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Globalism: How It Works and Who Benefits From It
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Globalism: How It Works and Who Benefits From It

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WASHINGTON - February 14, 2019

Andy Warhol admired the fact that the US President, a movie star and a homeless man on the street all drink Coca-Cola. One and the same soda is now drunk on six continents, the same Snickers bars are sold on the stands at the cash register of supermarkets, and McDonald's has restaurants in 118 of 197 existing countries. By 2020, Chinese cinemas will bring Hollywood more money than American, the whole world knows Leonardo DiCaprio’s face, and the President came into politics straight from a popular reality show.

Feminists appear even in Muslim countries, there are fewer cities not boasting LGBT marches, vegetarianism and environm—ental activism are no longer marginal hobbies but have become a fashionable lifestyle, and animal advocacy has become a respected profession in most economically developed countries. Welcome to the global world.

What is globalization?

The world without globalization is easiest to imagine on the example of the limited internet, which is closed access to external resources  you cannot buy imported goods and download foreign films, music, books. Messengers either don't work or allow you only to contact people in your own country. The content is strictly monitored by censorship, and users have no right to express thoughts contrary to ideological dogmas. In its extreme form, this approach is typical for the DPRK, where access to the internet can be obtained only with the personal permission of Kim Jong-un, and all the rest are forced to use the intranet, the internal North Korean network.

Every year the "global village," as Marshall McLuhan said, is getting closer. However, this process can take place in two opposite scenarios: a unipolar world where people move freely around the globe, earn money in different countries, actively influence what is happening, independently choose a worldview, sexual orientation and form political preferences — and a multipolar world of fundamentally disagreeable civilizations-hegemons, in which the boundaries are strong, and the clouds of war and global environmental catastrophe gather over the planet.

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When and how did globalization begin?

The economy is one of the main engines of globalization in the world. The Great Silk Road from East Asia to the Mediterranean Sea, which China used to trade with the Indian, Arab and European peoples, created a single market space for these regions. The next large-scale revolution was the colonization of the Portuguese and Spanish traders of America, and then the birth of the first transnational corporation, the Dutch East India company that connected Europe with Asian countries. The invention of the steam engine, the railways and the industrial revolution in the 18th-19th centuries led to a sharp increase in economic production and the revival of international trade, but then this development of the global market was slowed down for almost half a century due to two World Wars.

How does the global economy work?

Since the 1950s, the volume of international trade has stably increased. Neoliberalism became the dominant economic model gradually, which reached its peak in the UK during the reign of Margaret Thatcher (Thatcherism) and in the United States under Ronald Reagan (Reaganomics). The main principles of this doctrine are unlimited freedom of trade, the minimum role of the state in the regulation of the economy, the promotion of the private sector and its main players — corporations and transnational companies.

There is no denying the positive impact that globalization has had on the world economy: Here you can increase the efficiency of market trade (there will always be a buyer for your product), the growth of competition (your client will have offers from other sellers, which means you need to try harder), and an evener wealth distribution around the world. Economic globalization proponents believe that it has lifted more than 1 billion people out of poverty, providing them with jobs including through increased foreign direct investment: Capital owners have long term control over the economy in the poor and developing regions of the world, where GDP is growing, employment, and in general, these countries are on the path of technological improvement. On the other hand, most of the profits go to the same foreign investors, most often represented by transnational corporations (TNCs).

Does everyone benefit from the global economy?

In the near future, the globalization of the economy at the current pace of technology development will hit the highly and low-skilled. The claim that it's beneficial to all is based on the assumption that people engaged in a particular field of activity, if necessary, will be able to easily change it. South Korean economist Ha Joon Chang gives an example: " In this view, if the US signs NAFTA with Mexico, some auto workers in the US may lose their jobs, but they will not lose out, as they can retrain themselves and get jobs in industries that are expanding, thanks to NAFTA, such as software or investment banking."

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Try to imagine 50-year-old auto mechanic Joe who collected cars for 20 years and now has to learn a programming language in a couple of months to feed his family — then the fragility of these economic theories will become obvious. In most affluent countries there are mechanisms of dealing with such devastating consequences: government grants and free requalification courses. They work best in Scandinavia, while in the United States in recent years, on the contrary, they have been reducing financing for such projects.

Is the global economy beneficial only to corporations?

TNCs benefit other globalists the most. They have access to new markets, they choose where to pay taxes, where to buy the cheapest and most efficient labour, and they have almost no responsibility to the people they hire or to the people of the country who have no influence over them — they can only buy or not buy their products.

