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What is Globalisation?

Relaunched: 13 December 2016

“Despite huge differences in distance, upbringing and social context, many of us now listen to the same music, read the same books and watch the same films and television. Youth in Soweto listen to LA rap; viewers in southern China’s Guandong province watch pirated tapes of Jackie Chan; Sri Lankan refugee kids in Toronto come home from school to settle down in front of Tamil movies rented from the local grocery store. Teenagers and their young siblings in almost every place on earth know Bart and Lisa Simpson. I can sit at my home computer downloading the latest comminqués from Mexico’s indigenous Zapatista rebels and out of the corner of my eye watch the World Cup live from Korea on the TV in the next room.”

Peter Steven (2004, p16-17) is describing the communication aspect of globalisation. Alan Cochrane & Kathy Pain (2000) describe other aspects:-
“Drugs, crime, sex, disease, people, ideas, images, news, information, entertainment, pollution, goods and money now all travel the globe. They are crossing national boundaries and connecting the world on an unprecedented scale and with previously unimaginable speed. The lives of ordinary people everywhere in the world seem increasingly to be shaped by events, decisions and actions that take place far away from where they live and work.”

Globalisation can be described as the emergence of a global economic and cultural system which is integrating the peoples of the world into a single global society.

Theories of globalisation
However, there are issues in trying to define just what ‘globalisation’ is, with John Wiseman (1998) commenting: “Globalisation is the most slippery buzzword of the late 20th Century because it can have many meanings and can be used in many ways.”

 Wiseman’s reservations about a hard definition of ‘globalisation’ are reflected in Cochrane & Pain’s identification of 3 basic positions on the issue of globalisation:-

  1. Globalists work on the basis that globalisation IS occuring and has real consequences for people and organisations across the world. Cochrane & Pain see local culture and the power and authority of nation-states as being eroded by a homogeneous global culture and economy.
    However, Globalists tend to fall into 2 distinct camps when it comes to anticipating the consequences of globalisation.
    Optimistic Globalists (aka ‘Hyperglobalists’ or ‘Positive Globalists’) welcome globalisation in the belief that it will eventually produce tolerant and responsible world citizens. Robin Cohen & Paul Kennedy (2000) predict globalisation will lead to human rights being respected more around the world, universal access to education and communications, and multi-cultural understanding. This might seem like GREEN naivety but they do concede (p372) that “globalisation has so far done little to diminish the blight of poverty and wretchedness in which about half the world’s inhabitants live.”
    Modernists tend to side with the Hyperglobalists, perceiving globalisation as a positive phenomenon. They argue it creates a new class of global consumers who have a greater range of choice, from which they can construct a hybridised global identity. Clearly this thinking reflects the ORANGE vMEME’s theme of endless opportunity.
    Pesimistic Globalists, such as Jeremy Seabrook (2005), argue that globalisation is damaging because it is basically a form of Western – and particularly American – imperialism. Seabrook characterises globalisation as swamping local and regional cultures with a superficial and homogeneous mass form of Western/American culture. Benjamin Barber & Andrea Schulz (1995) raise the concern that the planet is turning into a ‘McWorld’ where cultures and consumption will be standardised. However, as  Arundhati Roy tells David Barsamian (Roy & Barsamian, 2004), there is an elitist twist to this that reflects Zygmunt Bauman’s (1988) concept of the ‘seduced’ and the ‘repressed’: “…globalisation means standardisation. The very rich and the very poor must want the same things, but only the rich can have them.”
    Pessimistic Globalists also tend to view globalisation as a one-way process, leading inevitably to dystopia. Damien Kingsbury et al (2004) posit that, until globalisation leads to the widescale relief of poverty, conflict, especially between East and West, is likely to grow.
  2. Traditionalists reject the idea that globalisation is happening. They argue that it is a myth or, at best, is exaggerated. They point out that Capitalism has been an international phenomenon for hundreds of years. So-called ‘globalisation’ is merely a continuation or evolution of Capitalist production and trade. Indeed, Karl Marx & Friedrich Engels (1848) predicted the globalisation of Capitalism: “The bourgeoisie has, through its exploitation of the world market, given a cosmopolitan character to consumption in every country…. All old-established industries have been destroyed or are daily being destroyed. They are destroyed by new industries…that work up raw materials drawn from the remotest zones, industries whose products are consumed in every corner of the globe.”
    Certainly dissemination of ideas to ‘foreign lands’, often accompanied by conquest and/or large-scale migration is nothing new. Eg: Muslim concepts were spread across Africa, Asia and the Middle East from the 7th Century on; the European empires spread European languages and different versions of Christianity right around the world from the 1400s onwards, including from the 19th Century the remarkable scientific, engineering and medical advancements coming especially from the northern European countries. Mass migration in the 19th and early 20th Centuries populated the USA, Canada and Australia with Europeans and their cultures. Since the 1950s there has been significant immigration into the UK of people from her former colonies. For the Traditionalists, it is more the pace of global connectedness and its implications that are the issues.
  3. Transformationalists occupy a middle ground between Globalists and Traditionalists. They accept that the impact of globalisation has been exaggerated by the Globalists but argue that there is a globalisation process happening as a complex set of interconnecting relationships by which power is exercised indirectly for the most part. Transformationalists also contend that the negative effects of globalisation can at least be controlled and perhaps even reversed.

