Stability, Freedom, Individuality in an age of Globalization
About this Herald feature...
A lot is being said these days about the global economy — and the concept of globalization. There are positive and not-so-positive thoughts regarding this issue, and there's a great deal of discussion as to where globalization might ultimately lead. In this special feature, we'll explore the issue.
We'll begin with an introduction by David Francis, Senior Economics Correspondent for The Christian Science Monitor. Then we'll hear from some 35 people our staff has talked with about this issue worldwide. And we'll conclude with a roundtable discussion by the Herald Managing Editors, looking at globalization from a spiritual standpoint.
Introduction
What is this trend dubbed globalization?
Fundamentally, it includes the rapid internationalization of the world economy. Most nations are becoming more dependent on each other economically. Just as space travel revealed more clearly the unity of our environment on earth, the evolution of commerce is binding humankind together.
Yet, currently, the world is going through its most serious crisis of globalization.
It started more than a year ago, when a financial emergency hit such East Asian nations as Indonesia, Thailand, and South Korea, and they began to tumble economically. Then last summer, Russia was forced to devalue its currency, the ruble, and impose a moratorium on some debt payments. Then Brazil wanted its currency propped up on foreign exchange markets by a huge loan from the International Monetary Fund, a Washington-based multilateral institution.
Fears have mounted that this crisis will spread to Western Europe, the United States, and Canada, bringing a recession with it.
World trade usually grows more rapidly than output in individual nations. In the US, for instance, exports amounted to about 4% of the nation's total output of goods and services in 1958. Today, four decades later, exports come to 12% of output. Imports this last year were equivalent to 13% or more of what economists call “gross domestic product.” In the current crisis, American exports have started to decline, while imports have grown rapidly. Thereby the US has its worst trade deficit ever — probably around $250 billion in 1998.
Another factor in globalization is the surge in international investment. There are more than 50,000 “transnational” firms today, with some 450,000 foreign affiliates. These multinational companies do more than export their goods and services. They do business in foreign countries through branches, subsidiaries, and other affiliates. These are the Sonys and the Fords and the Microsofts of the world, plus thousands of others with less familiar names. They already account for some 7% of all the goods and services produced in every nation on earth. Despite the Asian financial crisis, in 1997 they made $400 billion of direct investments in plants, equipment, and offices in nations outside those where they are based — and probably more in 1998 — according to the World Investment Report of the United Nations Conference on Trade and Development.
Supporting this huge volume of international commerce and investment, average daily foreign exchange transactions have grown from $15 billion in 1973 to more than $1.2 trillion by now. Such international money transactions exceed trade flows by 60 to 1.
There are pros and cons to globalization.
One positive side is the spread of prosperity to what used to be called the “developing” nations. Today, these are often termed “emerging” nations, since these also include former communist countries. Trade thrives because it generally makes economic sense. Americans and Europeans buy South Korean VCRs because they are well made and relatively cheap. The US sells many tons of wheat abroad because American farmers can grow it efficiently at low cost. Transnational companies spread modern technology, management methods, and marketing practices to less developed nations.
As a result of these benefits, the per capita output of developing countries has nearly tripled since 1960. Living standards and life expectancy have risen quickly in these countries. Middle-income nations have rapidly industrialized.
But there has been a negative side to globalization.
For one thing, it has brought greater financial volatility, as seen in the recent crisis. Investors who put huge flows of money into emerging nations can, when frightened, take it out even more rapidly. Such sudden shifts can force currency devaluations, rattle financial institutions, and bring about recession, declining corporate profits, and high unemployment.
Downturns can spread. Economists speak of “contagion” or “infection.” People living in the weakened economies in the Far East and elsewhere buy fewer goods from Europe, the US, and other industrial nations.
But another element of the equation is fear. For example, if European and American financial institutions are afraid to lend as much, and businesses and consumers in the industrial nations are too frightened to borrow as much, or spend less of the money they already have, the economy could slow further. Concern over a “credit squeeze” and a spending slump is one reason why the Federal Reserve decided last fall to lower interest rates.
Another criticism of globalization is that it has reduced job security in the industrial nations, especially for lower-skilled workers. Companies buy more input from abroad or actually produce more goods in foreign countries where labor is cheaper, taking jobs from, say, American workers. Or the foreign competition may depress wages and benefits in the industrial nations, especially in the case of goods that can be made easily in low-wage nations. Contrariwise, for those with skills and education, globalization can increase the demand for their services.
Some critics also charge that globalization is marginalizing some nations with extremely low incomes, such as those in sub-Saharan Africa. They are not making much progress against poverty.
Finance ministers, central bankers, and other leaders are striving to remedy these globalization problems, especially the increased volatility it has brought to the world financial system. Many solutions are being explored or implemented. But cures aren't proving easy, since they often involve reform in developing nations and a greater sense of accommodation or generosity in richer countries. Plain self-interest sometimes clashes with enlightened self-interest.
In general, though, it is becoming more recognized that our own welfare depends to an increasing degree on the welfare of those in other nations, often far away from home. Prosperity must be shared.
Taking this concept a giant step higher, Mary Baker Eddy wrote more than a century ago in Science and Health with Key to the Scriptures: “In the scientific relation of God to man, we find that whatever blesses one blesses all, as Jesus showed with the loaves and the fishes, — Spirit, not matter, being the source of supply” (page 206).
This feature originally appeared in the January 1999 French, German, Portuguese, and Spanish Heralds.
