Section 2

Key Features of Globalization

Globalization is a long-term process of change, not a static condition. It comes in many forms, of which economic globalization is only one. The central features of globalization are the rapidly growing and uneven cross-border flows of goods, services, people, money, technology, information, ideas, culture, crime, and weapons. Owing to globalization, international and transnational activity is growing exponentially, and the rate of change is accelerating almost everywhere, often faster than governments and institutions can respond.

Dynamics

Globalization is not entirely new. A global economy began to emerge at the end of the 19th century and continued to develop through the 1930s. The process was disrupted by the two World Wars and the Cold War. Not until the 1970s did trade as a percentage of global output reach the level that had been achieved before World War I (15 percent). Before then, trade protectionism, nationalism, global conflict, and the rise of the Communist bloc had slowed the effects of globalization.

At the same time, globalization today is markedly different from its predecessors. Greatly expanded trade flows have been accompanied by growing foreign investments, ever-bigger multinational corporations, and financial transactions that total trillions of dollars daily. In addition, the integration of capital and commodity markets since the 1970s has surpassed all previous levels and is still spreading.² This trend has been accompanied by a fuller acceptance of the institutional framework created after World War II to promote global trade and growth, and by a growing willingness to settle disputes according to agreed-upon rules.

Traders on London International Futures and Options Exchange. Ap Wide World Photos (Charles Miller)

What is unique about globalization in the current era is the revolution in information technology, accompanied by the spread of cable television, the increasing number of personal computers, electronic mail, and the instant availability of information. This revolution has sparked a business-driven interaction of advanced telecommunications, technology transfer, and capital flows. Globalization would not be occurring in its present form were it not for the business application of the knowledge revolution--for example, computers, e-mail, satellites, and other innovations. One hallmark of globalization is the emergence of the Internet, which has the effect of spreading knowledge to the far corners of the Earth. The "Net"--the ever-expanding global communications network linked together by the Internet, which is both a product and instigator of globalization--is spreading information, changing business and governmental institutions, creating enormous new wealth, and generally promoting the openness that is essential to a healthy democracy. But the Net cannot itself eliminate security problems and dangers associated with its development and may inflame them.

There are several other foundations and enablers of globalization in the current era. The success of the Western policy of democratic enlargement has yielded a larger group of states well prepared to embrace the challenges of globalization. Moreover, the passing of socialism and the triumph of market-oriented economic policies in much of the world have given new impetus to market competition.

Multiple Manifestations

Globalization is having a number of effects--economic, political, cultural, religious, social, demographic, environmental, and military. Understanding these aspects of globalization is important because the interactions among them can be benign or destructive. In the latter case, globalization can trigger new security problems in which the United States may be called upon to intervene.

Economic Growth and Disparities. Most economists applaud economic globalization because it promotes efficiency and specialization. They argue that the more global the scale of the market, the more efficient the allocation of resources. Several major studies have concluded that nations with open, market-oriented economies recently have grown twice as fast as those with closed economies; in the 1970s and 1980s the disparity was even higher.³ Never before have so many people in so many regions experienced a rise in real income.⁴ During the past decade, the world economy grew by about 30 percent in total value, benefiting many countries--not only in Asia, but elsewhere. Today's global economy totals about $40 trillion, as measured in terms of annual GDP for all countries combined, using "purchasing power parity" estimates. This level compares to about $30 trillion a decade ago. Helping propel this growth have been increased exports, which today amount to nearly $6 trillion. While most trade is carried out by the wealthy industrial powers, less-developed countries are now exporting about $1.5 trillion annually. However, other statistics in poor regions--including rapid population growth, environmental degradation, and disease--are far less encouraging. What is hotly debated is whether and to what extent globalization is exacerbating poverty in various parts of the world. In the eyes of globalization's critics, there is a direct, causal relationship between globalization-fed corporate profits and global poverty.

The modern industrial powers possess 70 percent of the world's wealth but have only 28 percent of the world's population. Their per-capita wealth is four to seven times greater, on average, than the vast number of far poorer countries that house nearly three-quarters of the world's people. While some developing countries are growing fast, the overall disparity between the rich and poor is not shrinking because both clusters are growing at similar rates, and rapid population growth can lower per-capita income. A considerable portion of trade and investment takes place within the wealthy industrial countries; a far smaller share flows between them and the developing world. With global growth rates averaging about 3 percent annually, many years, or even decades, will pass before a considerable number of developing countries achieve moderate wealth, much less attain the prosperity that industrial countries take for granted.

