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Characteristics:

Globalization /
internationalisation has
become identified with a
number of trends, most of
which may have developed
since World War II. These
include greater international
movement of commodities,
money, information, and
people; and the development
of technology, organizations,
legal systems, and
infrastructures to allow this
movement. The actual
existence of some of these
trends is debated.
• Economically
oIncrease in international
trade at a much faster rate
than the growth in the
world economy
oIncrease in international
flow of capital including
foreign direct investment
oCreation of international
agreements leading to
organizations like the WTO
and OPEC
oDevelopment of global
financial systems
oIncreased role of
international organizations
such as WTO, WIPO, IMF
that deal with international
transactions
oIncrease of economic
practices like outsourcing,
by multinational
corporations
• Culturally
o Greater international
cultural exchange,
o Spreading of
multiculturalism, and
better individual access to
cultural diversity, for
example through the
export of Hollywood and
Bollywood movies.
However, the imported
culture can easily supplant
the local culture, causing
reduction in diversity
through hybridization or
even assimilation. The
most prominent form of
this is Westernization, but
Sinicization of cultures also
takes place.
o Greater international travel
and tourism
o Greater immigration,
including illegal
immigration
o Spread of local foods such
as pizza, Chinese and
Indian food/Pakistani Food
to other countries (often
adapted to local taste)
o World-wide Fads and Pop
Culture such as Pokemon,
Sudoku, Numa Numa,
Origami, Idol series,
YouTube, MySpace, and
many others.
o Increasing usage of foriegn
phrases. Example...
"Amigo" and "Adios" are
Spanish terms many non-
speaking spanish people in
the US understand, Most
Americans understand
some French, Spanish or
Japanese without actually
knowing the language.
• Development of a greater
transborder data flow, using
such technologies as the
Internet, communication
satellites and telephones
• Increase in the number of
standards applied globally;
e.g. copyright laws and
patents
• Formation or development of
a set of universal values
• The push by many advocates
for an international criminal
court and international justice
movements
Barriers to international trade
have been considerably lowered
since World War II through
international agreements such
as the General Agreement on
Tariffs and Trade (GATT).
Particular initiatives carried out
as a result of GATT and the
WTO, for which GATT is the
foundation, have included:
• Promotion of free trade
o Of goods:
Reduction or elimination
of tariffs; construction of
free trade zones with
small or no tariffs
Reduced transportation
costs, especially from
development of
containerization for
ocean shipping.
o Of capital: reduction or
elimination of capital
controls
o Reduction, elimination, or
harmonization of subsidies
for local businesses
• Intellectual property
restrictions
o Harmonization of
intellectual property laws
across nations (generally
speaking, with more
restrictions)
o Supranational recognition
of intellectual property
restrictions (e.g. patents
granted by China would be
recognized in the US)
Anti-globalization:
Critics of the economic aspects of
globalization contend that it is
not, as its proponents tend to
imply, an inexorable process that
flows naturally from the
economic needs of everyone. The
critics typically emphasize that
globalization is a process that is
mediated according to elite
imperatives, and typically raise
the possibility of alternative
global institutions and policies,
which they believe address the
moral claims of poor and working
classes throughout the globe, as
well as environmental concerns
in a more equitable way. In terms
of the controversial global
migration issue, disputes revolve
around both its causes, whether
and to what extent it is voluntary
or involuntary, necessary or
unnecessary Increase in
international flow of capital
including foreign direct
investment Critics of the
economic aspects of globalization
contend that it is not, as its
proponents tend to imply, an
inexorable process that flows
naturally from the economic
needs of everyone. The critics
typically emphasize that
globalization is a process that is
mediated according to elite
imperatives, and typically raise
the possibility of alternative
global institutions and policies,
which they believe address the
moral claims of poor and working
classes throughout the globe, as
well as environmental concerns
in a more equitable way. In terms
of the controversial global
migration issue, disputes revolve
around both its causes, whether
and to what extent it is voluntary
or involuntary, necessary or
unnecessary; and its effects,
whether beneficial, or socially
and environmentally costly.
Proponents tend to see migration
simply as a process whereby
white and blue collar workers
may go from one country to
another to provide their services,
while critics tend to emphasize
negative causes such as
economic, political, and
environmental insecurity, and
cite as one notable effect, the
link between migration and the
enormous growth of urban slums
in developing countries.
