Globalization: Old and New

There exist two distinct phases of globalization of very different nature, which I’d like to call the old and the new.

The former occurred around the turn of the 16th century when European explorers began to venture out and colonize other parts of the world, aided by the technologies of the Industrial Revolution especially the steam engine and naval guns. The old globalization is characterized by empire building overseas, world wars, gross injustice, and uneven distribution of wealth. Since only a few countries benefited from the old globalization, the result was a great divide between a small industrialized world and the rest, that is, a much larger underdeveloped world.

The era of colonization began to fade after World War II, ushering in the new globalization of modern days with the development of international commerce. The impetus came when China began dismantling its communist economic system around 1980 in favor of open-door capitalism. Again, technology has made it possible. This time it is the Information Revolution in addition to modern aviation and shipping containerization for the movement of people and goods around the world.

By contrast, the new globalization is marked by global trade, investment and communication; intense business competition; home grown entrepreneurship; the rise of the middle class; and much wider spread of wealth. Although relatively peaceful, the disruptions to the status quo are far greater than the previous one. This is known as creative destruction where the new way of life buries the old one in an increasingly faster pace, while huge opportunities are being created at the same time.

Old Globalization

The old globalization was initiated by a few maritime countries in Europe, namely, Portugal, Spain, France, the Netherlands, and Great Britain that were naval powers filled with adventurism. Although the rest of the world was not ready, globalization was brought and imposed upon them nonetheless by the Europeans in the form of colonial rule, exploitation and slave trade. What did colonization entail? Basically, a group of European settlers arrived and claimed the new territory as part of their own country. Then they established production facilities and trade connections to ship gold and raw materials back to the motherland. They also shipped slaves grabbed from the African population to other colonies in the Americas. Did the natives resist? Of course they did, but they were outgunned and outmaneuvered.

Capitalizing on the latest technology, the Europeans extended their influence to the colonies overseas. As a consequence, English and French have become official languages in North America. So are Spanish and Portuguese in South America. The United States has grown to superpower status from an initial colony of English settlers. India is known as the world’s largest democracy, a legacy of British colonial rule. On the negative side, most countries of Africa, Asia and the Middle East have gone through a long period of struggle to achieve independence from Western colonization. After that they have yet to deal with underdevelopment that will last well into the future.

One group of people suffered the most under the old globalization. During the heydays of slave trade, millions of African natives were uprooted and shipped to the American colonies to work in the plantations against their will. Although slavery was eventually abolished, the legacy remains that the black community is put down as an underclass mired in poverty, and subject to all kinds of racial discrimination still existing. To millions of ethnic Africans living in North and South America, the old globalization means being uprooted and transplanted thousands of miles from their homeland with depressing implications for their offspring. This is the worst nightmare that has befallen the black community, in great contrast to the other ethnic immigrants who came voluntarily in search of a better life.

Do you think war is a form of globalization? What about the Second World War? This war was in fact waged between only three industrialized countries with scores to settle, namely, Germany against Great Britain and France. The other smaller European countries were victims just because they happened to be neighbors to those three. The war later widened further because Italy and Japan joined Germany to form the Axis, and the US and USSR joined Britain to form the Alliance. World War II became truly global because those warring states had already established their worldwide empires, thus dragging their colonial territories into the conflict. No wonder British and German troops fought in North Africa; British and Japanese troops fought in Singapore; and US and Japanese troops fought in the Philippines. They were fighting to keep their colonial territories rather than for the natives, who never wanted to have foreigners fighting on their soil in the first place. This shows the violent and unjust aspects of the old globalization.

The Cold War that followed the end of the Second World War pitched one ideology against another, that is, American capitalism against Soviet communism. Because these two emerging superpowers possessed a huge arsenal of nuclear weapons, the rest of the world felt the need to coalesce around them for security and protection. Thus we saw two superpowers dividing the world into two opposing camps for more than 40 years. In late 1989, the implosion of the USSR ended the Cold War suddenly, and removed the last barrier to the new globalization.

New Globalization

By contrast, the new globalization is not imposed by the Western powers, but aided by Western technology introduced by multinational corporations trying to outsource production to low-wage countries. The new globalization first blossomed in China with a new open-door policy and plenty of labor. This has resulted in China becoming a manufacturing center of the world. Later, India has also risen to become the service center, especially for software development and telephone answering service. This new globalization is based on home grown low-wage labor and brainpower. There are plenty of them because China and India together account for about one-third of humankind. Other emerging countries are waiting in the wings, such as Brazil, Russia, Indonesia, Mexico, etc., which all have vast landmass and big populations. They have one more resource that China and India lack. They possess raw materials such as oil, gas, timber, minerals, etc. It would be interesting to see how those countries take advantage of the new opportunities.

The new globalization now sprouting in Asia will eventually spread to different corners of the globe through international commerce and investment. The most important consequence is the growth of the middle class, estimated at 500 millions in China alone. The lifting of so many people out of poverty cannot be a bad thing. Politically, it also means the advancement of democracy that depends on a large vibrant middle class asserting its own people power. The growth of the middle class undoubtedly contributes to a bigger market and a more even distribution of income. Consequently, it will make a more stable society, too.

Despite the expansion of the middle class, the new globalization does not mean everybody will reap the fruits of progress equally. On the contrary, many people will be left behind, especially those who lack specialized skills, and those who bury their heads in the sand. However, some entrepreneurs will become billionaires because of two reasons. First, the market spills over borders easily due to the rise of international commerce. Second, modern technology helps the market expand with lightning speed.

The new globalization seems to benefit the developed countries less. For over two decades now, their growth rates have mostly been lackluster. Unemployment has become a big issue due to continued corporate outsourcing to low-cost countries. Western corporations are making more money overseas. They just cannot see the benefits of investing in their own countries due to higher costs. On the positive side, Western countries have enjoyed relatively tamed inflation due to cheap imports from the developing world. They have also enjoyed relatively low interest rates because China continues to buy large amounts of US and Euro bonds. This new environment means that the developed world have to accept tougher competition from the developing world.

The new globalization has achieved two great things. First, it made us aware that the world has limited resources to be shared by all. What are the limited resources? They comprise fresh water, agricultural land, food supply, wildlife, timber, minerals, and other raw materials including oil. During the times of the old globalization, a small number of industrialized countries took control of nearly the entire supply of world resources via territory occupation. No wonder the resources seemed limitless for a small minority to consume while the rest of the world was shut out because they were powerless. Nowadays, with the rise of China, India, and many others, billions more people will want to share the same limited amounts of resources. This raises the urgency of conservation and efficient usage, and the development of new and alternative resources. Herein lie the opportunities in the face of a great challenge.

Second, the new globalization creates a monumental survival problem that we only started to think about recently. The problem is environmental pollution. The rise of middle class consumption means environmental pollution will become much worse. No pollution seems bigger than global warming that is essentially over-polluting the atmosphere with carbon dioxide and other greenhouse gases. Carbon dioxide really makes us see this global problem because of the devastating impacts of climate change on crops and ocean levels. No country can solve this problem alone without cooperating with all the others. Despite so many things that tear us apart, the urgent survival problem of global warming, still being rejected by many as unfounded, may just be able to bring us together someday.

(January 2012)

This entry was posted in 21st Century, Business/Investment, Economics/Politics. Bookmark the permalink.

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