Globalization

 

"The term globalization has come to be emotionally charged public discourse. For some, it implies the promise of an international civil society, conducive to a new era of peace and democratization. For others, it implies the threat of an American economic and political hegemony, with its cultural consequence being a homogenized world resembling a sort of metastasized Disneyland"

Peter L. Berger

 

What is globalization?

George Soros defines globalization as the "free movement of capital and the increasing domination of national economies by global financial markets and multinational corporations."

Export Processing Zones are the mechanism through which global production chains are elaborated, and their prospects are closely linked to the dynamics of global investment and trade. As production costs rose in developed market economies firms shifted the labor intensive parts of the production process offshore where EPZs provided an attractive base. Enterprises either set up their own plants or built up a network of sub-contractors, with whom they often work very closely in order to ensure that performance is satisfactory. Given the trend towards de-verticalization whereby major brands concentrate only on the design and marketing of their brand and sub-contract all the manufacturing activities we can expect to see even more production taking place in zones.

The growth of EPZs is a direct result of globalization. "The free trade, foreign investment, and export-driven ethos of the modern economy has transformed them into 'vehicles of globalization'."

 

How has globalization affected EPZs?

Countries like the Dominican Republic are beginning to realize that-

  • competition for investment is intensifying--which makes it harder to attract and retain investors
  • competition in international product markets are increasing--this forces firms to become more competitive
  • the increasing use of technology reduces the labor cost component--this might cause enterprises to move back to higher labor-cost production sites
  • the rise of trading blocs like NAFTA are having a major influence on where investors decide to locate
  • producing quickly and cheaply without compromising quality, and constantly improving are needed for survival
  • for trade unions it is a question of overcoming the obstacles to organizing in the zones and then developing appropriate responses to the new forms of human resource management and organization of work spawned by globalization.

Many zone enterprises are fighting this losing battle to meet higher standards by working harder, but the most competitive enterprises in each zone have realized that the trick is to work smarter. In the case of large multinationals constant improvement and human resource management techniques may be planned at headquarters level and implemented company wide, but many of the enterprises at zone level do not have such conscious strategies or capacities. For them the switch from working harder to working smarter is a far more haphazard and accidental one often forced upon themby crisis rather than by planning.

 

Arguments for and against globalization-

 

For Against

International trade helps economic development when a country's exports drive its economic growth

Globalization does not reduce the poverty as it promises
Standard of living is far better It does not ensure stability within a country
It reduces the sense of isolation--developing countries access knowledge well beyond the reach of even the wealthiest in any country a century ago Western countries have pushed poor countries to eliminate trade barriers, but kept up their own barriers, preventing developing countries from exporting their agricultural products and so depriving them of desperately needed export income
It allows financial capital to move around freely The movement of capital is allowed, but the movement of people remains heavily regulated

Does globalization lead to a "race to the bottom"?

The current debates over economic globalization have produced a seemingly simple and intuitive conclusion: Unfettered globalization triggers an unavoidable "race to the bottom" in labor and environmental standards around the world. The reduction of restrictions on trade and cross-border investment frees corporations to scour the globe for the country or region where they can earn the highest return. National policies such as strict labor laws or rigorous environmental protections lower profits by raising the costs of production. Multinational corporations will therefore engage in regulatory arbitrage, moving to countries with lax standards. Fearing a loss of their tax base, nation-states have little choice but to loosen their regulations to encourage foreign investment and avoid capital flight. The inevitable result: a Darwinian struggle for capital where all other values-including workers' rights and the environment-are sacrificed upon the altar of global commerce.

In an article entitled "Bottom Feeders," Daniel Drezner claims that opponents of globalization, including environmentalist, labor unions, and a multitude of NGOs advance the myth of a race to the bottom to oppose further global market integration. He writes:

"The race to the bottom is a wonderful rallying tool for fundraising and coalition building and also serves as the perfect bogeyman, allowing these groups to use scare tactics derived from previous domestic policy campaigns against nuclear power and acid rain. Such strategies are consistent with a pattern of exaggerating dangers to capture the attention of the press and the public: Only by crying that the sky is falling can antiglobalization forces rouse complacent citizens."

The core of the race-to-the-bottom hypothesis is that profit-maximizing firms will locate to places where the production costs are relatively low. Since any regulatory standard presumably raises these costs, corporations will seek out countries with the weakest possible standards. Whether or not this race to the bottom exists, which Drezner does not seem to have faith in, it is important to see that by depicting a world without choices, the race to the bottom taps into the primal fear of a loss of control. Governments and citizens appear powerless in a world dominated by faceless, passionless capital flows. This perceived lack of control prompts unease for the same reason that many people prefer driving a car to flying an airplane even though the latter is safer. Even if driving is riskier, at least we are in control behind the steering wheel.

 

back to Eco. Impacts back to Home top of Page