly speaking. The definition
seems to imply that globalization is an inevitable, and perhaps unintended, outcome of
human innovations and technological progress as if telling us that there is no idea that
directs all these innovations and progress. Do you agree with this?
We can be critical about the definitions given about globalization. We may ask, for
instance, who is defining the term because definition sometimes depends on the
interest of the one who is giving it. Definitions may appear to be neutral at a glance but
upon examination we may be able to uncover some hidden agenda especially when
they are given by powerful bodies like the IMF.
Aside from that, however, we can agree with the IMF’s definition of economic
globalization, which is the continuing integration of the economies of the world into one
global economy through the worldwide movement of goods, services, capitals, labors,
and technologies. In other words, economic globalization is the transformation of
previously dispersed economic activities between and among countries to one of
worldwide integration through the removal of regional and national economic borders
giving rise to the unhampered worldwide flow of people, goods, and services ushered
the developments in transportation and information and communication technologies.
Economic globalization involves the following interrelated aspects:
“(1) the globalization of trade of goods and services;
(2) the globalization of financial and capital markets;
(3) the globalization of technology and communication; and
(4) the globalization of production.” (Benczes 2014, 134)
Globalization of goods refers to the worldwide movement of goods from and to
different directions. Globalization of services has been intensified because of the
development in information and communication technology. The rise of BPO industry is
one example, wherein services previously given by local workers can now be performed
by qualified workers wherever they may be. COVID-19 pandemic has made the
globalization of services even more intensified as work from home has seemingly
become the new normal.
Globalization of financial and capital markets refers to the movements of currencies
through direct and portfolio investments making the world market the playing ground of
the Transnational Corporations.
Globalization of technology and communication means the availability of technologies
all over the world. Everyone in the world may have access to these technologies—
computer most especially—thereby intensifying more economic engagements of people
all over the world.
Lastly, globalization of production refers to the system wherein the various parts of a
certain product are manufactured in different parts of the world taking into consideration
the principle of competitive advantage (David Ricardo's principle that states that a
country should focus on a product in which it has better edge than other countries). This
also refers to the worldwide supply chains where a certain company, for example, gets
its products from different countries in the world
These economic processes are interrelated in the sense that the operation of one
dimension requires that of the other. For example, global trade and global production
cannot exist without the globalization of transportation and information and
communication, vice-versa.
As scholars differ in their definitions of globalization, according to Benczes, they also
differ in their ideas on when and how globalization began. However, if globalization
refers to the “organic system of the world economy,” according to him, we must look
beyond the last three decades for its origin. But, how far should we look back, he asks
On one hand, Gills and Thompson (in Benczes 2014, 135), states that globalization
started from the time the Homo sapiens began to populate the world, impliedly claiming
that migration is one of the drivers of globalization. On the other hand, for Frank and
Gills (in Benczes 2014, 135), globalization can be traced back to the existence of the
world-system which existed some 5, 000 years ago. They consider Silk Road, the land
routes that connected Asia, Africa and Europe as proof of the existence of this ancient
globalization. However, world-system analysts, according to Benczes, mark the
16th Century, the start of the long distance trade, as the origin of modernity and
globalization.
Adam Smith considers two historical events as mankind’s greatest achievements: “the
discovery of America by Christopher Columbus in 1492 and the discovery of the direct
sea route to India by Vasco de Gama in 1498.” (Benczes 20124, 135) These
achievements, however, were overshadowed, according to him, by the technological
and methodological developments introduced by the British Industrial Revolution, which
spread to Continental Europe and North America in 1800s
While international economic integration was slowed down by the adoption of economic
nationalism and monopoly in trade in the 16th and 17th centuries, it gained impetus
during the 19th century when “[t]he annual average compound growth rate of world
trade saw a dramatic increase of 4.2 per cent between 1820 and 1870…”(Madison in
Benczes 2014, 135) and the amount of international trade in 1913 was 16-17 per cent of
the world income (Held in Benzces 2014, 135). In fact, the period between the last
quarter of the 19th century and the first quarter of the 20th century, “characterized of
relative peace, free trade, and financial and economic stability” is considered as the
“golden age” of globalization (O’Rourke and Williamson in Benczes 2014, 135) . Even
sceptics of globalization consider this era as the origin of globalization. The 19th century
world economy, according to them, was more integrated than the present one (Benczes
2014, 135).
