Posted on January 24, 2022 by Il Grido del Popolo©
The article was originally published in: Economic and Social Development 30th International Scientific Conference on Economic and Social Development, Varaždin Development and Entrepreneurship Agency in cooperation with Megatrend University, republic of Serbia University North, Croatia Faculty of Management University of Warsaw, Poland Faculty of Law, Economics and Social Sciences Sale – Mohammed V University in Rabat
“Namely, solely for profit-making, the company does not care for the interests of workers in developed countries when, along with the benefits of globalization, their production can be started in a less developed country with far less labor costs. This is perhaps the only equality brought about by economic globalization – the bad position of workers both in developed and undeveloped countries.”
Researching the processes of globalization reveals that we are facing the field which covers more dimensions: economic, social, political, cultural, religious and legal, and those are all linked together. This means they are susceptible to unique interpretations and explanations that take into account only one side of the problem. In addition, instead of adapting to the modern, Western model of globalization that is homogeneous and unbiased, the theories of modernization and theories of development, they are both relentlessly supportive of admirers of Lamb as well as those of Marks, therefore, for the last thirty years the process of globalization combines universality and the abolition of national boundaries, on the one hand, with special emphasis on local diversity, ethnic identity and return of value of communities, on the other hand (Albrow, 1990, pp. 34). Moreover, such a model of globalization implies a variety of things, interactive relationship with one another, overwhelming processes of world transformation such as a dramatic increase in inequality between rich and poor countries, between rich and poor in each country in particular, along with the ecology, disaster, ethnic conflicts, mass migration on the international plane, occurrence of new states and the collapse or decline of the old ones, growing number of civil wars, organized at a global level, or a formal democracy as a political condition for obtaining international assistance.
Before we offer the interpretation of contemporary globalization in order to describe its main features, from an economic, political and cultural standpoint, we could casually mention the three most important types of debates it has undergone, which are based on the following questions: Is globalization a new or old phenomenon? Whether it is monolithic or has positive and negative aspects? Where is the ever-increasing intensity of globalization?
All these deliberations are peculiar for the extreme need of globalization to dedicate the same attention to the social, political and cultural dimensions of globalization. Appearing as the main feature of globalization, the globalization can act as propagation of the idea that it is not just a single process, but an entire process behind the consensus. As we will demonstrate later, this is clearly not true. However, although wrong, this idea prevails. Although incorrect, it also contains the grain of truth. We cannot be saying that the globalization is based on consensus; on the contrary, we will see that it opens wider field for conflicts between different social groups, governments and hegemonists, interests, on one hand, and social groups, governments and subordinated interests, on the other hand. Even within the hegemonistic camp there are fewer or bigger divisions in that sense. However, in spite of all these divisions, the hegemonic camp exists based on the consensus of its most influential members. It is precisely this consensus that determines not only that the dominant objections of globalization become larger and legitimate as the only possible, or appropriate. Similar to the concepts that preceded it, such as modernization and development, the notion of globalization contains both a descriptive and a prescriptive component.
Given the length of the ongoing process, it prescribes a long list of regulations that are all based on the hegemonist consensus. That consensus is known as neoliberal; it refers to the future of the world economy, development policy and, in particular, to the role of the state in such an economy. Consensus did not, in the same way, determine all dimensions of globalization, but it influenced all of them, to a certain extent. The neoliberal consensus itself is a set of four consensuses. Today, this consensus has been relatively weakened because of the more severe conflicts within hegemonists, as well as because of the resistance to it; these conflicts and resistances are so strong that the period in which we now live is called the period of result of the British consensus. Still, we are just a neoliberal consensus imposed on to the state we live in today, which means that it has made the characteristics of present globalization very dominant. According to the different consensuses contained in the neoliberal consensus, there is one major idea on which meta-consensus is based. That idea comes to an end on the assertion that we enter into a period in which deep political scars disappear. There are no more imperialist controversies between hegemonic countries that in the twentieth century caused two world wars; the great dependence of the great powers has enabled the development of cooperation and regional integration (Bauman, 1992, pp. 80-90). Today, there are only small wars, many of which are of weak intensity and are almost always on the periphery of the world system.