According to "The Challenge of
Slums," a 2003 UN-Habitat
report, "the cyclical nature of
capitalism, increased demand for
skilled versus unskilled labour,
and the negative effects of
globalisation "in particular, global
economic booms and busts that
ratchet up inequality and
distribute new wealth unevenly"
contribute to the enormous
growth of slums.
Various aspects of globalization
are seen as harmful by public-
interest activists as well as
strong state nationalists. This
movement has no unified name.
"Anti-globalization" is the
media's preferred term; it can
lead to some confusion, as
activists typically oppose certain
aspects or forms of
globalization, not globalization
per se. Activists themselves, for
example Noam Chomsky, have
said that this name is
meaningless as the aim of the
movement is to globalize justice.
Indeed, the global justice
movement is a common name.
Many activists also unite under
the slogan "another world is
possible", which has given rise
to names such as
altermondialisme in French.
Economic arguments by fair
trade theorists claim that
unrestricted free trade benefits
those with more financial
leverage (i.e. the rich) at the
expense of the poor. Many "anti-
globalization" activists see
globalization as the promotion of
a corporatist agenda, which is
intent on constricting the
freedoms of individuals in the
name of profit. Some "anti-
globalization" groups argue that
globalization is necessarily
imperialistic, is one of the
driving reasons behind the Iraq
war and is forcing savings to
flow into the United States
rather than developing nations;
it can therefore be said that
"globalization" is another term
for a form of Americanization, as
it is believed by some observers
that the United States could be
one of the few countries (if not
the only one) to truly profit from
globalization.
Some argue that globalization
imposes credit-based
economics, resulting in
unsustainable growth of debt
and debt crises. The financial
crises in Southeast Asia, that
began in the relatively small,
debt-ridden economy of
Thailand but quickly spread to
Malaysia, Indonesia, South Korea
and eventually was felt all
around the world, demonstrated
the new risks and volatility in
rapidly changing globalized
markets. The IMF's subsequent
'bailout' money came with
conditions of political change
(i.e. government spending
limits) attached and came to be
viewed by critics as undermining
national sovereignty in neo-
colonialist fashion. Anti-
Globalization activists pointed to
the meltdowns as proof of the
high human cost of the
indiscriminate global economy.
The main opposition is to
unfettered globalization
(neoliberal; laissez-faire
capitalism), guided by
governments and what are
claimed to be quasi-
governments (such as the
International Monetary Fund and
the World Bank) that are
supposedly not held responsible
to the populations that they
govern and instead respond
mostly to the interests of
corporations. Many conferences
between trade and finance
ministers of the core globalizing
nations have been met with
large, and occasionally violent,
protests from opponents of
"corporate globalism".
Some "anti-globalization"
activists object to the fact that
the current "globalization"
globalizes money and
corporations, but not people and
unions. This can be seen in the
strict immigration controls in
nearly all countries, and the lack
of labour rights in many
countries in the developing
world.
Another more conservative
camp opposed to globalization is
state-centric nationalists who
fear globalization is displacing
the role of nations in global
politics and point to NGOs as
encroaching upon the power of
individual nations. Some
advocates of this warrant for
anti-globalization are Pat
Buchanan and Jean-Marie Le
Pen.
The movement is very broad,
including church groups,
national liberation factions, left-
wing parties, environmentalists,
peasant unionists, anti-racism
groups, anarchists, those in
support of relocalization and
others. Most are reformist,
(arguing for a more humane
form of capitalism) while others
are more revolutionary (arguing
for a more humane system than
capitalism). Many have decried
the lack of unity and direction in
the movement, but some such
as Noam Chomsky have claimed
that this lack of centralization
may in fact be a strength.
Protests by the global justice
movement have forced high-
level international meetings
away from the major cities
where they used to be held, into
remote locations where protest
is impractical.
Pro-globalization
(globalism):
Supporters of democratic
globalization can be labelled
pro-globalists. They consider
that the first phase of
globalization, which was
market-oriented, should be
completed by a phase of
building global political
institutions representing the
will of world citizens. The
difference with other
globalists is that they do not
define in advance any
ideology to orient this will,
which should be left to the
free choice of those citizens
via a democratic process.
Supporters of free trade point
out that economic theories of
comparative advantage suggest
that free trade leads to a more
efficient allocation of resources,
with all countries involved in the
trade benefiting. In general, this
leads to lower prices, more
employment and higher output.
Libertarians and other
proponents of laissez-faire
capitalism say higher degrees of
political and economic freedom
in the form of democracy and
capitalism in the developed
world are both ends in
themselves and also produce
higher levels of material wealth.
