Globalisation is not a strategy, nor is it a practice or a process. Globalisation is a perception, an act of very substantial imagination. Even today, there is nowhere we can stand from which to experience “The World”. At best we could stand on the moon and see half of it, and the detail would be minimal. The world, globalisation, is a mental construct, and a vastly more difficult place to do business than we have been led to believe.
Canadian Academic Northrop Fry said that the biggest problem for post-colonial authors, is that the question “Who am I?” slides inexorably into the absurdity of “Where is here?” For the global entity the answer to that question is the even more absurd, “Everywhere is here”. This presentation is about dealing with the realities of Everywhere, being Here.
I have heard a number of speakers refer to the different kinds of globalisation. There is, they say, economic or social, political or environmental globalisation. I suggest that they are telling only half the story. There are different kinds of globalisation in the same way as there are different kinds of pregnancy. You cannot be partially, intermittently or occasionally global.
The problem that most of us have is that we identify ourselves with a specific place. That gives us a centre, which implies a periphery. There is here, and somewhere else. I call this “Level Playing Field Thinking”. It is two dimensional, bounded in space and time, it has an edge and a middle. It is a workable approach for a local business and wholly at odds with any notion of globalisation which is 4 dimensional, unbounded in space and time, with no periphery, and no centre.
To feel comfortable as a global entity, its members must work within a kind of Globalism Uncertainty Principle which states roughly that, if you know who you are, you cannot be sure of where you are. If you know where you are, you cannot know exactly who you are and if you know both who and where you are for certain, you are simply not a global enterprise.
In deciding to become a global enterprise, any business is taking a huge step into the uncertain. Everywhere else is not like here, everyone else is not “just like us” but in different languages. There is no MBA process that will enable you to become a global organisation.
Globalisation is at a turning point. Most of the easy gains have been made and the success stories are being balanced by failures that are exciting criticism and opposition from many quarters. As with any radical revision of human relations, the initial promise was overblown, the downsides minimised and the reality is likely to be more mundane than the prospectus painted.
The thesis has been offered, the antithesis is being written and we now must synthesise. I want to propose some ideas that will support that synthesis but I will first be critical of the premise, the promise, the process and the outcomes of Globalisation. This process is not only about business, it will decide whether or not life on this planet is worth living.
I believe nevertheless that we have no option but to carry the process through and that, with a global, ethical perspective, it can be reformed to meet the criticisms and fulfil its potential. Some ideas for that process will be the aim of the second part of this paper.
The
promise of Globalisation is that the whole world can achieve standards of
living similar to those enjoyed by post-industrial, capitalist western
economies. This has been the implicit and sometimes explicit objective of the
WTO[1],
the World Bank, the IMF[2]
and the WEF[3] among others
Although
rarely completely stated, to achieve this outcome:
n the poorest economies will have to grow faster than the wealthy ones in order to catch up,
n the tools of capital investment, market and legal reform must produce greater wealth for recipients than for their investors.
This outcome
will probably mean that:
n the consequent reduced advantage will be unacceptable to the current beneficiaries
n the environmental costs of raising global consumption levels will be prohibitive.
Furthermore,
to standardise the global economy on a single model is both ecologically
irresponsible[4] and
practically unachievable.
The
proponents of Globalisation state that free trade across borders on a “Level
Playing Field” is a necessary condition for success. This sporting metaphor
assumes that all participants are equally equipped, resourced, trained and
experienced and that it is therefore appropriate, in fact “fair” to demand that
all participants meet and be bound by the conditions acceptable to the most
able players. Another assumption is that each participant will be able to
benefit from their assumed unique “comparative advantage”.
The crucial
criticism of Globalisation is that it doesn’t deliver. If this is true we must
wonder whether the reason is that its proponents ever intended that it should,
or that its process is inadequate. In either case, to reconcile its objectives
with its outcomes it needs to be reformed.
Proof that
Globalisation is not working so far can be found in a number of significant
statistics. After 20 years of Globalisation we should see reduced poverty in
all participating nations and better stewardship of the human and material
resources needed to generate wealth. Instead of which the statistics now
strongly indicate that the poor are getting very poor and the comfortably off
are losing ground.
The income gap between the world’s
richest 20% and the poorest 20% increased from 30:1 in 1960 to 74:1 in 1997.
For 59 countries, mainly in sub-Saharan Africa and the countries of the former
Eastern Bloc, GNP per capita declined from 1980-96.