Transformations of the world
Cohen & Kennedy (2000) argue that key areas of mutually-reinforcing ‘transformations’ drive globalisation:-

  • Technical advances collapsing the barriers of time and space
    Mobile phones, the Internet, satellite TV, etc, etc, make communication around the world virtually instantaneous. Mass media developments such as television – especially the development of 24-hour news and sports channels – films and music enable people to encounter and experience a greater range of other cultures. The phenomenal expansion of tourism has a similar effect. One result of these interactions with new and different experience is a cross-pollination of ideas in such fields as fashion, literature and food.
  • Increasingly producing in one country for markets in others
    The massive growth in international trade, with production in one country for sales in markets in other countries, has been facilitated by the New International Division of Labour, the increasing influence of transnational corporations (TNCs), 24-hour global financial trading markets and  global dominance of the World Trade Organisation, the World Bank and the International Monetary Fund (IMF).
  • More and more shared problems – eg:-
    – Economic
    Decisions made about lifestyle preferences and leisure pursuits in one country can affect debt issues in another country thousands of miles away and cause unemployment and the loss of livelihoods for workers and peasants in yet other countries. The financial problems experienced by the so-called ‘Asian tigers’ in 1998-1999 contributed to unemployment in the UK. The 2008 implosion of several American banks, due to overlending in the sub-prime housing market, was the catalyst for a global recession.
    Graeme Thompson (2000) notes the Hyperglobalist claim that there has been a rapid, recent intensification of international trade and investment, with the result that distinct national economies have been meshed into a global economy by world market forces. Traditionalists refute this, stating the international economy is not dominant over national economic policies. Neo-Marxists tend to agree with the Hyperglobalists but condemn it as an extension of global Capitalist exploitation.
    – Environmental
    Eg: the Soviet Union’s Chernobyl nuclear disaster in 1986 led to acres of land in England’s Lake District and parts of Wales still registering high levels of radiation more than 20 years later due to the fall-out from an accident thousands of miles away.
    Environmental degradation is attributed to the developing world as well as the West, with deforestation and overcultivation having major impacts on gobal climate change.
    – Health
    It might have its highest incidence in sub-Saharan ‘Black’ Africa but there is no doubt that HIV/AIDS is a worldwide problem.
    – Crime
    By their very nature people trafficking – often for the sex trade – and drug trafficking have no respect for national borders, with cross-border crime having an estimated value of $500B per year.
    According to Cohen & Kennedy, more than 22 millon Americans have tried cocaine and 2-3 million of them are addicted to it – more than in any other industrialised country. $110,000M a year is spent on drugs – $28,000M on cocaine – more than twice the profits of the USA’s top 500 companies put together. Between 1970 and 1990 heroin consumption doubled and cocaine use increased by 500%. In 1989 around 2,500 Americans died as a result of using it. In 1990 1 in 5 people arrested for any crime was hooked on cocaine or crack.
