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Managing Globalization: If It’s Here to Stay, What Do We Do Now?

It has been approximately two decades since the word “globalization” became standard in business and economic discussions. In the beginning, the word described the challenges facing Western companies that had to compete with lower-priced, sometimes better quality imports from countries like Japan, South Korea, and China. Over time, however, the term’s meaning expanded as Asian companies started designing and manufacturing in the West and Western companies sent jobs overseas in manufacturing and service industries. At the turn of the millennium, debate centered on whether globalization was inherently good or bad. Analysts scrutinized the role of multinational corporations in the developing world and the pace at which globalization created and dissolved industries, often benefiting investors more than workers or their communities. Introducing a new column about the global economy, writer Daniel Altman recommends that the public regard globalization as inevitable and devise flexible strategies for a changing world with an uncertain future. – YaleGlobal

Managing Globalization: If It’s Here to Stay, What Do We Do Now?

Daniel Altman
The International Herald Tribune, 10 February 2006

This is a new kind of column on globalization. Its purpose is not to argue whether the spread of market forces around the globe is good or bad, or whether it should be allowed to proceed or stopped in its tracks. Rather, it takes as a given that globalization is here to stay and moves on to the more pressing question of how to manage the transition to a more integrated world economy.

Two decades have passed since the word "globalization" started showing up with any frequency in discussions of business and economics. At first, the focus was on Western companies' trying to compete with cheaper, sometimes better imports from Japan, South Korea, China and other countries. It was a straight fight: The battle lines were drawn along each country's borders.

Later on, things became more complex. Asian companies started designing and assembling products in the West. Western companies opened up new fronts by sending jobs abroad - not just in manufacturing but in service industries as well.

At the turn of the millennium, there was a lot of talk about whether globalization was a Good Thing or a Bad Thing. One side argued that it allowed big, multinational corporations to exploit workers in poor countries to pad their profit margins. The other side retorted that the expansion of these corporations into the developing world offered the best hope for raising living standards. One side complained that globalization was creating and destroying industries too quickly for the labor force to adjust. The other side answered that these shifts were rapidly improving the world's ability to use its resources efficiently.

Now it's pretty clear that globalization, be it good or bad, is an Unavoidable Thing. Rather than dealing with the problems of globalization head-on, it can be tempting to try to slow the process. Yet that's likely to postpone the problems, not solve them. Unless every country simultaneously decides to close its borders to commerce, migration and financial transactions, globalization will continue. Tariffs exist, of course, as do restrictions on foreign workers and foreign investment. But as technology for moving goods, people and information improves, globalization will accelerate.

How and why this is happening is well-trodden territory. Moreover, arguing about whether it's good or bad has become something of a simplistic activity. There are clearly winners and losers, and they're identified every day through layoffs, profit figures and the cash registers of retail stores carrying ever-wider selections at ever-lower prices.

The more relevant question now is how to manage the transition to a more globalized world. In theory, the gains of the winners in trade always outweigh the costs to the losers. So how can those gains be distributed so that everybody wins, at least a little bit?

To some, the answer is coordination and regulation.

"The biggest challenge to the transition to a more globalized world economy is to keep it human and fair, that is to agree on values, rules and procedures which should allow us to set up the necessary governance," said Pascal Lamy, the director general of the World Trade Organization. "That is why organizations like the WTO, where international trade rules are agreed by consensus of all the members, must be improved and reinforced."

But others see a need for greater regulation to protect workers and prevent all the gains of globalization from accruing to investors alone.

"Markets inevitably exert pressure downwards," said Ron Oswald, general secretary of the International Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied Workers' Associations, a global trade union federation with about 11 million members in 135 countries.

In comments delivered through a spokesman, Oswald continued, "The greatest challenge facing workers and the organizations that they create to defend them is to resist that downward pressure, which operates both on wages and living standards, but also in terms of rights."

These opinions form the context for what happens on the ground, like a bird's-eye view of a battlefield. At the level of a single company or worker, though, the challenge is more like hand-to-hand combat.

"As the global economy becomes more integrated, you discover that your potential customers, partners, suppliers and competitors can emerge from literally any country in the world," said Phillip Overmyer, executive director of the Singapore International Chamber of Commerce. "The challenge is to be able to clearly and thoroughly understand the needs, drivers and characteristics of these many different players, so you can develop your own strategy."

People are making decisions every day that change the impact of globalization on their lives. Parents choose whether to pay for extra language lessons for their children. The chief executive in a dying industry weighs how much his company should invest in researching new products. A government minister tries to figure out how to keep her country's brightest scientists from moving overseas.

Yet it's not easy to plan for the future without knowing what the future will look like. Back in the 1980s, Americans were encouraging their children to learn Japanese. Now, Chinese is the language of choice. Solar-powered cars were all the rage, then electrical hybrids. In the next decade, fuel cells may take over. Though India still watches as hundreds of its brightest graduates head to the United States every year, more and more are staying home to start their own businesses.

The ground-level challenges require flexible solutions. Developing specific skills, inventing specific technologies or passing specific laws to fit the circumstances of the moment may not be enough.

It may be more important to develop skills that help you to pick up more skills, to invent technologies that set the stage for generations of innovation, and to pass laws that open the door to several different kinds of regulation - in other words, to create a platform for flexible decision-making in the midst of rapid changes.

Education, pension rules, intellectual property laws, tax policy, research spending, job training and the financial system - all of these areas are feeling the effects of globalization.

The integration of the global economy is making every single topic more complex. But each one is also involved in the solutions to those big challenges.

With that knowledge in hand, a few more winners may appear on the battlefield of the global economy. This column will tell their stories, one week at a time.

Daniel Altman, the IHT's global economics correspondent, is writing a book about how the global economy works behind the scenes.

Source:The International Herald Tribune
Rights:Copyright © 2006 the International Herald Tribune All rights reserved