Globalization is much more than the financial systems that have brought so much conflict and doubt to the global economy. Many companies do more business outside their home country than they do in their own country.
WE ASKED our most recent debaters whether the credit crisis would reverse globalization. Their answers generated scores of comments. While many readers agreed with Harold James that the global downturn will lead to an inevitable disruption, many more sided with Moisés Naím’s view that the world is far too tightly integrated to be easily split apart.
A few readers noted that our debaters were essentially arguing different points. James defined globalization in terms of trade and finance, pointing to earlier historical periods when economic or political disruption led to retrenchment among nations. Naím, on the other hand, used a broader definition that included many different kinds of interactions among people and groups around the world. He felt that the Internet, in particular, with its ability to unite people no matter how far flung, made the current period different from any that have come before it. Our readers overwhelmingly agreed with Naím:• “The main difference between globalization now and the earlier examples given by Harold James is that the technology is such that we are now truly global. His earlier examples are of several countries but not of all, and not bound together as tightly and comprehensively as now. Technology is pervasive and our interconnectedness is not just financial• I fully agree with Naim in the sense that globalisation is not only an economic phenomenon. There are other linkages as well such as social, cultural, etc. As an aftermath to the crisis, economic globalisation may go a little slow but other linkages world over cannot be stopped at the will of the policy makers.• “Globalization is much more than the financial systems that have brought so much conflict and doubt to the global economy. Many companies do more business outside their home country than they do in their own country. Their success is so tightly coupled to doing business globally that they cannot uncouple without their business collapsing. Many readers, however, expect to see a slowdown in globalization in the short-term:• “There is no doubt that global capital has deteriorated drastically and has had an impact on cross-border migrations, but technology will continue to drive ideologies (cultural, social, etc) across borders.• “The present economic downturn would probably stall globalization a bit, may even correct the process and regulate it, but not reverse it.”• Globalisation, as it happened in the last few years will definitely slow down. The world has been on steroids and this current slowdown is probably a necessary respite for people, companies and governments to re-evaluate some of the things that have been happening. Both debaters acknowledged that many governments are responding to the crisis with various protectionist policies. Readers didn’t express much surprise at these measures but they were concerned that such moves could hinder long-term growth. Many discussed the implications these policies could have for businesses:• “The rise in unemployment will increase curbs on outsourcing deals and immigration. Implementing measures that go against the doctrine of free movement of labour across borders might even become a political necessity. But the effect will be temporary. The competitive advantages of sourcing goods from low-cost manufacturing units in China, textile exports from Bangladesh and India, outsourcing processes to the back-offices of technology parks in India, the Philippines et al are too huge to be junked in the long term.” • “This downswing may demonstrate the reality that protectionism is no longer feasible or even an option. Banks can’t just shut off or switch their mortgage processing operations (done in India or perhaps in Cebu). Manufacturers can’t just bring back their Chinese production capacity. As companies’ operations have gone global, there is no turning back without severe repercussions that would dwarf the benefits of protectionism.” • “A component of globalization is offshore outsourcing … an area where the economic crisis will definitely derail globalization, at least, for awhile. However, this is cyclical. One day, when the economy starts to recover and demonstrates positive momentum, and people get jobs, we will gradually refocus on bottom line results again, and the pressure to cut costs will eventually lead back to off-shoring. Readers also raised issues that weren’t part of the kick-off debate essays. For instance, several readers emphasized the need for innovation spending to gain competitive advantage when global trade and investments resumed:• The theory of comparative advantage encourages more globalization of business activity, because economics is never a zero-sum game; increasing productivity and knowledge increases the economic strength of all parties. An economic downturn should not be an excuse to increase protectionism, but instead should encourage innovators with extra time on their hands to create new value and to start new high value businesses.”• “In times of crisis the tendency is to play it safe. …As the global economy rebounds [companies] will be caught flat-footed. Leading companies will avoid such reactions, staying true to long-term opportunity, even as they reduce investment to match reduced cash flow. Those that react by cutting back will be compromised; those who continue to trust globalization will gain competitive advantage.” • “I believe the solution to this deep financial crisis will come out of true global thinking. Protectionism and xenophobic vision will only worsen the scenario. The challenge is, which countries, corporations, or communities are going to be the leaders of this transformation? Who are going to be the major players?” It’s hard to get a fix on the future from the depths of a crisis, but the many points of view from our readers and our debaters can help to illuminate the possibilities. What do you think?