    The international drug trade is also linked to poverty. Farmers in countries as geographically diverse as Bolivia, Nepal and Jamaica are forced to grow crops for drugs because the international trading system means they cannot survive by growing legitimate crops.A BEIGE/PURPLE vMEME harmonic need to provide for self and family can lead people into ‘criminal activity’. Jane Chrispin & Francis Jegede (2000) chronicle the case study of Juan Paredes, a Bolivian tin miner who turned to farming coca after technological advances in the West enabled manufacturers to switch from tin to the cheaper aluminium. (In October 1985 the London Tin Exchange was dropped by speculators from £8,000 per tonne to £4,000, putting thousands of tin miners out of work.) Getting the title to 4 hectares of land, Juan Paredes found coca – with 4-5 harvests per year – earned him far more than tin mining ever had done.Small wonder that by 1991 Bolivia was the largest producer of the coca leaf in the world and the second ranked producer of refined cocaine.
    Additional areas of major cross-border criminal activity include computer fraud and white collar crime, illegal arms dealing, smuggling, patent/copyright violation  and money laundering through legitimate operations.
    – Terrorism
    al-Qaeda’s Afghanistan-based 9/11 attack on the United States took terrorism onto the international stage in a BIG way, eclipsing such localised issues as Britain’s problems with the IRA in Northern Ireland or Spain’s attempts to close down ETA’s violent campaign for an independent Basque region. Now UnIslamic State (ISIS) recruit from Arab, Asian and European nations. Jihadist  targets include Western embassies and hotels/restaurants/nightclubs frequented by Western tourists. UnIslamic State give videos of atrocities to A-Jazeera TV so that the images will be broadcast  all over the world via TV and the internet, thus demonstrating both their power and their barbarity.
    – Violent suppression of internal dissidence
    A basic presupposition of the United Nations Charter is that the UN will not approve one state interfering in the internal affairs of another. While the UN has authorised interventions from time to time – with the major (and very American-manipulated) exception of the Korean War (1950-1953) – their purposes have been largely to impose and/or maintain peace between countries as opposed to pursuing a war of aggression against the government of a country. That changed with the ‘first humanitarian war’ in 1999: NATO, acting rather broadly on a UN resolution, aggressively bombed Yugoslav military units and Serb-Kosovan paramilitaries in the Kosovan conflict – even communication assets such as a Belgrade TV station. A similar approach to a UN resolution authorising force to protect civilians was taken in 2011 by NATO in their bombing of Libyan government forces, effectively turning NATO into the airforce of the rebel movement in what very rapidly turned into a full-scale civil war.

Cohen & Kennedy conclude that such ‘transformations’ lead to a new depth of appreciation that the world is a single place. Anthony Giddens (1999), displaying something of a Move Away From meta-programme characterises globalisation as a ‘runaway world’ featuring common tastes and interests, change and uncertainty, and a common fate. Giddens (1990) and Ulrich Beck (1998) postulate that the immediacy of global communication means it is difficult for people to avoid acknowledging that we live in a world characterised by risk – eg: terrorism, global warming and war. This awareness may result in a broadening of identities – especially where people champion particular causes around issues such as debt relief or the environment.

Transnational corporations
Globalisation is driven by TNCs.

Leslie Sklair (2003) describes TNCs as being able to produce and market internationally. They rarely have a single home or national base and their income comes increasingly from outside the original home country. They shift frequently to the cheapest/most efficient production locations to get competitive advantage and to maximise profits. TNCs have the geographical flexibility to shift  resources and operations across the world. As they spread into other countries – especially in the developing world – they recruit members of the local elites onto their regional boards. In this way, the TNC mesh their global interests with those of local power brokers.