Not surprisingly, this steep hierarchy, coupled with the difficulty of competing in the global economy, creates frustration and resentment in many quarters. Many countries owe their troubles to their own governments, societies, and economies. Yet a number of those governments complain that their efforts to become prosperous are hampered by wealthy countries. They assert, for example, that wealthy countries provide them insufficient aid, erect protectionist trade barriers to their agricultural products, suppress prices for their natural resources, and pursue trade policies that seek to impose inappropriate labor and environmental standards on other countries as a cover for protectionism. Accompanying these judgments is dissatisfaction with the actions of multinational corporations, Western banks, and the international financial institutions. The effect is to create a psychological gap between wealthy countries that view globalization as a positive force and less well-endowed countries that see it in more negative terms.

Stressful Economic and Social Changes. Although economic globalization can help many countries gain wealth, its potential to wreak havoc, especially in developing countries, is becoming evident. The speed, volatility, and sudden withdrawal of financial flows sent a number of countries spinnung into recession in 1997-1998. This downswing was the first real crisis of globalization. The collapse of the Thai baht pulsed through most of Asia and then much of South America, ravaging the economies of Brazil and its neighbors. The collapse of confidence associated with the Asian crisis ultimately spread to Russia, crippled what was left of the Russian economy, and brought forth a younger, technocratic leader to clean up the mess. This was an unpredictable chain reaction that caught even seasoned observers by surprise. Efforts are now under way to bring greater stability to international financial markets to prevent similar contagious shocks. However, the world economy seems certain to remain driven by unpredictable market mechanisms.

Another byproduct of globalization is that the speed of changes in income and its distribution within and among countries can rock political stability. As a general rule, globalization offers rising elites and the urban middle classes a bigger share of the economic pie. If this share increases too rapidly and if the rest of the pie is not made available to others because of monopolies or corruption, the government can lose its legitimacy, as it did in Indonesia. If the speed of change is glacial because the government has deliberately isolated its citizens from globalization and restricted the free flow of information, disgruntled students and merchants may complain or rebel, as they have in China and Iran. Likewise, the uneven distribution of direct foreign investment in the developing world--three-quarters goes to fewer than a dozen countries, with the Middle East accounting for only a fraction--will intensify a widening income gap within the developing world.

Grain from International Red Cross arriving in North Korea. AP Wide World Photos
(Red Cross, Piero Calvi Parisetti)

Income gaps mirror social and geographical divisions both within societies and among countries and regions. In most countries, unskilled laborers, workers in protected industries, and small farmers are increasingly at risk of rapid dislocation due to external developments. What is politically important is the perception of prosperity relative to that of other groups or states. Globalization exposes fissures in this arena and often exacerbates them. Beyond this, globalization affects the health, wealth, and daily lives of people everywhere. For example, it is triggering a big surge in immigration as people move to new locations in search of jobs, as well as changing career paths, social mores, and expectations in many countries.

Some lessons of economic globalization are clear. If a government pursues market-oriented policies that benefit the ruling elite or the middle class at the expense of the poor, if inadequate disclosure and weak supervisory organs trigger a run on the banks, and if social safety nets are weak or absent, openness to globalization can severely destabilize the political system and hurt the poorest members of the population. Because people in other countries tend to assume that the United States pulls the strings of the World Bank and the IMF, financial crises of the Indonesian variety not only evoke a legitimate humanitarian outcry, but they also ignite anti-Americanism.

Cultural and Religious Impact. The worldwide predominance of American business practices and popular culture, facilitated by the globalization of the communications and entertainment industries, has raised anxieties and backlash among elites in some countries who fear the loss of their own cultural identity, particularly in areas of the world where national identity is weak or recently formed. Popular culture has fostered the learning of English, the language of international communication, which has accelerated the global flow of ideas. Cultures that are capable of borrowing and adapting foreign influences are generally faring better in the face of globalization. But globalization has also created awareness of traditional cultures that face the threat of extinction.

Globalization is facilitating the spread of religious ideas rather than destroying religion. The strength of religious values and institutions has helped people in many regions cope with alienation, insecurity, and rapid economic change. Much of the violence that is sometimes described as religious actually stems from a political backlash against globalization by instigators who use religion for their own ends. Although cultural wars are unlikely, communal conflict is becoming a hallmark of globalization. The politicization of Islam poses a particular challenge in this regard, but it is not the only one. A widespread backlash is building against Western values and practices, which often are perceived as demeaning, decadent, self-indulgent, and exploitative.

Impact of the Media. The growth of international communications has contributed to a new political awareness. Television and the Internet, to paraphrase the late Congressman Thomas P. (Tip) O'Neill, have made all local politics global. The global village is becoming more tightly knitted as new technologies make it far easier to broadcast and receive news worldwide. These innovations have had many positive effects. They have facilitated media exposure of abuses of official power, diffused norms of democracy and human rights, and heightened awareness of environmental problems and regional conflicts. Because markets need information to function properly, the Chinese and other authoritarian governments that want to participate in the global economy are finding it increasingly difficult to control the flow of information within their borders. Over time, these pressures toward greater openness could stimulate political liberalization. However, these developments also present new challenges to national policymakers. In some cases, global media coverage can dramatize and harden political conflicts and subject military operations to daily, and sometimes unhelpful, scrutiny.