- INTERNATIONALIZATION OF THE WORLD ECONOMY
The end of the 20th century characterizes a series of global changes in the structure, characteristics and types of products and services provided by providers of financial products and services in developed market economies (USA and EU). This was particularly evident in three areas: consolidation, unification and competition. At the same time, financial institutions have faced numerous new challenges, rapid changes that took place in information technology, deregulation, geography and expansion of production, globalization of business, laws, accounting standards, market and trends in the direction of many business combinations (Grbić, 2005, pp. 4-5). Globalization has many similarities with internationalization, and these two concepts often change, though many prefer to use globalization when they want to highlight the collapse of national borders. Strongly economically speaking, globalization is in contrast to economic nationalism and protectionism, while it is consistent with laissez-faire capitalism and neo-liberalism. There are three phases in the process of internationalization of the world economy. In the first phase, from the World War II by the end of the sixties, the world’s leading role was played by the world trade, and the degree of the internationalization was merited by a worldwide export share. In the second phase of internationalization, during the seventies, the foreign investments have the dominant role. The most dynamic is the competition between multinational corporations, and the measure of internationalization of some economy or company was determined by the participation of its production capacities in inactivity in sales made in the world market.
Globalization is called the third phase of the internationalization process in the world economy (OECD 1992). During the eighties, the third phase of internationalization, or the process of globalization, takes place mostly under the influence of technology. Ability to innovate, adapt and apply technology becomes a key element of industrial competitiveness, accompanied by new forms of investment and models of industrial organizations. The notion that some companies might be involved in international game relies on more complex technologies, maximum flexibility, products tailored to the specific market and a wide supply chain. New industrial forms are creating business, such as: joint ventures, subcontracting, licenses, agreements between companies, and international networks are established in the domain of research, production and information. The third phase of internationalization includes trade, investment and the establishment of global industrial networks. This indicates that it is no longer just about interdependence, but about intertwining through national economies, mainly through the activities of multinational companies. Earlier some of the measures of economic or sectoral policies acted largely within national frameworks, while today their work has significance for the economic development of the countries, and simultaneously it influences the world trade system. All this suggests that such a global economic system is created, whose main actors are multinational corporations connected through networks of various activities of the enterprises. Because of that, many industrial and trade policies deal with the global activities of the companies, and they are looking for competitive advantages in other countries. The governments of the OECD countries are trying to attract attention of multinational actors, but at the same time work to keep the biggest activity at home added value. National states and multinational corporations have a smaller matching part, and to a greater extent, contradictory interests. The key interest of multinational corporations is that its competitiveness does not originate solely from the resources of the parent or any individual nationwide economics, rather than having global resources available (Dasić, 2003, pp. 222-225).
2.1. Economic integration as a consequence of globalization
The globalization process has led the world into huge structural changes. Economic integration is basically market integration. Free movement of goods and services is a fundamental principle of economic integration. As well-known from the classical theory of international trade, free exchange of goods is promising a positive impact on the prosperity of everyone to whom it relates. It allows consumers to choose cheap prices, and wider choice of options. The increase in the social wealth, arising from market liberalization of products, is a good economic reason to begin integration with this goal (Prvulović, 2010, pp. 43-45).
Today, there are different types of cooperation between sovereign states. The cause of any cooperation is globalization, which promotes international relations and contributes to their diversity. We talked about cooperation between countries at a global level, but first we have to start from a particular country and its region. The performance on the global level will depend on what kinds of relationships are established between the countries in their region. In addition to the bilateral and multilateral cooperation, we recognize increasingly difficult and institutionalized form of economic, financial, technological, security, and other cooperation between the regions of individual countries (province, republic), the state within the framework of formed regional economic integration (group), and regional integration itself. The most prominent among all aspects of regional cooperation is certainly the economic one. The emergence of numerous regional integrations has become global megatrend. Economists are aware of the size and power of the market, the flow of capital, services, and labor in the countries of the modern world (Friedman, 2000, pp. 636-656).
Free movement of production factors can be understood as the second foundation of economic integration. One argument for this is that it allows an optimal allocation of labor and capital. Sometimes some factors of production are missing in places where production is most economical. In order to solve that problem, the entrepreneurs should be ready to move their capital from places where they could achieve a low gaining to places that promise more. The same goes for the workforce: the employees will migrate to the regions where their work is more demanding and therefore better rewarded. The second argument is that the expanded factor of market production provides new production possibilities, which, in turn, allows it to be more modern and more efficient (new credit lines, new occupations). The choice of the production factor for the goal of the second phase of the integration process is partly based on the economic advantages derived from such integration. However, here we must also consider political logic. Labor market integration seems to be an obvious choice in periods of general shortage of labor. The list of national regulations on wages, social security, etc., it seems that it left the opportunity to leave for practical intervention on a national basis, in order to agree to accept the general principles at the European level. As for the integration of capital markets, the issue of direct investment becomes clear; many countries can hope to attract new foreign investments in this way. For other types of movement of the capital, the desire for integration is less obvious, because integration implies a disclaimer of control through sensitive macroeconomic instruments (Sassen, 1998, pp. 35).