20% of the world’s people have 86% of world GDP, 82% of world export markets, 68% of foreign direct investments and 74% of telephone lines: the bottom 20% has about one per cent in each sector. This is entirely at odds with the premise and the promise of Globalisation
After
10 years of economic growth the majority of US workers are making less in
inflation-adjusted dollars, than they made in 1973. [6]
In large companies, some employees earn $1 for every $416 paid to the CEO. In 1940,
it was $1 for every $12. The financial wealth of the top 1% of households
exceeds the combined wealth of the bottom 95%. I don’t know about you, but when
I start talking about the bottom 95%”, I begin to get very
uncomfortable.
The reduced standards of living are not only in financial terms. Al Gore’s presidential campaign rhetoric about "hard-working middle-class families" pointed to a central fact of American life: most of the nation's 72 million families feel overworked and under paid. Rising working hours are the cause. From 1989 through 1998, middle- income families added 3.4 weeks to their work year.[7]
The problem is so bad that Fire-fighters in Connecticut recently challenged the constitutionality of mandatory overtime, arguing that it violated the 13th Amendment ban on slavery. New laws being proposed will increase rather than decrease worker liability to unpaid, compulsory overtime.
The blame is now falling squarely on
flaws in the process itself. A United Nations study on the protection of human
rights[8]
has labelled the World Trade Organisation (WTO), a 'nightmare' for developing
countries, saying that its 'open trading' rules are based 'on grossly unfair
and prejudiced' assumptions. The report says that rules of the WTO 'serve only
to promote dominant corporatist interests that already monopolise international
trade'. It will find many ready ears.
Supreme
Court Justice Louis Brandeis wrote: "We can have a democratic society or
we can have the concentration of great wealth in the hands of the few. We
cannot have both." The US is well down the second track. The rest of the
world is close behind and the potential impact on Globalisation strategies will
be important.
A second major area
of the current unworkability of Globalisation is that of economic and resource
sustainability. Western Fuels Association General Manager and CEO
Fred Palmer recently said,[9] “There's a correlation between our energy consumption and our
success. We succeed in the United States because of energy consumption.”
There is little doubt that the US and similar economies are very
dependent on cheap energy, although it is not always put quite as blatantly as
Mr. Palmer states it.
The current oil crisis is a direct effect of Globalisation [10] which has both increased demand for oil and reduced investment in capacity development.[11] In 1990 the oil business had 20% over-capacity. That has now gone and the economic effects of increasing demand and static supply are affecting global businesses. The energy issue shows that the numbers are too big for the promise. Total annual energy consumption is about 10 trillion watts. The "business as usual" projection for the next 100 years means energy demand will increase 400% to 30 or 40 trillion watts.
To
illustrate the point, if we assume that growing global prosperity enables its
beneficiaries to use just one extra cup of oil products per day. The increased
daily requirement for oil would grow approximately as follows.
1 Billion people 1,572,452 Barrels/day
3 Billion people 4,717,357 Barrels/day
6 Billion people 9,434,715 Barrels/day
In the light of these figures, the recent proposed rise of 1 million barrels per day in oil production will not even cover 1/6th of the world’s population increasing oil use by a cupful a day. The effect of successful Globalisation in the current mould will place much higher demands on energy production and because of its linkage with the US dollar, drive global energy costs much higher.
While the US economy may be insulated
from some of the cost driven effects on business, its global partners will not
be. For a global business, serious challenges can come from disruption to any
market. When nations can’t afford their oil, they very quickly turn nasty.
Britain and Europe have shown how quickly social and political unrest can
happen when a critical threshold in energy costs is reached.
The first major
casualty of Globalisation may be the cheap-energy economy. The second casualty
will be any process based on extending that model globally. In either case we
will need to re-examine the proposition. While I don’t
propose to deal with the ecological effects of escalating energy use, they
should also be part of a rational Globalisation plan.
As I have suggested,
the necessary condition of a globalised economy is assumed to be the healthy,
vigorous one of the Level Playing Field. It presumes free and fair competition
among equals. But the metaphor is flawed and its application is both
inconsistent and biased. It takes no account of the issues of boundaries,
unequal players, cheating, adequate rules, external interference and outmoded
business practices. I will now look at each of these in turn.
A playing field is bounded both in space and time. Outside the playing area the rules of the game do not apply, reserves can be called into play and casualties can be cared for, treated, recuperate in safety and play again another day.
Under Globalisation, boundaries have no place by definition. As the process is currently played out there is no sanctuary, no-one is deemed to be out of play, anyone can be tackled anywhere, any time. This is not a description of field of fair play, it is a field of war and it is no way to extend and enhance the quality of life on the planet.