They see globalization as the
beneficial spread of liberty and
capitalism.
Critics argue that the anti-
globalization movement uses
anecdotal evidence to support
their view and that worldwide
statistics instead strongly
support globalization:
• the percentage of people in
developing countries living
below US$1 (adjusted for
inflation and purchasing
power) per day has halved in
only twenty years, although
some critics argue that more
detailed variables measuring
poverty should instead be
studied.
• Life expectancy has almost
doubled in the developing
world since WWII and is
starting to close the gap to
the developed world where
the improvement has been
smaller. Child mortality has
decreased in every
developing region of the
world. Income inequality for
the world as a whole is
diminishing.
• Democracy has increased
dramatically from almost no
nation with universal suffrage
in 1900 to 62.5% of all
nations in 2000.
• The proportion of the world's
population living in countries
where per-capita food
supplies are less than 2,200
calories (9,200 kilojoules) per
day decreased from 56% in
the mid-1960s to below 10%
by the 1990s.
• Between 1950 and 1999,
global literacy increased from
52% to 81% of the world.
Women made up much of the
gap: Female literacy as a
percentage of male literacy
has increased from 59% in
1970 to 80% in 2000.
• The percentage of children in
the labor force has fallen from
24% in 1960 to 10% in 2000.
• There are similar trends for
electric power, cars, radios,
and telephones per capita, as
well as the proportion of the
population with access to
clean water.
However, some of these
improvements may not be due
to globalization, or may be
possible without the current
form of globalization or its
negative consequences, to
which the global justice
movement objects.
Some pro-capitalists are also
critical of the World Bank and
the IMF, arguing that they are
corrupt bureaucracies controlled
and financed by states, not
corporations. Many loans have
been given to dictators who
never carried out promised
reforms, instead leaving the
common people to pay the
debts later. They thus see too
little capitalism, not too much.
They also note that some of the
resistance to globalization
comes from special interest
groups with conflicting interests,
like Western world unions.
However, there are also many
anti-capitalist who are against
the World Bank and the IMF
because they believe they are
too capitalist and only in
interests for profit.
Others, such as Senator Douglas
Roche, O.C., simply view
globalization as inevitable and
advocate creating institutions
such as a directly-elected United
Nations Parliamentary Assembly
to exercise oversight over
unelected international bodies.
Other uses:
"Globalization" can mean:
• Globalism, if the concept is
reduced to its economic
aspects, can be said to
contrast with economic
nationalism and
protectionism. It is related to
laissez-faire capitalism and
neoliberalism.
• It shares a number of
characteristics with
internationalization and is
often used interchangeably,
although some prefer to use
globalization to emphasize
the erosion of the nation-
state or national boundaries.
• Making connections between
places on a global scale.
Today, more and more places
around the world are
connected to each other in
ways that were previously
unimaginable. In geography,
this process is known as
complex connectivity, where
more and more places are
being connected in more and
more ways. Arjun Appadurai
identified five types of global
connectivity:
o Ethnoscapes: movements
of people, including
tourists, immigrants,
refugees, and business
travellers.
o Financescapes: global
flows of money, often
driven by interconnected
currency markets, stock
exchanges, and
commodity markets.
o Ideoscapes: the global
spread of ideas and
political ideologies. For
example, Green Peace has
become a worldwide
environmental movement.
o Mediascapes: the global
distribution of media
images that appear on our
computer screens, in
newspapers, television,
and radio.
o Technoscapes: the
movement of technologies
around the globe. For
example, the Green
Revolution in rice
cultivation introduced
western farming practices
into many developing
countries.
Although Appadurai's
taxonomy is highly
contestable, it does serve to
show that globalization is
much more than economics
on a global scale.
• In its cultural form,
globalization has been a label
used to identify attempts to
erode the national cultures of
Europe, and subsume them
into a global culture whose
members will be much easier
to manipulate through mass
media and controlled
governments. In this context,
massive legal or illegal
immigration has been
allowed, mainly in European
countries.
• The formation of a global
village closer contact
between different parts of the
world, with increasing
possibilities of personal
exchange, mutual
understanding and friendship
between "world citizens", and
creation of a global
civilization.