According to the opinion of many authors, the economic component of the process of globalization is actually the most important one and it is precisely the economic interdependence and integration, above all, (the EEC primer) that, in addition to technological revolution, has contributed to the intensification of globalization, during the seventies and the eighties of the 20th century. As one of the arguments in favor of this theory, it is stated that the very term globalization itself appeared in a single text dealing with economic analysis of imports into Italy in 1959. One of the strong arguments in favor of this theory has been the fact that the economic relations are those that dictate social relations, their change and the pace of their changes, and that they are in reality the drivers of political changes, cultural trends and technological innovations. According to the abovementioned, it is entirely logical that globalization, as one of the essentially social phenomena, has its roots in economic changes, so that, for example, the neoliberal economy imposes the subordination of all expansion and strengthening of the market and the increase of profits, and accordingly promotes technological progress to make it all easier. Therefore, culture develops in that direction, foreign policy is put in the service of protecting and spreading such market, and social policy is minimized (Giddens, 2000, pp. 55).
The elimination of the limits of capital, the greater interdependence of financial events, the division of production, the availability of products from all over the world are only some of the consequences of economic globalization, while as the main confirmation of economic globalization and its best indicator is the number of direct foreign investments in a particular economy. It takes this factor as a proof of economic globalization, and it has to be approached with a specific reserve, as the research shows, that direct investment is geographically, regionally grouped among the economically most developed parts of the world (USA, Western Europe, Southeastern Asia), in favor of regionalization rather than globalization, and again confirms the previously outdated attitude of “the injustice” brought by globalization and the political component of regionalization within the multi-polarization. Far more robust confirmation of economic globalization is the growth of transnational companies (TNC) and the more active role of global financial institutions in creating financial policy (Sirkin, 2008, pp. 73). Especially since the GDP of these companies is a lot bigger than the GDP of some states, as evidenced by the statistics of the International Monetary Fund in 2012, with GDP of over $50 billion. Companies have achieved this success thanks to their approach to global production and distribution, including a wide territorial network of companies and affiliation with specific markets, with the forthcoming expansion of the market, and numerous subsidies to the governments of host countries and know-how in attracting the foreign investments, sometimes not so much calculated.
Capital is thus, without any doubt the most important and invisible launcher of globalization and it serves as an ideal tool for its largest holders, in the most developed states and stationed TNCs which perform the neoliberal doctrine, keeping in mind that neo-liberalism could increasingly take on a totalitarian character that could glorify the cult of violence and abuse of rights but also the ignorance and devaluation of workers’ rights, something that is already happening. Namely, solely for profit-making, the company does not care for the interests of workers in developed countries when, along with the benefits of globalization, their production can be started in a less developed country with far less labor costs. This is perhaps the only equality brought about by economic globalization – the bad position of workers both in developed and undeveloped countries.
It is reported that in 2006 the number of billionaires increased to over 200 while at the same time 1.2 billion people lived with less than $ per day, and 20% of the richest people consumed 67% of the world’s national income while at the same time 20% of the poorest consumed 1% of the same, as most of the world’s capital is housed in the hands of the newly-formed elite of TNC and the government of the most powerful countries. Prior to these figures, this concept brought about the so-called “business complex”, which unambiguously points to the growing inequality and the fact that the globalization only deepens it, so there is no wonder the UN delineates those 48 countries in the world actually have no benefit from economic globalization (UNDP Human Development Report, 2001).
