1. What is globalization? Africa in the Global Economy Renata Serra Spring 2008 What does globalization mean?  Many    use the term ‘globalization’ to imply: Increasing internationalization processes Liberalization of economies and societies Westernization (1989 is the key date)  G. strictly speaking is however distinct concept and implies de-territorialization:  Trans-border phenomena take place in no particular space: it is the ‘trans-world’ space • Ex: Telephone calls, internet, electronic finance, and the depletion of stratospheric ozone Qualities of truly global phenomena  Time-space compression  Round-the-clock operations  Border-less – borders are not obstacles  Inter-connected-ness, interdependencies  Is  this the end of geography and territory? No, because there is much in the world that is not globalized!! The end-less debate  Enthusiasts:   Novelty of the de-territorial element Increasing inter-dependencies • Information and technological innovations!  Skeptics:   G. is an ideological construct (neo-liberal) G. is neither new nor unprecedented • There were higher rates of migration and trade, in relative terms, during 1870-1914 than now The main drivers of G  Transport revolution  Technology  Internet continues to double every 100 days!  Economic policies  Changes in economic regulation and governance  Multilateral arrangements Economic globalization  Global production chains    Integration of financial markets Increased trade flows    Including in services (travel, insurance, financial, computer and information services) Relocation of production processes across national borders (surge in FDI) Outsourcing of a wide range of activities   TNCs account for 20% of world production, 70% of world trade and 54 millions direct jobs Ex. Outsourcing of radiology services to India But also contagion of financial crises!! Political globalization  Rise in trans-national/international organizations  UN but also civil society, pressure groups and social movements  Global governance  Increased regionalism (EU)  Peace and security as global public goods  The nation state is less autonomous  Skeptics: the business of politics is still in the hand of the nation state. The latter has never been so strong Cultural globalization? Yes  Technological advances  unrivalled export and import of cultural products, exchange of information, new media   Popular culture is truly global Companies rather than nation states drive cultural G.   Shared and cross-cutting cultural identities Global goals transcend the objectives of nation states  ‘Global consciousness’ may lay the basis for a ‘global civil society’  Commitment to global human rights Cultural Globalization? No  Historical role of national culture and nationalist movements   Crucial in the decolonization process, e.g. Africa National identity today as political/ideological tool  Modern technologies serve the purposes of ethnic communities  Flows of ideas enable knowledge of diversity but also emphasize distinctiveness/idiosyncracies Global public goods (GPG)  Public goods: non-rival and non-excludable (typically under-provided)  Global goods: effects reach across borders, generations and population groups.  Global public goods are both a:    driver of G an outcome of G Governance gap is the result of:  Increasing externalities but lack of recognized global actors Examples of GPG  Equity,  justice and peace Can a collective system emerge?  Health  Increased international travel + new diseases  Environmental  protection Climate change, bio-diversity, water  Knowledge  Issues of unequal access and pricing G. and development  “G is good” argument:     Increased competition, more jobs and greater welfare Importation of knowledge for health advancement Pressure against un-democratic governments “G is bad” argument:     Unequal: few benefit at others’ expenses Dominance of global production channels and TNCs Increases in global risks Western-centric: no alternative discourses Sub-Saharan Africa (SSA)  By many standards, SSA is the least integrated region:  Trade/GDP increased little, against massive world increases • SSA’s share in world X was 1.5% in 2000 (against 3.9% in 1980)      Marginal FDI flows (mainly to Gabon, Nigeria, and South Africa) ODA declined from 4 billions US$ in 1995 to 1 billion in 2002 Number of internet users is about 1% of world total 17 mobile phones/1000 people (123 in LA&C, 530 in OECD). Recent setbacks despite global progress:   The number of poor people has increased Health and education have deteriorated in some parts SSA predicaments: causes  External factors • 1980s oil crisis, deterioration in the terms of trade, huge debt overhang, Sahelian droughts, civil wars and conflicts  Internal factors • State weak capacity, corruption, bad policies  Roles and responsibilities of the international community • Neo-colonialism • SAPs and dominance of externally driven policies G: what’s in it for Africa?  Optimists   G. can bring both benefits and costs, the secret is to learn how to “navigate it” Cosmopolitanism has been an African trait for long time; one needs only to re-actualize it  Pessimists   African renaissance should involve a new African ideology/discourse of resistance Reviving African history, culture, social relations, and entrepreneurial spirit Global convergence… Yes, but … but Africa’s falling behind… … and gaps between skilled and unskilled wages increase Inequality across countries: why  Rules of the game may not be fair  Even when they are, the interpretation or implementation may favor one side   Poor countries are disadvantaged to start with    E.g. Limited use of compulsory license within TRIPs High commodity dependence Weak or inappropriate institutions Global markets are imperfect and create risks  Volatility is particularly detrimental to poor countries Inequality across individuals: why  Individuals/households  may differ in their: Distribution of skills • High skills are better compensated  Distribution of assets • Education especially, but also land and capital  Degree of geographical mobility • Ability to move where opportunities are better  Ability to cushion risks • This is crucial given volatility  Ex: financial crises are especially detrimental to the poor Why does inequality matter? Inequality may be harmful to growth 1.  2. 3. 4. Countries with low initial asset inequality have grown faster e.g. East Asian countries Inequality may lead to social tensions Inequality undermines good public policy Inequality is particularly harmful in poor countries, which lack effective mediating institutions and protective mechanisms 1. Inequality may be harmful to growth 2. Inequality may lead to socioeconomic instability  Tensions between global markets and socioeconomic stability (see economist Dani Rodrik):  Asymmetry in individuals’ capabilities to ‘go global’ • D for unskilled labor is more elastic  Threat to domestic norms and social arrangements • Demand for procedural fairness e.g. no child labor  Threat to the welfare state and its social provisions • Precisely when social insurance is highly needed  The risks of not resolving these tensions are social fissures and resurgence of protectionism What to do?  If G creates asymmetries, then corrective institutions and policies are needed  Economic theory tells us that market imperfections and asymmetric risks require global solutions  A global social contract?  We are definitely not (yet?) there!