• Economic globalization there
are four aspects to economic
globalization, referring to four
different flows across
boundaries, namely flows of
goods/services, i.e. 'free
trade' (or at least freer trade),
flows of people (migration), of
capital, and of technology. A
consequence of economic
globalization is increasing
relations among members of
an industry in different parts
of the world (globalization of
an industry), with a
corresponding erosion of
national sovereignty in the
economic sphere. The IMF
defines globalization as the
growing economic
interdependence of countries
worldwide through increasing
volume and variety of cross-
border transactions in goods
and services, freer
international capital flows,
and more rapid and
widespread diffusion of
technology (IMF, World
Economic Outlook, May,
1997). The World Bank
defines globalization as the
"Freedom and ability of
individuals and firms to
initiate voluntary economic
transactions with residents of
other countries".
• In the field of management,
globalization is a marketing or
strategy term that refers to
the emergence of
international markets for
consumer goods
characterized by similar
customer needs and tastes
enabling, for example, selling
the same cars or soaps or
foods with similar ad
campaigns to people in
different cultures. This usage
is contrasted with
internationalization which
describes the activities of
multinational companies
dealing across borders in
either financial instruments,
commodities, or products that
are extensively tailored to
local markets. Globalization
also means cross-border
management activities or
development processes to
adapt to the emergence of a
globalized market or to seek
and realize benefit from
economies of scale or scope
or from cross-border learning
among different country-
based organizations.
• In the field of software,
globalization is a technical
term that combines the
development processes of
internationalization and
localization.
• Many, such as participants in
the World Social Forum, use
the term "corporate
globalization" or "global
corporatization" to highlight
the impact of multinational
corporations and the use of
legal and financial means to
circumvent local laws and
standards, in order to
leverage the labor and
services of unequally-
developed regions against
each other.
• The spread of capitalism from
developed to developing
nations.
• "The concept of globalisation
refers both to the
compression of the world and
the intensification of
consciousness of the world as
a whole" - Benedikt
Kiesenhofer
Measurement of
globalization:
To what extent a nation-state
or culture is globalized in a
particular year has until most
recently been measured
employing simple proxies like
flows of trade, migration, or
foreign direct investment. A
more sophisticated approach
to measuring globalization is
the recent index calculated by
the Swiss think tank KOF. The
index measures the three
main dimensions of
globalization: economic,
social, and political. In
addition to three indices
measuring these dimensions,
an overall index of
globalization and sub-indices
referring to actual economic
flows, economic restrictions,
data on personal contact, data
on information flows, and data
on cultural proximity is
calculated. Data are available
on a yearly basis for 122
countries. According to the
index, the world's most
globalized country is the USA,
followed by Sweden,
Canada, the United
Kingdom, and Luxembourg.
The least globalized countries
according to the KOF-index
are Togo, Chad and the
Central African Republic.
Global Falsehoods: How the
World Bank and the UNDP
Distort the Figures on Global
Poverty:
According to Professor Michel
Chossudovsky ,until the 1998
financial meltdown ("black
September" 1998), the World
economy was said to be
booming under the impetus of
the "free market" reforms.
Without debate or discussion,
so-called "sound macro-
economic policies" (meaning the
gamut of budgetary austerity,
deregulation, downsizing and
privatisation) continue to be
heralded as the key to economic
success and poverty alleviation.
In turn, both the World Bank and
the United Nations Development
Programme (UNDP) have
asserted authoritatively that
economic growth in the late
20th Century has contributed to
a reduction in the levels of
World poverty. According to the
UNDP, "the progress in reducing
poverty over the 20th century is
remarkable and
unprecedented... The key
indicators of human
development have advanced
strongly."
The Devastating Impacts of
Macro-economic Reform are
casually denied:
The increasing levels of global
poverty resulting from macro-
economic reform are casually
denied by G7 governments and
international institutions
(including the World Bank and
the IMF); social realities are
concealed, official statistics are
manipulated, economic concepts
are turned upside down.
The World Bank framework
deliberately departs from all
established concepts and
procedures (eg. by the US
Bureau of Census or the United
Nations) for measuring poverty.
It consists in arbitrarily setting a
"poverty threshold" at one dollar
a day per capita. It then
proceeds (without even
measuring) to deciding that
population groups with a per
capita income "above one dollar
a day" are "non-poor".
The World Bank "methodology"
conveniently reduces recorded
poverty without the need for
collecting country-level data.
This "subjective" and biased
assessment is carried out
irrespective of actual conditions
at the country level. The one
dollar a day procedure is absurd:
the evidence amply confirms
that population groups with per
capita incomes of 2, 3 or even 5
dollars a day remain poverty
stricken (ie. unable to meet
basic expenditures of food,
clothing, shelter, health and
education).