Thomas Friedman (2007) has a different take on the history of globalization. For him,
globalization is a historical process that evolved from one stage to another, namely:
Globalization 1.0 (from 1492-1800); Globalization 2.0 (1800-2000); and Globalization
3.0 (2000-onwards). While Friedman believes that globalization is not a new
phenomenon, the kind of globalization that we are experiencing today is unprecedented
in intensity. In his book poetically titled, The World is Flat, Friedman argues that
Globalization 3.0 has flattened the world. And he names ten forces that have flattened
the world.
Thomas Friedman (2007) declares that the world is flat or the world has been flattened.
What does he mean by this?
Flattening the world means that “[the] global competitive playing field was being
leveled” (Friedman 2007: 8), making it "possible for more people than ever to
collaborate and compete in real time with more other people on more different kinds of
work from more different corners of the planet and on a more equal footing than at any
previous time in the history of the world—using computers, e-mail, fiber-optic networks,
teleconferencing, and dynamic new software.” (Friedman 2008: 8
When the world is flattened, the barriers that separate people all over the world are
removed thereby giving them equal access to the resources of the world. The world is
flattened when the ideological walls that separate the world are removed so that that
world has become ideologically one. The world is flattened when all are given equal
access to technology, information, and resources of the world. The world is flattened
when it becomes everyone's field irrespective of his/her nationalities.
Friedman enumerates ten (10) significant events that have flattened the world, which
have, in turn, intensified the globalization of goods and services, capitals, and
production, namely:
(1) Fall of Berlin Wall
(2) Introduction of Netscape to the public
(3) Invention of Work Flow Software
(4) Outsourcing
(5) Offshoring
(6) Open-sourcing
(7) Insourcing
(8) Supply-chaining
(9) Informing
(10) Steroids
The second flattener of the world, according to Friedman, is the introduction of
Netscape to the public on August 9, 1995. This event is revolutionary for two
things: “First, it brought the Internet alive by giving us the browser to display images and
data stored on Web sites. Second, the Netscape stock offering triggered the dot-com
boom, which triggered the dot-com bubble, which triggered the massive overinvestment
of billions of dollars in fiber-optic telecommunications cable.” (Friedman 2005)
The third flattener is the invention of the workflow software which "enabled more people
in more places to design, display, manage, and collaborate on business data previously
handled manually. As a result, work started to flow within and between companies and
continents faster than ever." (Friedman 2007: 79)
This third flattener has brought about the six other flatteners: outsourcing, offshoring,
open-sourcing, insourcing, supply-chaining, and informing.
Outsourcing
"When my software applications could connect seamlessly with all of your applications,
it meant that all kinds of work -- from accounting to software-writing -- could be digitized,
disaggregated and shifted to any place in the world where it could be done better and
cheaper." (Friedman 2005
OffshoringIt is the system of putting up factories outside one's country, the operation of
which may be directed from the country of origin
Open-sourcing
The system in which engineers, scientists, and other professionals collaborate online in
order to produce something usually for free
Insourcing
The system in which the company hires an independent contractor to perform its
various operations.
Supply-chaining
"This is Wal-Mart's specialty. I create a global supply chain down to the last atom of
efficiency so that if I sell an item in Arkansas, another is immediately made in China. (If
Wal-Mart were a country, it would be China's eighth-largest trading partner.)" (Friedman
2005)
Informing
"[T]his is Google, Yahoo and MSN Search, which now allow anyone to collaborate with,
and mine, unlimited data all by themselves." (Friedman 2005
Steroids
"[T]hese are wireless access and voice over Internet protocol (VoIP). What the steroids
do is turbocharge all these new forms of collaboration, so you can now do any one of
them, from anywhere, with any device." Friedman 2005)
“[E]conomic globalization is a historical process, the result of human innovation and
technological progress. It refers to the increasing integration of economies around the
world, particularly through the movement of goods, services, and capital across borders.
The term sometimes also refers to the movement of people (labor) and knowledge
(technology) across international borders.” (IMF in Benczes 2014, 134; emphasis
supplied)
Underline the phrase "the result of human innovation and technological progress."