An example of outsourcing work to a cheaper location is the British computer company ICL  subcontracting its software design to a  company in Pune, India. The Indian software  designers are paid the equivalent of about  £3,000 per year, 10 times less than an  equivalent worker in Britain. UK customers  calling ICL software are put through to engineers in Pune.

3/4 world trade is via TNCs which account for 1/3 global economic output. Disturbingly some estimates put 1/3 of all trade within the global economy as between branches of the same corporations. There is increasingly a trend towards monopolies and frequent mergers between corporations – particularly so in banking and mass  media. Eg: the 10 largest corporations in  telecommunications now control more than 86% of the  global market.

Approximately 130 nation states (mainly in the developing world) have economies  smaller than the top 50 TNCs. Of the world’s top 100 most important  economic units, approximately half are  nation states and half are TNCs. The table shows how in 2001 revenue (in $M) from the  largest companies in the world matched  national economies. 2001-country-tnc-comparisonThe combined annual revenues of the biggest 200 corporations are bigger than those of 182 nation states – ie: 80% of the world’s  population. This is 18 times the combined annual  income of the 1.2 billion poorest people.

Another way of analysing the 2001 figures is  that there were 240 TNCs earning in excess of $20B per year while 71 of the 132 countries with a population over 2 million had  a gross national income of less than $20B.

This trend has increased througout the first years of the 21st Century. Philip McMichael (2011) states that the combined annual revenue of the 200 largest TNCs exceeds the GDP of the 182 nation states containing 80% of the world’s population. He cites BP as bigger than Finland and Chevron as bigger than Ireland.

Sklair (1993) writes: “Such well-known companies as Ford,  General Motors, Shell, Toyota, Volkswagen,  Nestlé, Sony, Coca-Cola, Kodak, Xerox (and  many others most of us have ever heard of)  have more economic power than the majority  of the countries in the world.” 

Sklair’s point is illustrated by Forbes magazine’s 2013 assessment that 37 of the 100 largest economies in the world were run by TNCs rather than countries.

Interestingly Raymond Vernon (1971)  foresaw the transfer of power from the nation state to the TNC when he wrote: “Suddenly,  it seems the sovereign states are feeling  naked. Concepts such as national  sovereignty and national economic strength  appear curiously drained of meaning.”

Are TNCs ‘institutional psychopaths’?
Neo-Marxists argue that TNCs exercise power without responsibility. Joel Bakan (2004) calls them ‘institutional psychopaths’ programmed to exploit and dehumanise people for profit. He also accuses them of acting immorally and illegally – a kind of unhealthy RED/ORANGE vMEME harmonic. Examples include;-

  • Shell in Nigeria and RTZ in Angola have exploited natural resources with  ruthlessness and indifference.  Indigenous people have had their land  forcibly seized and, despite international  protests, have been removed at gunpoint  from their homelands by local elites acting on behalf of these TNCS.
    The military dictatorship of Nigeria had  the high-profile environmental campaigner Ken Siro-Wiwa executed on charges widely viewed as entirely politically motivated and completely unsubstantiated.  Soro-Wiwa’s non-violent  campaign had temporarily forced Shell to stop pumping oil.
  • The sweatshop conditions of TNC factories in developing countries have been criticised, especially for their use of  child labour and exploitative rates of pay.  British chain stores like Matalan and  Primark have been said to be able to keep their price low because of such exploitative practices.
  • TNCS have been responsible for ecological damage in countries like India.  In 2003 Coca-Cola was accused  of putting thousands of farmers out of  work in the Indian state of Kerala by draining up to one million litres of water to produce Coke for the Indian market. The water previously had fed the farmers’ wells.
  • TNCs have refused to take responsibility for the welfare of local people killed or injured by their factories and plants.
    The 1984 Union Carbide plant explosion at Bhopal in India killed 2,800 people and  injured another 28,000. The company has paid very little in compensation.
    In 2006 Trafigura dumped tons of toxic waste in Côte d’Ivoire. Over 100,000 Ivorians had to seek medical help due to exposure to these chemicals.
  • TNCs have influenced tastes and consumption patterns in the developing world in negative ways.
    Eg: Nestlé has been criticised for its  aggressive marketing of baby milk in  areas without ready access to clean water.
    Other TNCs have been criticised for their  marketing of high tar cigarettes, drugs and pesticides – many of the latter having been banned in the West for being dangerous to public health.
  • There is evidence that TNCs have interfered in the internal politics of  developing countries and have even  financed military coups against political  leaders they didn’t like.
    The military coup in the early 1970s  against the democratically elected Socialist president of Chile, Salvador Allende, was sponsored by American multinational companies unhappy at his modernisation of the country’s copper industry.
    In 2003 an international boycott of Coca- Cola products was launched by the trade  union movement in protest at the company’s alleged use of illegal  paramilitary groups to intimidate,  threaten and kill workers who wished to  set up a trade union at its bottling plant  in Colombia.