Authoritative" World Bank
Numbers:
These authoritative World Bank
numbers are those which
everybody quotes, --ie. 1.3
billion people below the poverty
line. But nobody seems to have
bothered to examine how the
World Bank arrives at these
figures.
The data is then tabulated in
glossy tables with "forecasts" of
declining levels of global poverty
into the 21st Century. These
World Bank "forecasts" of
poverty are based on an
assumed rate of growth of per
capita income, --ie. growth of
the latter implies pari passu a
corresponding lowering of the
levels of poverty. Its a numerical
game!
The UNDP Framework:
While the UNDP Human
Development Group has in
previous years provided the
international community with a
critical assessment of key issues
of global development, the 1997
Human Development Report
devoted to the eradication of
poverty broadly conveys a
similar viewpoint to that
heralded by the Bretton Woods
institutions. The UNDP's "human
poverty index" (HPI) is based on
"the most basic dimensions of
deprivation: a short life span,
lack of basic education and lack
of access to public and private
resources".
Based on the above criteria, the
UNDP Human Development
Group comes up with estimates
of human poverty which are
totally inconsistent with country-
level realties. The HPI for
Colombia, Mexico or Thailand,
for instance, is of order of 10-11
percent (see Table 1). The UNDP
measurements point to
"achievements" in poverty
reduction in Sub-Saharan Africa,
the Middle East and India which
are totally at odds with country-
level data.
The human poverty estimates
put forth by the UNDP portray an
even more distorted and
misleading pattern than those of
the World Bank). For instance,
only 10.9 percent of Mexico's
population are categorised by
the UNDP as "poor". Yet this
estimate contradicts the
situation observed in Mexico
since the mid-1980s: collapse in
social services, impoverishment
of small farmers and the
massive decline in real earnings
triggered by successive currency
devaluations. A recent OECD
study confirms unequivocally
the mounting tide of poverty in
Mexico since the signing of the
North American Free Trade
Agreement (NAFTA).
Double Standards in the
"Scientific" Measurement of
Poverty:
"Double standards" prevail in
the measurement of poverty:
the World Bank's one dollar a
day criterion applies only to the
"developing countries". Both the
Bank and the UNDP fail to
acknowledge the existence of
poverty in Western Europe and
North America. Moreover, the
one dollar a day criterion is in
overt contradiction with
established methodologies used
by Western governments and
intergovernmental organisations
to define and measure poverty
in the "developed countries".
In the West, the methods for
measuring poverty have been
based on minimum levels of
household spending required to
meet essential expenditures on
food, clothing, shelter, health
and education. In the United
States, for instance, the Social
Security Administration (SSA) in
the 1960s had set a "poverty
threshold " which consisted of
"the cost of a minimum
adequate diet multiplied by
three to allow for other
expenses". This measurement
was based on a broad consensus
within the US Administration.
Conversely, if the US Bureau of
Census methodology (based on
the cost of meeting a minimum
diet) were applied to the
developing countries, the
overwhelming majority of the
population would be categorised
as "poor". While this exercise of
using "Western standards" and
definitions has not been applied
in a systematic fashion, it should
be noted that with the
deregulation of commodity
markets, retail prices of
essential consumer goods are
not appreciably lower than in
the US or Western Europe. The
cost of living in many Third
World cities is higher than in the
United States.
Moreover, household budget
surveys for several Latin
American countries suggest that
at least sixty percent of the
population the region does not
meet minimum calorie and
protein requirements. In Peru,
for instance, following the 1990
IMF sponsored "Fujishock", 83
percent of the Peruvian
population according to
household census data were
unable to meet minimum daily
calorie and protein
requirements. The prevailing
situation in Sub-Saharan Africa
and South Asia is more serious
where a majority of the
population suffer from chronic
undernourishment.
The investigation on poverty by
both organizations take official
statistics at face value. It is
largely an "office based
exercise" conducted in
Washington and New York with
few insights or awareness of
"what is happening in the field".
The 1997 UNDP Report points to
a decline of one third to a half in
child mortality in selected
countries of Sub-Saharan
despite the slide in State
expenditures and income levels.
What it fails to mention,
however, is that the closing
down of health clinics and the
massive lay-offs of health
professionals (often replaced by
semi-illiterate health volunteers)
responsible for compiling
mortality data has resulted in a
de facto decline in recorded
mortality. The IMF-World Bank
sponsored macro-economic
reforms have also led to a
collapse in the process of data
collection.