Human innovation and technological progress may include developments in the field of
transportation, information and communication. Development in information and
communication brought about by the invention of computer, its operating systems and
applications, is what Friedman calls the flattener of the world. Indeed, economic
globalization is made possible by these innovations and progress. But to say that they
are major causes of economic globalization is to forget about the first flattener of the
world: The Fall of the Berlin Wall. Of course, the fall of the Berlin Wall is not the force
behind the flattening of the world. The fall of the wall is just an effect of the force behind
it, which is the very ideology behind economic globalization--that is, neoliberalism.
Neoliberalism as the Ideology behind Economic Globalization
Before we attempt to understand what neoliberalism is, let us try define ideology and
then describe what it means for neoliberalism to be an ideology. According to Ritzer
(2010: 115):
"An ideology may be defined as a system of widely shared ideas, patterned beliefs,
guiding norms and values, and ideals accepted as truth by some group. An ideology
offers a more or less coherent picture of the world not only as it is, but as it ought to be.
While ideology simplifies tremendous complexity, it is often distorted as well. In addition
to distortion, ideology also serves to legitimate and to integrate."
Accordingly, an ideology is a system of ideas, beliefs, norms, values, and ideals
believed to be true by its advocates (but usually offers a distorted view of reality) and
used to justify a policy or a practice. The key word here is "justify". To justify means to
hold something valid. A policy must be implemented as a demand of right reason; it is
something that ought to be done.
Neoliberalism, then, as an ideology is the system of thoughts that seeks to legitimize or
justify the prevailing form of economic globalization. It is the system of ideas that keeps
the fire of economic globalization alive. Economic globalization, from the perspective of
neoliberalism, ought to happen because it is the right economic policy the world should
adopt.
What then is neoliberalism?
For David Harvey, neoliberalism is "a combination of classical liberalism's commitment
to individual liberty with neoclassical economics devoted to the free market and
opposed to state intervention in that market." (Ritzer 2010: 110)
Core Concept of Neoliberalis
"Great faith is placed in the free market and its rationality. The market needs tobe
allowed to operate free of any impediments, especially those imposed by the nation-
state and other political entities. The free operation of the market will in the "longrun"
advantage just about everyone and bring about both improved economic welfare and
greater individual freedom (and a democratic political system). George Soros calls this
market fundamentalism, or the idea that "markets will take care of all our needs." To
help bring this about, it is important to champion, support, and expand a wide range of
technological, legal, and institutional arrangements that support the market and its
freedom." (Ritzer 2010: 116
"Related to the belief in the free market is a parallel belief infree trade.Where there are
restraints on the free market and free trade, the theory leads to a com- mitment to
deregulation to limit or eliminate such restraints. (Ritzer 2010: 116)
"There is a strong and generalized belief in limited government. The theory is thatno
government or government agency can do things as well as the market (the failure of
the Soviet Union is seen as proof of that). Among other things, this leaves a govern-
ment that is, at least theoretically, less able, or unable, to intervene in the market. It also
presumably means a less expensive government, one that would need to col- lect less
in taxes." (Ritzer 2010: 118)
"The neo-liberal state is very interested in privatizing various sectors (e.g. "trans-
portation, telecommunications, oil and other natural resources, utilities, social housing,
education" [Harvey 2006: 25]) in order to open up these areas for business and profit-
making. It seeks to be sure that those sectors that cannot be privatized are "cost
effective" and "accountable." (Ritzer 2010: 118)
An ideology remains a theory unless it is put into practice. Its plausibility as a system of
thought that seeks to legitimize the prevailing form of economic globalization must not
only be defended in the academia and in the halls of the policy-making bodies; it must
be supported and funded by the major players in economic globalization.
Economic globalization has not arisen accidentally. There are institutions created to see
to it that the idea behind economic globalization is realized.
There are three major institutions with the powers to oversee the smooth functioning of
the wheels of economic globalization, namely: World Bank, International Monetary
Fund, and World Trade Organization.
Economic globalization hinges on the promise that the global free market economy will
bring about an amazing prosperity in the world. Globalists argue that economic
globalization, in the long run, will benefit not only the highly developed but also the
developing and underdeveloped countries. Indeed, the flattening of the world has
brought many benefits to countries and peoples all over the world. However, it has
failed to promote the greatest happiness of the greatest number of people. Economic
globalization has definitely resulted to the growth of global economy. But whether or not
such growth has redounded to the benefit of all, especially the poor countries and the
marginalized sectors of the society, is a big question.