Modern TNCs are equal in economic and political power to the state: Their financial assets often exceed the GDP of most countries, millions of dollars are spent on lobbying interests in local governments, they can even sue foreign powers. At the same time, corporations are not limited, while states have a number of obligations to their citizens — they are forced to redistribute income to social payments, education, health care and maintenance of the army.

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TNCs produce goods and services on the principle of "global value chains," consisting of several links: concept development, design, production of materials and spare parts, marketing, distribution and support of the final product. Such chains are called global because each stage of production is carried out in different countries and on different continents. Studies in 2013 showed that about 80% of international trade is accounted for by global TNC chains, which create about 20% of jobs worldwide. In addition, American corporations top the rankings in almost any sector of the economy from manufacturing and finance to services and retail. This is despite the fact that China is the largest computer market in the world; 84% of all profits from the sale of hardware and software goes to "star-striped" companies.

A classic example of such global chains is the iPhone's production. The design and the content developed in the United States. Resources and materials for spare parts are extracted in Asia and Europe, the components itself are made mainly in Asia. Apple buys the displays and memory cards from one of its main competitors, the South Korean giant Samsung. Then the spare parts are brought to China, where they are collected in the finished product in factories owned by Taiwanese Foxconn. Apple, Samsung and Foxconn are among the five most profitable technology companies in the world —-- but Chinese, Malaysian, Filipino and Vietnamese workers involved in this global chain, get exactly as much money as you need to not die of hunger.

It is even worse for those responsible for the early stages of this production line — the supply of natural resources. The Democratic Republic of the Congo has been suffering for decades from civil wars, with armed groups fighting each other for control of mines that extract rare minerals that will be found in almost all of our laptops and smartphones. Millions of civilians have been killed in these conflicts, and more than 2 million children in the Congo are at risk of starvation. But the chaos inside the country allows computer manufacturers to buy resources at low prices.

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At the end of the iPhone production chain, Apple spends 90% of its profits through offshore zones, where the company doesn't have to pay US taxes, which for 2017 alone would amount to $78.6 billion.

Can globalization be final?

One of the most impressive manifestations of globalization is the creation in 1993 of the European Union, a single political and economic space, which includes 28 European States with more than 500 million inhabitants. A common market was formed inside to ensure free trade, the movement of capital, goods and services. The Schengen area has abolished passport control and borders, and citizens of these countries can freely change their place of residence and work. Europe has shown by its own example how globalization works and has set a common vector for unification for the rest world.

However, after 25 years of existence, the EU found itself in a precarious position, and now there is a strengthening of opposing, anti-globalization trends. The most powerful blow to the European world was dealt by the country, which initially initiated the unification — Great Britain. In 2016, 51.9 % of its residents voted to leave the European Union, prompting a rise in nationalist, eurosceptic, and anti-globalist sentiment throughout the region.

Following the elections in 2017, the right-wing conservative party "Alternative for Germany" became the third largest in the Bundestag. The country is considered an informal EU leader, and yet it was its residents who brought the eurosceptic "Alternative..." to power, and in their slogans, AfD calls to expel 1 million foreigners from German lands.

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The nationalist mood is growing also in Poland, Hungary and the Czech Republic, and Spain is going through Catalonia’s desire to become independent.

Global peace or civilization war?

The economy has become global and politics remains national. In 1993, Foreign Affairs published an article "Clash of Civilizations?" by distinguished American political scientist Samuel Huntington. After the collapse of the bipolar world, he foresaw not the end of history but the emergence of a new, multipolar construct, in which wars and clashes are inevitable, and the main actors will no longer be countries, but entire civilizations.

The great French revolution at the end of the 18th century gave rise to such a thing as the nation, and since then "wars between kings ceased, and wars between peoples began." This model lasted until the First World War, and after the Russian revolution was transformed into a confrontation of ideologies. In World War II there were already three: liberal-democratic, communist, and fascist.

The new world, according to Huntington, doesn't intend to become a single socio-cultural space. On the contrary, it will turn into an arena of clash of eight civilizations: Western, Hindu, Islamic, Confucian, Latin American, Orthodox-Slavic, Japanese and African. Each differs from the others in language, history, religion, customs, institutions, and subjective self-identification.