Table 1
SELECT SPEECHES
India and Globalisation
This is a truly momentous
occasion in the life of this
Institute, its students, its
teachers, and its friends. Let me
begin by conveying my heartiest
congratulations to the students
who are receiving their degrees
today. For all of them, it is a
culmination of years of hard
work, and a recognition of their
high academic merit.
All the teachers of this great
Institute, who have put in so
much time and effort to make
this day possible, also deserve
our gratitude.
I would like to specially welcome
the parents of the students, who
are present at this Convocation.
Without some sacrifice and a
good deal of support, successful
completion of higher studies by
young men and women, who are
here today, would not have
been possible.
I am personally grateful to the
President of the Indian
Statistical Institute, Prof.
M.G.K.Menon and Director, Prof.
K.B.Sinha, for inviting me to be
a part of this occasion. A
scientist, a scholar and a public
figure, Prof. Menon has led this
Institute with great distinction.
He has been a source of
inspiration for all those
connected with ISI and its
teachers and students. It is a
particular privilege and honour
to deliver this address in his
esteemed presence.
On this important occasion, I
would also like to pay homage
to the memory of Professor
P.C.Mahalanobis, founder of the
ISI and the builder of the
modern statistical system in
India. His technical contribution
to the development of statistics
as a science are fundamental
and well known all over the
world. What was even more
remarkable, in a developing
country context, was his desire
to use statistical methods
including sample surveys to
understand and solve the
problems of an underdeveloped
economy, including low
productivity agriculture.
The high quality, the depth, and
the breadth of research and
teaching in statistics and other
inter-related subjects at this
Institute are tributes to the
vision of Prof. Mahalanobis and
his confidence in our country’s
future.
While I am thankful for being
here on this occasion, I am also
a little daunted by the task of
having to say something useful
which may be of interest to this
varied audience from so many
different walks of life. After
some reflection, I have chosen
to speak to you on "India and
Globalisation", or how we in
India should look at the process
of so-called "globalisation" that
the world has been passing
through in recent years. I had
an occasion to speak on this
subject at Mumbai University
Convocation a couple of weeks
ago. This is a matter of
considerable contemporary
debate, and I thought some
reflection on this may also be of
interest here in Kolkata.
There is a debate not only in
India but all over the globe
about the pros and cons of
"globalisation". There is hardly
any important global meeting
which does not witness vigorous
protest marches or picketing by
the opponents of the
globalisation process.
Equally, on the opposite side,
there are those who regard it as
panacea for all the world’s
problems and key to unmixed
prosperity and well being for all
the countries and all the people.
If you take a poll in any
assembly, including I am sure
this one, you will find some are
strongly for and some are
strongly against globalisation.
To my mind, neither view – for
or against – is correct. The only
rational view is to accept it as
an emerging and powerful global
reality which has a momentum
of its own. Our job as an
independent nation / state is to
ensure that we maximise the
advantage for our country and
minimise the risks. It has both
pluses and minuses like any
other major global economic
change – say, the industrial
revolution of the 18th century.
Some countries gained, some
lost – partly because of the then
prevailing political
circumstances. India, for
example, lost because of
colonialism and fragmented
nature of our polity. U.K.,
Europe, U.S. – and later Japan
prospered. Same is the case
with globalisation. One big
difference, however, is that
unlike the olden days, today our
destiny is in our own hands.
Before we look at our
opportunities and challenges
from globalisation, it is good to
be certain of facts – where
exactly India is in terms of
globalisation. If we look at some
of our own debate, it would
seem as if we were already well
on the way to globalisation,
which was shaking up our
economy. A most common
measure of globalisation is
openness to trade and a
country’s participation in trade.
By this measure, the extent of
India’s globalisation is
insignificant – it is one of the
lowest in the world. India’s
share in world trade is a meagre
0.7 per cent or so. If a map of
the world were drawn on the
scale of a country’s participation
in trade, India with a population
of more than 1,000 million will
occupy a smaller area than
Singapore with a population of
only 3 million. You would need a
magnifying glass to locate India
on that map!
A second commonly used
measure of globalisation is a
country’s participation in
international capital flows,
particularly Foreign Direct
Investment (FDI). As you know,
annual flow of FDI across the
globe is more than $ 1 trillion,
i.e., $ 1,000 billion. Annual FDI
inflows into India is $ 3 – 4
billion only or 0.3 – 0.4 per cent
of the total – that is all. Same is
true of Foreign Institutional
Investment (FII).