Providing refuge for displaced family, East Timor. U.S. Marine Corps (Bryce A. Piper)

The new global awareness has not always galvanized international responses to crises. The so-called CNN effect, the notion that heightened awareness of human suffering compels governmental responses to crises of peripheral interest, is overstated. While European and American citizens pressed their governments to respond to graphic media reports of atrocities in the Balkans, there were much more circumspect calls for responses to equally horrific suffering during conflicts in Rwanda, Chechnya, and Afghanistan. These other crises were not assessed to be as important or compelling. Geopolitical and other filters appear to temper the CNN effect. In short, while the media is now a powerful actor on the world scene, its effects are not uniform, and it can both help and hinder governmental responses to crises.

Democracies and Market Economies

The widening income gap both within countries and between countries and regions that are adapting relatively well to globalization and those that are left behind should be a matter of growing concern to national security strategists, not just international development experts. Sudden shifts in wealth can create a backlash against successful ethnic minorities. Extremist movements can often attract those who are uprooted or fearful of globalization. There is a real risk that these governments or nonstate actors within them will become more hostile to the West and more aggressive. Moreover, the countries that are falling behind in the global economy are found in regions of the world with simmering interstate and intrastate tensions; among these countries are many that support terrorism and are actively pursuing the development of weapons of mass destruction.

In countries where the legal and institutional structures are weak, globalization has generally intensified the problems of bribery and corruption and facilitated the development of criminal networks. Corruption and crime not only divert resources, but they also damage public confidence in a market economy. In the area of public works, crime and corruption jeopardize public safety and can severely damage the environment. In these circumstances, it becomes all too easy for citizens whose welfare is declining to associate democratization with the corruption and criminalizing of the economy, creating fertile soil for internal and external backlash.

Organized crime, drug trafficking, and terrorism, aided by the latest information technology, are also growing, to the point where they already form a sinister underbelly of globalization that threatens the security of all countries, including the developed democracies. These criminal activities have the potential to infect world politics on a larger scale by creating criminal states that seek economic profits through illicit activities and use military power accordingly.

By contrast, societies with a flexible social structure, respect for the value of shared information, a functioning judicial system, and openness to new technology are well suited for the global age. There is considerable evidence that the political cultures that adapt most successfully to economic globalization feature accountable and adaptive institutions based on some minimal level of civic trust. Attitudes toward work, education, entrepreneurship, and the future are also important. A democratic government not only safeguards liberty and private property but also tends to produce flexible and responsive policies that facilitate economic growth. Globalization has sounded a death-knell for totalitarian governments and rigid command economies. But whether it makes democracy and market economies inevitable is another matter. In recent years, China, Russia, and other countries seemingly have been trying to craft a set of policies that combine some element of reform with existing structures of power.

Anti-narcotics raid on cocaine lab in Colombia. AP Wide World Photos (Javier Casella)

Broadly considered, the political cultures of North America, Western Europe, parts of East Asia, and the South American countries of Mercado Común del Sur (MERCOSUR--Common Market of the South) are either adapting relatively well to globalization or have a good chance of doing so if transitional political problems can be resolved. China and India remain uncertain because they are confronting enormous internal problems, with some of their regions adapting better than others. Significantly, the successful countries are either free or partly free, that is, democracies or soft authoritarian states with substantial democratic features and market economies. Even so, many effective democratic polities are hard-pressed to cope with some of globalization's challenges.

By contrast, most nations located in a huge swath of contiguous territory ranging from the former Soviet Union through the Middle East and South Asia to sub-Saharan Africa are presently ill-suited for globalization. Much of the Andes region and the Balkans are also adapting poorly. Such countries exhibit some combination of weak or closed political institutions, inflexible or divisive social cultures marked by vengeance and distrust, predominantly tribal or clan loyalties, and excessive regulation accompanied by a high degree of corruption. While these countries face incentives to democratize and create market economies, their deeply held values and social structures often make the transition difficult, if not impossible.

Notes

²Michael D. Bordo, Barry Eichengreen, and Douglas A. Irwin, "Is Globalization Today Really Different from Globalization a Hundred Years Ago?" Brookings Trade Forum 1999 (Washington, DC: The Brookings Institution Press, 1999), 1-50. [BACK]

⁴World Bank, World Development Indicators 2000 (Washington, DC: The World Bank, 2000), 3. [BACK]