The next problem is
gross mismatches. The newest players are matched directly, without protection
or support, against world champions who play very hard ball.
The inequalities
among players are further magnified by powerful governments applying state
resources to ensure that ‘their’ teams are even better protected.
American companies, including Boeing and General Motors, already avoid an estimated $4 billion a year in taxes by sheltering foreign sales in offshore shell companies. [12] The new US tax plan exempting certain kinds of foreign-earned profits from US taxes would increase these tax breaks alone for American companies to an estimated $6 billion annually.
The Cato[13] Institute estimates that the US Government provides corporations with $75 billion in direct subsidies and $60 billion in tax breaks. [14] The lean, mean corporate warrior is revealed as very flabby but safe from new players who are kept out of the market or quickly neutralised.
Those numbers are a trifle compared with the externalised costs of global corporations in terms of substandard wages and working conditions, worker health and safety, environmental damage and unsafe products. Estimates place the value of these subsidies around $10.7 trillion per year of which about $2.7 trillion is in US subsidies, about 5 times corporate profits. [15] These subsidies are invisible for the very reason that business is not obliged to account for them.
There are two problems with the rules of Globalisation. The first is that there seems to be an assumption that every kind of human interaction can be governed by a single set of simple rules and measured by only one scoreboard, money. The second is that the Level Playing Field metaphor assumes a contest governed by universally agreed rules. While acceptable rules might equalise the players, the 90’s has been a decade of de-regulation.
What rules have been written were created
by existing players for their own protection. They insist on strong banking and contract
law, but human rights and employment, public health, education and political
legislation are highly optional, opening the way to exploitation. The clear
message is, money matters, people don’t.
Since most of those affected are not consulted about these rules, an ethical issue arises very quickly. “Companies that move or relocate production capacity are in effect trading system quality and security for lower cost inputs. … The question ..is whether the corporate world should be willing to roll out or support an economic model when the differences between nations on matters that go to fundamental human rights are so great”[16]
A community is not a
playing field from which the participants can walk away when they are finished.
A brain surgeon who treated operations as a sport would be struck off, a
teacher who tried to win against the students would be a failure and a business
that goes to war with the world on which it depends for resources and customers
is delusional.
The best games are in doubt till the last
second. They are great dramas in which neither side deserved to lose and is
honoured in defeat. The winner can take all because with the new season, the
counters are reset to zero. There are no proposals to reset the Globalisation
counters to zero, so the rules need to be far more complex and ethically based.
When
it comes to raw materials or primary production in which most of the world’s
economies operate, the field is often tilted.
To facilitate
development, European nations gave Caribbean ex colonies preferential access to
their banana markets because it is better to trade with impoverished nations
than simply to hand out aid. This practical response to a problem of poverty
has been forbidden by the WTO at the instigation of the world’s largest banana
producers with US government support, none of which organisations feels any
responsibility to do anything about the original poverty.
To take another
example, the economically disadvantaged Australian state of Tasmania spent
millions to develop salmon farming and a local market for the product. Canada
used the WTO to prise open the market which they did not help create and which
they will now plunder at the cost of local jobs and investments.
When small nations
do have strong competitive advantages they are regularly prevented from
exercising those advantages by political interference. New Zealand and
Australian lamb producers are more than able to compete on the Level Playing
Field of meat production. US and European farmers used political power to
protect them behind quotas and tariff barriers. Antipodean manufacturing
industries however are forbidden from protecting the jobs of tens of thousands
of poor, unskilled, usually women workers.
For a generation the
wealthy and unscrupulous have hidden money in some 40 nations with relaxed
banking laws, the better to avoid paying legitimate taxes in their home
nations. Now that corporate taxes are so low in their home nations, avoidance
is no longer worth it and there are efforts to close down these conveniently
secretive banking operations, except for those in Switzerland and Belgium.
These examples
demonstrate that powerful governments and vested interests work to ensure that
the advantage remains with the already successful. If the objective of
Globalisation is genuinely to reduce the inequalities between societies through
trade, it is not happening.
The results of
Globalisation so far show that there is an inherent inequality in the structure
designed to prevent peripheral economies from catching up with the core
economies. This is exactly the opposite of the promise. Where there is unequal wealth
there is poverty and where there is poverty there are no consumers.
When we force a net
profit from Globalisation “someone” makes a net loss. This parasitic recipe is
born out by the figures from the UN and the World Bank. How close can we go to
concentrating all value in one place before something breaks? Apart from the
economic insanity, the ethics are unacceptable.