Therefore, the first point that I
would like to emphasise is that
despite all the talk, we are
nowhere even close to being
globalised in terms of any
commonly used indicator of
globalisation. In fact, we are still
one of the least globalised
among major countries –
however we look at it.
An equally important point is
that whether the so-called
globalisation is considered to be
good or bad for a country
depends crucially on the sense
in which the word is used. The
word may be used in a purely
descriptive sense to describe a
"shrinkage" of distance among
nation states due to
technological changes in
transport and communication
and closer integration of product
and financial markets across the
world.
Another sense in which the word
may be used is the effect of
such changes on different
countries or groups of countries,
such as, developed and
developing. In yet another
sense, the word may also
represent a "globalisation of
ideas or ideology" and may be
used as a synonym for triumph
of capitalism or dominance of
unfettered markets.
In discussing the issue of
globalisation in the Indian
context, I propose to confine
myself largely to the factual and
descriptive sense in which the
word is used, i.e. the
technological changes, and
associated policy changes, that
have brought the world
economies closer and made
them more integrated with each
other.
In this particular sense, I believe
that the changes that have
occurred in the patterns of trade
and capital flows in recent years
are to India’s advantage –
although, unfortunately, so far
we have not made much use of
it. Today, in terms of the
potential benefits of
globalisation, India is in a very
different position than would
have been the case 50 or even
20 years ago.
This is because the sources of
what economists call
"comparative advantage" have
changed dramatically in India’s
favour in the 1990s because of
the technological revolution. In
the old days, comparative
advantage was largely
determined by "factor
endowments", i.e. land, labour
and capital. Geographical
location and early starts in
industry also conferred greater
advantages.
Thus, at one time, a country’s
trade pattern, was determined
by its natural resources and the
productivity of its land. Leaving
aside political and institutional
factors, a country’s level of
income was also largely
determined by the global
demand for its natural resources
and its relative efficiency in
exploiting them. The importance
of land as a source of
comparative advantage,
however, changed dramatically
after the industrial revolution.
Today, it is almost insignificant.
Thus, except for the United
States, countries accounting for
a predominant share of the
world GDP have a relatively
small share of global land area.
After the industrial revolution,
the availability of "capital" or
investible resources became the
most dominant source of
comparative advantage. At this
Institute, established by the
great Prof. P.C.Mahalonobis, I
hardly need to elaborate on the
importance that was attached to
domestic capital accumulation in
early development economics.
In fact, scarcity of capital and
low domestic savings were
considered to be, and rightly so,
as principal causes of a
country’s underdevelopment.
Today, availability of capital and
productivity are still crucial in
determining a country’s growth
rate. However, there has been a
dramatic change in the global
mobility of capital, and national
boundaries are no longer
important determinants of
sources and uses of capital. A
dramatic illustration of this is
the fact that the most developed
country in the world, which
enjoyed unprecedented growth
during the 1990s, is actually a
capital-importing country, i.e.
the United States. Similarly, the
fastest growing developing
country, i.e. China, is one of the
largest recipients of capital from
outside.
Similary, labour is no longer an
important element in cost of
production and in determining a
country’s comparative
advantage. In most
manufacturing industries in the
world, it is no higher than 1/8th
of total costs. In India, it may
be somewhat higher because of
our domestic laws, but the
important fact to note is that
India no longer needs to
specialise only in the production
of labour-intensive plantation
crops or primary commodities.
A related development which is
linked to the above changes, is
the "Services Revolution". The
focus of attention in
conventional economics, was on
production of goods –
manufactured products and
agricultural commodities. It was,
of course, recognised that the
services sector (which includes
transport, communication,
trade, banking, construction and
public administration, etc.) was
an important source of income
and employment in most
economies. However, overall,
the growth of services was
perceived at best as a by-
product of developments in the
primary and secondary sectors,
and at worst as a drag on the
prospects for long-term
economic growth.
In the last few years, there has
been a phenomenal change in
the conventional view of
services and their role in the
economy. This change has been
facilitated by unprecedented and
unforeseen advances in
computer and communication
technology. As a result, the
development of certain services
is now regarded as one of the
preconditions of economic
growth, and not as one of its
consequences.
The boundary between goods
and services is also
disappearing. Many industrial
products are not only
manufactured, but they are also
researched, designed,
marketed, advertised,
distributed, leased and serviced.