- ECONOMIC GLOBALIZATION
Globalization is, however, mostly considered from an economic point of view, since it can be said that the other aspects of globalization are the side effects of globalization in the service of economic globalization. Economic globalization is based on the minimized role of the state, with the preponderance on the free market, the principle of liberalism, based on perfectly fructifying market mechanisms that have been institutionalized through the international economic relations. Under economic globalization the overall liberalization of trade flows continuously, which is underlined by the capital on the international scale, with the mobility of production factors such as labor, ideas, information, and technology. Economic science has been mainly focused on studying: financial globalization, regionalization of the economy, co-financing capital and creation of global transnational companies, intensification of the world trade and its liberalization. They all marked the end of the 20th century that was followed by the major events that have affected the globalization of the economy: the collapse of Eastern European socialist bloc with the abandonment of the socialism in the economy, the creation and strengthening of the North American Union, the European Union and the East Asian Union, in recent times the rise of the BRICS economy, the globalization of the world economy on the basis of permanent technology discoveries and processes of capital internationalization and concentration of economic power (Dimitrijević, Ladjevac, 2013, pp. 11-20). Globalization is global availability of information and exchange of information through new information-communication technologies (ICT). This aspect of globalization can be summarized in three letters – WWW. Together with technology, mobile and smart phones, ICT have become an opportunity to connect individual and global through social networks and to exchange information of different levels of importance (Castells, 1996, pp. 116-130). These technologies enable breakdowns of work places all over the world from one country to another where workers are in need of information available because we live in a time when it becomes clear that the job does not have to be tied to a fixed location. It is interesting to hear that the term “globality” is being often referred to a situation in which the process of globalization is already over and there is a glimpse of new global reality. Contemporary use of this term is the most relevant one for boosting competition. This situation is characterized by the structural shift of trade flows and companies that compete for consumers, suppliers, partners, capital, capacities, and distribution systems.
3.1. Consequences of globalization
The first consequence of globalization is related to the deep crisis of moral and system of values. There are three basic ethical challenges that have led to the global crisis: 1) the enormous greed expressed through the profit-making; 2) absence of empathy and elemental feeling for another human; 3) the ethos modeled to encourage borrowing, gaining and spending. This life orientation produces stress for world population, resulting in a loss of happiness, and neglecting emotional, friendly and humane social relationships. Accordingly, the ethical challenges of globalization are in the interaction and make the future rather uncertain. The essence of uncertainty is related to survival, debt crisis, personal insecurity and geopolitical challenges. The ethical challenges of globalization are in direct contact with economic, social, psychological and other risks that interact with one another. Primarily, ethical challenges manifest themselves in deepening the gap between the rich and poor, the rude behavior of business and political elites (which suggests growing number of reported scandals and corruption), inadequate market regulation, shrinking gray and black market, etc. Such an ambience of constraints in economic and social prosperity determines the materialist culture that has emerged from globalization. On the other side, the growth of ecological and social problems has enormous damage on people, entire communities and future generations (Robertson, 1992, pp.178-185). All listed sufficiently points to the consequences of a global crisis which is not apparent only in the economic dimension. Those who expected “dividends of prosperity” today do not hide their disappointment. The world has become neither serene, nor more secure, nor humane. On the contrary, instead of benefiting from globalization and the expected economic growth and the social well-being of the inhabitants of the planet, the social community is faced with many challenges of multi-dimensional character.
Modern international economic processes represent a part of the long-term global transition from industrial to postindustrial society and from the internationalization of economic life to the globalization. Many economic, technological, institutional, political, cultural and other parameters show contradictory tendencies: globalization, on one hand, unites the world, and on the other hand it divides it on post-industrial civilization and various variants of the pre-industrial and industrial civilization. Difficulties in understanding the complex and contradictory processes of globalization, and especially its numerous consequences and accompanying phenomena cannot be explained unambiguously, except perhaps by using the existence of proclaimed dynamics of the development of human society in general, as well as the large volume of changes (Beck, 2992, pp. 17-44). In economics, integration means new ways of connecting in national, regional and international proportions. It signifies various processes of internationalization of production processes and economic activities, in general. In addition to economic integration, the modern world integration processes are also exercised in the political and military spheres. In this context, regional economic integrations are represented, regardless of some of their undeniable autonomous determinants, as integral part of the process of globalization of the world economy (Yergin, 2002, pp. 67-75). Regionalization and globalization are represented as complementary rather than divergent processes.
The most progressive example of creating a successful regional economic integration is the European Union created more than fifty years ago, continuing its development and expansion. It was a unique model for economic regional integration that was later created in other regions of the world (NAFTA, MERCOSUL, ASEAN, etc.). Regional economic integrations are, in fact, a link in the chain of increasing interdependence of states and actors of the world market scene; they are one of the essential mechanisms that enable intensive realization of globalization of the world economy. Regional economic integration is the economic cornerstone of the global trade liberalization, which fosters universal economic competitiveness. For Serbia, the development of regional cooperation in the Southeastern Europe, and especially in the Western Balkans, is a powerful instrument for speeding up the accession to the European Union. In order to make this process more effective, it is necessary to achieve close coordination and cooperation with other countries in the region by implementing reforms and joint projects related to European integration.
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Author: prof. Ljubica Vasić, PhD