TNCs or MNCs?
Paul Hirst & Grahame Thompson (1996) distinguish between TNCS  operating in a ‘globalised economy’ and  ‘multinational corporations’ (MNCs) operating  in an ‘international economy’. TNCs are globally-based and ‘footloose’.  They have an international management  team and are potentially willing to base their  operations, including, if necessary, their  headquarters, anywhere in the world. In contrast, MNCs have a national base, which is important to them, and a ‘home  government’.

Hirst & Thompson compared the 1987 sales, assets and profits of 500 comporations with  the sales and assets of more than 5,000 corporations in 1992-1993 as a test whether corporations were still MNCs or had  transcended into TNCs. They found that  home-based activities dominated in  measures such as the number of subsidiaries and affiliates, the location of assets and the place where profits were made. Eg: in 1992-1993 75% of German and  Japanese, 67% of American and 65% of  British manufacturing corporation sales were in the home region/country. From this the researchers concluded that MNCs were dominant in an international, rather than  globalised, economy.

Hirst & Thompson’s distinction between  TNCs and MNCs is far from universally  accepted. It is seen as being over-picky and  largely unfounded. Sklair (2003) points out methodological  issues with the research – eg: with home  regions…

  • ‘Germany’ includes the rest of Europe, the Middle East and Africa
  • ‘USA’ includes Canada
  • ‘Japan’ covers the whole of southeast Asia

Sklair also argues that shareholders do not encourage the corporation to act in the  interests of their home country but in their interests – that is, in the interests of the Capitalist shareholders, regardless of national  interests.

Whatever the criticisms, Hirst &Thompson  do draw attention to the fact that TNCs are not a distinct, homogenous entity; but, in fact, there are variations of TNC. For some the ‘national base’ is clearly much more important than it is to others.

Hirst & Thompson do concede that nation-states have lost economic power in a globalised world. However, they do contend that TNCs – or at least those corporations which could also be described as MNCs – have national headquarters, reflect national cultures, are regulated by the ‘home government’ and depend on the nation state’s institutions and support for their activities. They see the state as a “facilitator and orchestrator of private economic actors… It still retains one central role that ensures a large measure of territorial control – the regulation of populations. People are less mobile than money, goods or ideas: in a sense they remain ‘nationalised’, dependent on passports, visas, and residence and labour qualifications.”

TNC’s control of money and power
Critics are concerned that TNCs, along with the World Bank and the International Monetary Fund, are pressurising less economically- powerful countries into opening up their economies to Western private investment. Eg: American private healthcare companies have influenced the WTO to ‘encourage’ the privatisation of healthcare in developing countries. Even more of a concern is emerging evidence that TNCs are starting to target water for private investment in developing countries. Companies such as Shell and AT&T are virtually able to dictate the terms under which they will exploit oil resources or install telecommunications systems. For the most part, the agreements they extract reinforce their position of global importance. John Bunzl (2013) sees the massive and ever-increasing economic muscle of the TNCs pushing most nations into what he terms ‘destructive international competition’ to vie for their investment

Sklair (1995) claims: “Effective TNC control of global capital and resources is almost complete. There are few important resources that are entirely exempt from transnational practices. Transnational Capitalist classes rule directly through national Capitalist political parties or social democratic political parties that cannot fundamentally threaten the global capitalist system, or they exert authority indirectly to a greater or lesser extent as the price levied on the non-capitalist states as a sort of entrance fee into the global capitalist system.”