An important aspect of the
"services revolution" is that
geography and levels of
industrialisation are no longer
the primary determinants of the
location of facilities for
production of services. As a
result, the traditional role of
developing countries is also
changing – from mere recipients
to important providers of long-
distance and high value
services.
From India’s point of view, these
developments provide
opportunities for substantial
growth. For example:
• The fastest growing segment
of services is the rapid
expansion of knowledge-
based services, such as,
professional and technical
services. India has a
tremendous advantage in the
supply of such services
because of a developed
structure of technological and
educational institutions, such
as this one, and lower labour
costs.
• Unlike most other prices,
world prices of transport and
communication services have
fallen dramatically. By 1960,
sea transport costs were less
than a third of their 1920
level, and they have
continued to fall. The cost of
a telephone call fell more
than ten-fold between 1970
and 2000. Moreover, the cost
of communication is also
becoming independent of
distance. The most dramatic
example in this area is, of
course, provided by the
"Internet". India’s
geographical distance from
several important industrial
markets (for instance, North
America) is no longer an
important element in the cost
structure of skill-based
services.
• It is now feasible to
"unbundle" production of
different types of goods and
services. India does not
necessarily have to be a low-
cost producer of certain types
of goods (e.g., computers or
discs) before it can become
an efficient supplier of
services embodied in them
(e.g., software or music).
At the same time, it must be
recognised that the "death of
distance" and the growing
integration of global product,
services and financial markets in
recent years have also
presented new challenges for
management of the national
economy – not only in India but
all over the world. The trend
towards integration of markets,
particularly financial markets, is
by no means an unmixed
blessing. Unlike the old days, a
heavy price may have to be paid
by national economies for
somnolence, sloth and non-
conformity to generally accepted
international norms and
standards of macro-economic
management, disclosure,
transparency and financial
accountability.
Another consequence of recent
global trends is the greater
vulnerability of national
economies to developments
outside their own borders. A
crisis in any one or a group of
countries, can be transmitted to
other countries – including
countries which may not have
any strong economic linkages
with crisis-affected countries.
Thus, the ’nineties have been
marked by a large number of
currency crises (for example, in
Mexico, Russia, East Asia and
Brazil – and currently Argentina
and Turkey); substantial swings
in exchange rates (including the
exchange rate of three leading
currencies – the dollar, the Euro
and the Yen); and run ups in
asset prices followed by sharp
collapse (for example in Japan
and East Asia earlier and the
United States last year). While
the crises initially occur in one
or two specific countries, their
adverse effects are felt across
the world.
While we must be careful, on
the whole, in my view, – the
death of distance, the services
revolution, and the mobility of
capital – which characterise
globalisation – present
unprecedented opportunities for
India. The primary source of
comparative advantages today
are : skills and ability to adapt
and change. And, India has the
advantage – of skills, of
entrepreneurship and of
managerial competence in
taking advantage of these
changes.
If what I have said is correct,
then, why are we not jumping
with joy and optimism? Why are
we so "unglobalised" in terms of
our share in trade, investment
or communication?
Transition from a closed to a
vibrant, open and a more
globally dominant economy will
certainly take time and will not
be painless.
As of now, we also have much
greater tolerance for waste,
non-work and survival of the
inefficient, and the self-seeking
than other fast growing
countries. Somehow to make
this transition – from a less
productive and less challenging
economy to a more work-
oriented and competitive
economy – is the real challenge
of globalisation.
If we continue in our old ways, I
see real social problems and
inequalities emerging in our
society. We will have islands of
prosperity and excellence – IT,
beauty parades and media
entertainment amidst growing
disparity, rising unemployment
and immiserisation. And as has
happened in several countries in
the 1990s, including Turkey and
Argentina - just now, those who
are with us today will be the
first to leave.
The principal lesson of recent
economic and technological
developments, and growing
tensions and inequalities within
and across countries, is that our
fate is in our hands. Our public
policies have to respond to our
own requirements rather than to
any fixed global ideology or a
pre-determined and
internationally prescribed model
of economic progress. In my
view, this is the real lesson of
the 1990s.
My fervent hope is that as you –
the best and the brightest of our
country – go out and face a
"globalising" world, you will
keep India’s interest, its
integrity, its indivisibility and its
future potential close to your
hearts and your minds. I have
no doubt that, with your help,
India of 2025 will be a very
different place, and a much
more dominant force in the
world economy, than was the
case twenty five years ago or at
the beginning of the new
millennium.
Thank you.

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