To
extend the sporting metaphor, consider Tlatchli, played by the Aztec Indians.
It was a combination of basketball, volleyball and soccer. Sometimes as part of
religious ceremonies the losing team was sacrificed to the gods. In our
current, outmoded business model, not only does the winner kill the loser, it eats the customers.
Competitive businesses become lean and efficient by downsizing and job exporting.[17] In effect, “If I fire your customers (my staff, who are consumers of your goods and services) faster than you fire my customers (your staff) I win” Eventually there is only one player in the market who has all the customers who haven’t been fired yet. [18] Which is why expansion has been so important. While you are decimating customers in one market, you can always move into new markets to consume the opposition and customers there. But once you have globalised, you have reached the end of this strategy. As more benefits are corralled by a few businesses, we will start to run out of the most precious commodity of all, customers.
In the US, the only
single economy big enough to test the theory, the field was leveled for air
travel in the late 70’s. Deregulation of the airline business produced 51 new
airlines, apparently vindicating the theory. However, in the same time, 50 of
those new airlines have gone under. Of the preexisting group, several more have
gone and there are predictions that in 5 years there will be only 2 or 3
airlines in the US.[19]
This process should
nevertheless have benefited the aircraft manufacturers but Boeing is also
essentially the only one left. The free trade in aircraft on the Level Playing
Field has, as predicted by the WEF, produced one winner and no competition. The
Level Playing Field has been tested in the best available arena and it has
failed.
Globalisation has operated on the basis that the world could rise to a western standard of living. But that is not a guarantee and other, perhaps unexpected forces are at work.
At the recent WEF meeting in Melbourne one of China's top business executives, [20] Shanghai Tang chairman David Tang, said trade liberalisation would enable Asia to devastate the labour markets of western countries. In his opinion the world should be concerned about coping with the impact of lower trade barriers to China in their own markets.
"China's going to completely devastate your whole labour force. They have labour costs 15 times, 30 times lower than America…the entire Seattle problem was because the unions realised that that's the threat," Tang said.
There is no proposal for Chinese incomes to rise significantly in the near future and erode their very competitive margin. As China continues to accept high levels of pollution and further agrarian aggregation drives 150 million surplus farmers into the cities to compete for industrial work with more millions from bankrupt government enterprises, the effect of opening the Global marketplace to China will be very important.
It will change some cosy assumptions about the markets for high value, high cost products and services created by businesses outside China. The human rights card is off the table so Chinese exports of products and working conditions will be hard to restrict and the underclass in all other countries will swell further with the loss of even more customers.
The opposition to
Globalisation I mentioned in the introduction is gathering pace and power and
includes not only the disaffected and the morally outraged. The acknowledgment
of failure comes from Globalisation’s most avid proponents.
The WEF said in
1996, [21].
n Globalisation is causing severe economic dislocation and social instability
n Although productivity increases are supposed to produce more jobs and higher wages, technological change has eliminated more jobs than it has created
n Globalisation leads to “winner take all situations; the winners win big, the losers lose even bigger
n Globalisation tends to de-link the corporation from its employees, higher profits no longer mean job security or better wages.
n Unless serious corrective action is taken soon, the backlash could turn into open political revolt that could destabilise western democracies.
These are the strongest supporters of Globalisation[22] and their predictions were spot on. The alarm was sounded 4 years ago. The only suggested solution so far is better education in the absent benefits of Globalisation. There is no point explaining the greater good to someone who is not benefiting from it. There has to be a trade, what is it? The failure manifests not only in protests at corporate gabfests but also in real violence to people and assets. There are many examples to illustrate this.
In
1964, copper ore was discovered at Panguna in Central Bougainville, Papua New
Guinea, leading to the biggest open cut mine in the world. Mining company, CRA
and the Australian and Papua New Guinean governments offered the mostly women
landowners no participation. After MP Sir Paul Lapun fought on their behalf
they eventually received 0.05% of the mine's revenue. In addition to the
insulting financial return the mine polluted the Panguna river system
destroying the fishery and food and cash crops were poisoned by airborne toxic
mine chemicals. There was no compensation for these costs.
A
10 year civil war closed the mine. The people of Bougainville are no worse off
than they were before the mine, unless we count poisoned water, depleted
resource and 20,000 dead. Globalisation cannot afford resources at this price.
The “War Veterans”
of Zimbabwe are portrayed as dumb thugs who occupy land they don’t own and kill
or terrify the residents. The existing landowners are descended from Europeans
who occupied land they didn’t own and killed, corralled or terrorized the
original residents. The original owners received nothing. Now their descendants
are taking back the land, by the same methods.