Marxists have expressed great concern about  the deregulation of global finance which, together with the advent of the internet and email, has led to massive movements of money  around the globe. Said E Dawlabani (2013) sees this deregulation, begun under Margaret Thatcher and Ronald Reagan, as the legitimisation of debt as a financial instrument for investment and the beginning of the road to the 2008 global crash when debts in the financial systems were so large as to be unsustainable. Dawlabani (p210) describes these financial  investment strategies as “bets masquerading as complex financial instruments”.

Particularly concerning is transnational finance  corporations engaging in currency speculation  for profit. This has resulted in the destabilisation  of currencies, both in the developing and the developed worlds, resulting in increased  unemployment and loss of savings. The forced departure of the UK from the European Exchange Rate Mechanism in 1992,  due to the actions of currency speculators like  George Soros, was one of the earliest  examples of currency speculators damaging an  economy. (In this case, a relatively powerful  one.) Some of the ongoing problems in the ‘eurozone’  are due, in part at least, to speculators targeting  the euro through weak economies like Greece,  Eire and Portugal. The 2008 financial crash, requiring banks in a number of countries to be bailed out by their governments, is reckoned by the IMF to have cost taxpayers worldwide $1.4T.

Evaluating the role of TNCS in globalisation
Wayne Elwood (2001, p61-62) clearly perceives some benefits in the way TNCs drive globalisation, writing: ‘They are at the cutting edge of technological innovation and they can introduce new management and marketing strategies. It’s also true that wages and working conditions are usually better in foreign subsidiaries of multinational companies than they are in local companies.”

Philippe Legrain (2002), a former special adviser to the Director-General of the WTO, acknowledges 4 main criticisms of the WTO:-

  • It does the bidding of TNCs
  • It undermines workers’ rights and environmental protection by encouraging a ‘race to the bottom’ between governments competing for jobs and foreign investment
  • It harms the poor
  • It is destroying Democracy by imposing its approach on the world secretly and without accountability

But Legrain also defends the WTO and  globalisation by suggesting:-

  • The power of TNCs and global brands is exaggerated – consumer choice shapes  the global marketplace, not brands.
  • TNCs are actually socially responsible – eg: Shell caved in to a handful of  Greenpeace activists over the disposal of  the Brent Spar oil platform.
  • It is misleading to compare the sales revenue of companies of the top  corporations with the GDP of countries  because they are measuring different  things.
  • Inferring from companies’ size that they are as powerful as countries is misleading because companies have to attract workers and capital that can go elsewhere but countries can impose tax and regulations. Governments can – and  frequently do – tame corporate giants. Eg: the European Commission stopped giant General Electric from buying Honeywell. Microsoft was nearly broken up by the US Government at the start of  the 2000s, with investigations continuing  in several American states and at the European Commission. The fines exacted from BP by the US Government over the 2010 Gulf of Mexico oil spill disaster were well over $22B, with eventual settlement of all litigation expected to cost the corporation in the region of £60B.
  • Taxes on corporation profits have steadily risen as a share of the wealthy OECD  countries’ GDP – eg: from 2.2%  in 1965 to  3% in 1999.
  • Businesses have to comply with a battery of government legislation on workers’ rights, product liability, health & safety and environmental protection, etc.
  • If TNCs are doing so well out of globalisation, why did US corporate  profits fall to 11% in 2000 and 9.3% in  20001 – in line with the average decline of 10.5% over the past 50 years? (Figures in the UK show a similar trend.)
  • The only ‘companies’ with powers even remotely comparable to those of states are the drugs cartels. Colombia’s earn billions of dollars every year, control  parts of the country, have private armies and operate with disdain for the laws of  the country.
  • If TNCs are so powerful, why do around 2,000,000 lawsuits get filed against American companies every year, with damages payouts of around $150B per year?