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Yes, globalization leads to the borders of countries being blurred and people being settled around the world, losing the traditional identification with place of residence and nationality. However, in an alien environment, according to Huntington, civilization "self,” which is often reduced to religion, on the contrary, is aggravated. When Syrian refugees enter Germany, many of them gradually cease to identify themselves as representatives of Syria. But they are growing and actualizing a different identity: They are more than before; they feel like Muslims who don't share the fundamental values of Western liberal society because they are much less important in the rest of the world. Individualism, freedom (both individual and market), opinion pluralism, the rule of law and democracy don't find such a response in Muslim or Chinese or Hindu civilization. The West has been and remains the dominant force, and there are three ways to interact with it.

The first is complete isolation and elimination from the life of the world community. Until recently, North Korea used this way.

The second scenario is chosen by countries that agree to join the West and westernize, accepting democratic values and institutions like liberalism and a market economy.

The third way is an attempt to catch up with Europe and the United States in economic and military terms, without adopting their values. The Japanese experience is the most illustrative example here: The land of the rising sun was modernized and blended into Western society without losing its cultural identity and maintaining the status of a separate civilization.

And what's Trump?

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In his election campaign, Trump relied on a number of anti-globalist statements and appealed to the working class, which is more acutely aware of the negative effects of globalization. Then another presidential candidate explained that the US spends too much money supporting foreign partners, allowing foreign companies to oust local producers from the market, and Chinese and Mexican workers take seats from Americans. Therefore, among Trump's campaign promises was an increase in tariffs on imports of goods from China and Mexico, the elimination of the North American Free Trade Zone (NAFTA) or a change in its format, and the exit from the TRANS-Pacific Partnership (TPP) and even from the WTO. In other words, Trump promised to revise a significant part of the international treaties on which neoliberalism is based and which constitute the legal platform of the globalization process.

Ecology: Global challenges require global solutions

A classic example is global warming and climate change. Most often, these problems are denied by nationalist governments that pursue their private interests and prefer short-term benefits in the hope that "big issues" will be solved for them by other countries.

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Concern for the environment involves not only the abandonment of already operating financial schemes that bring fabulous profits but are based on the production of oil and gas, and therefore have a side effect in the form of harmful emissions into the atmosphere. To improve the climate, huge amounts of money are needed: the introduction of environmentally friendly technologies into mass production, the construction of new waste processing plants, the solution of already accumulated problems, such as the purification of the ocean from giant garbage spots, which surpass Mexico in their area. All this requires huge investments.

Only through joint, global efforts, through the development of international legislation, the creation of international monetary funds to combat climate change can change be achieved. Otherwise, individual political groups will continue to deny the problem and humanity will move towards an inevitable catastrophe.

Fighting robots

Another complex global problem that needs to be addressed together lies in the field of new technologies. While governments and corporations from different countries have not agreed among themselves on restrictions in the development of artificial intelligence, the Terminator shadow hangs over humanity, from where killer robots created by the military of different countries and out of control are bloodthirsty, looking at people.

Elon Musk, Bill Gates, Stephen Hawking, Ray Kurzweil and Google co-founders Sergey Brin and Larry Page have repeatedly spoken about the dangers of AI, but their alarmist position is not enough to protect humanity from all such threats. If only the United States would impose a ban on military development in this area, and China would refuse to do the same and continue to build and improve military robots, soon America would have to reconsider its position to catch up with China. It could lead to a situation much more dangerous than the nuclear arms race.

Automation and job loss

There is another, even more real problem related to AI and globalization. In the coming decades robots will deprive hundreds of thousands of people of jobs and this will be the main destabilizing factor in the world economy. According to various reports, about half of the existing professions will be abolished within 15 years, and first of all, it will affect the blue and white collar workers, that is, workers and managers of all levels and areas. Robots will displace people not only from the black labor market but also from more technological industries, where qualification is still valued: medicine, financial analysis, accounting, etc.

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Mankind has already faced such a problem during the industrial revolution when machines replaced live personnel in factories and the unemployment rate increased dramatically. And yet in our time, the situation is radically different: If in the 19th century it was possible to leave the factory for some easier profession, now it's impossible because robots will occupy all the lower niches of labor. A person will be more efficient than a machine only in highly qualified areas, such as software engineering, and this work is for a limited number of people and also requires special skills that cannot be obtained quickly.

World governments will have to address the challenges of retraining and upgrading the working class together, otherwise it could lead to uncontrolled migration flows around the world, riots and eventually wars.

Author: USA Really