The market shakes
its head because they don’t have the skills to run the farms as revenue earning
units. In a few years they’ll be back to subsistence farming. The full equation
however goes like this. After being kept in poverty, herded into city slums and
forced to work as wage slaves if they are lucky, subsistence farming looks like
a good deal.
This was not the
Globalisation promise and the price of failure is very high. Look for more of
this as more people in third world nations reach the point of absolutely
nothing to lose.
The most valuable
commodity in the world today is oil. Nigeria is well supplied with the resource
yet hundreds of Nigerians burn to death stealing it from pipelines because they
live in grinding poverty. Venezuelans have voted in a strongly socialist
government, in part because the majority of citizens gain no benefit from the
nation’s oil wealth.
We have to ask, “If
those sitting on valuable resources live in poverty, how valid is the process
that manages it?
After
20 years of Globalisation, its opponents have found their voice and the
vocabulary to fight back. In the US a new wave of students have had their
consciences pricked by the human costs of their designer clothing and
corporatised Universities. Organisations such as WRC, USAS and SEJ[24]
have sprung up as their members realise that they are benefiting from the
misery of others.
There is vandalism
in Seattle, beatings at the WEF in Melbourne, panicky conciliation in Prague,
trashed MacDonald’s in France. [25] There is a
change in the tide[26] and the diverse agendas of the coalition of
left and right wing, environmental and social opponents will not be satisfied
by piecemeal reforms.
They
also have a wide and continuously available range of targets including the WEF,
WTO, IMF and World Bank. These organisations attract increasingly energetic
protest which casts globalisers as secretive, unresponsive and in ever greater
need of armed protection. This opposition needs to be taken into account in a
Globalisation plan. They are well informed, well co-ordinated and they are gathering
power.
The worst hypocrisy of the Level Playing Field is that while goods, services, profits and dividends flow easily across borders, people may not. Britain, Europe, Australia and the US spend billions to protect themselves against Economic Refugees who want a better life and arrive in filthy ships or suffocating freight containers looking for economic benefit. In global terms they are looking for the exported wealth created in their own lands.
And why should they not? The Level Playing Field implicitly demands mobile work forces, a free market in wages and conditions as much as any other commercial freedom. If the agenda is to limit the benefits to certain geographically privileged populations it is unethical and needs reform.
Mexican President Vincente Fox set a cat among the pigeons in August when he suggested that a truly open business environment would remove the barriers to the flow of people across borders. US Politicians eventually “confirmed” that he meant, “when Mexican standards of living reach US standards, ‘in about 30 years’”. So the time frame is, benefits for the rich now while the poor wait a generation. Why would anyone support that process? Especially as current standards outside wealthy countries are falling, not rising.
An estimated 30 million illegal
immigrants per year cross borders in search of a better life. Many are
stigmatised as “Economic Refugees”. They are however, exactly the kind of
people who are supposed to be in greatest demand. They are enterprising, take
initiatives and risks. And in a global economy it doesn’t matter if governments
wont allow human migration because Globalisation ensures that their working
conditions can. There
is a race to the bottom. It is happening largely out of sight and
unmeasured by the tools of the marketplace and it has to stop.
The biggest criticism of Globalisation is that it has no ethical basis for anything. It does not value what it can’t, or refuses to, measure and its stance in the face of uncomfortable evidence is denial and attacks on critics. There is a long list of businesses whose ethics are unacceptable and as long as their practices are glossed over or discounted, it will remain a potent issue. The responsibilities must be commensurate with the rewards.
The
greatest loss of ethical high ground occurs in the distribution of products
that damage the health of communities. The difference between the criminal and
the legal too often comes down to a meaningless distinction.
White Powder Addicts
In the third world the dairy industry sold the image of the healthy, milk powder fed, baby. Millions of impoverished women paid money they couldn’t afford for a product they didn’t need, mixed it with contaminated water and fed it to their infants. Ethical business practice requires that they should have worked with the communities to ensure a ready supply of safe water. They did not.
The
essential difference between illegal drugs and the tobacco and alcohol
industries is that the last two are protected by law[28].
But these Global organisations all want the same thing. The consumers right to
choose and a Level Playing Field..
In reforming the process of Globalisation these ethical double standards need to be dealt with.
We Can See the Bottom from Here
When the economic dislocation identified by the WEF occurs, the most disadvantaged victims become vulnerable to exploitation and, in the worst cases, slavery. A conservative estimate puts global slave worker numbers around 27 million and growing. [29]