What is globalisation?

As the following extract from a lecture delivered by the writer in September 1995 to the University of Lausanne shows, globalisation is really a euphemism for 'transnationalisation' - the unfettered expansion of transnational corporations (TNCs) into the world economy, particularly into the economies of the developing countries. Multilateral organisations such as the WTO, the IMF and the World Bank are playing a key role in this process.

By Chakravarthi Raghavan

GLOBALISATION has become the latest buzz word, used in any and every context. In international discourses, both official and non-official, and more so within the last decade or so, the term is often used in an adjectival form -'this globalisation phenomenon' - and in the context of the 'interdependence' of economies and nations.

The word 'phenomenon', is generally used in relation to a fact or occurrence, something extraordinary, that is observable but not easily explained.

Used thus, 'globalisation', is acquiring a connotation akin to terms like karma or kismet (or fate) used by peasants and superstitious people in our parts of the world to explain their current difficult condition of life or some hardship they are undergoing - something that has to be borne, but can't be changed.

Even rational people who otherwise believe that science and technology can solve or cure anything (including economists who insist that their discipline is scientific and logical) use the term 'globalisation' in such a way as to appear to attribute (and blame) everything that happens in the broad social and economic sectors, on this phenomenon. Governments and governmental institutions, and a host of national and international elites, who are otherwise normal and rational, use the term to disown their own responsibilities for certain unwelcome developments.

But even the peasantry in the developing world no longer accepts that its ills and deprived conditions of life are due to karma or kismet and is beginning to relate them, accurately or otherwise, to those who govern them and the system that enables them to do so.

Economic development

'Globalisation' is clearly not a natural phenomenon like an earthquake, or hurricane - occurrences in nature which, whether they can be foretold or not, cannot be averted, but have to be endured.

And while the term is being increasingly used by various people - and journalists and media more than others are often to blame - to describe wide-ranging and often times dramatic changes in the world, 'globalisation' is correctly speaking, used to describe certain economic developments.

According to a recent Organisation for Economic Cooperation and Development (OECD) publication, the term was first used, in 1985, by Theodre Levitt - 'The Globalisation of Markets', (in Kantrow, A M, Sunrise...Sunset: Challenging the Myth of Industrial Obsolescence; New York: John Wiley & Sons; 1985, pp 53-68). Levitt used the expression to characterise the vast changes that have taken place over the past two decades in the international economy - the rapid and pervasive diffusion around the world of production, consumption and investment of goods, services, capital and technology.

Within the realm of world economic developments, or the new economic order, 'globalisation' is acquiring a wide variety of uses: the emergence of a new asymmetric international division of labour along with greater dispersion of economic activity directed by corporate strategic planning that has replaced governmental or state efforts in various countries. It also seems to be used in terms of the current situation - the erosion of the post-War US dominance of the world economy by the rising competitiveness of Western Europe and Japan and the rise of regional spheres of influence.

In the context of the collapse of centrally planned economies and the capitalist system dominating most of the world - even in countries like China where the political system is still being maintained, there are increasing moves away from the command economy towards market economy or as the Chinese call it 'social market economy' - the term globalisation is also used to describe the worldwide spread of capitalism.


It is also being used synonymously for 'liberalisation' and 'greater openness' of economies - implying both liberalisation of the domestic economy and external liberalisation. Thus, in October last year, the head of the World Trade Organisation, Mr Renato Ruggiero, speaking at the Telecom-95 to heads of the major telecommunication enterprises of the G-7 countries, said that while 'liberalisation of capital and trade flows is creating a global economy, the liberalisation of telecommunications, which can bring high quality, medical, education and business services to every village in the world, will globalise human society itself'.

When one talks of globalisation in the economic sector, one is thus talking about economic and economic-related structures knit together and across the world of nations. Globalisation (and the term 'integration' often used with it), is really man-made and the outcome of several elements of politics, economics, industrial processes and the way human society is organised and run, within countries and across countries and relationships.

Advances in technology

No doubt the advances in technology - in the technology of transport, and advances in communication and information technology and with it the transportation of ideas and information across the globe - have contributed to and helped this process. And the major corporations of the world - mostly those centred in North America and Europe, as also in Japan in the Far East - in the pursuit of their profit-maximisation and capital accumulation objectives, have been exerting their pressures and influence on their governments to facilitate this type of integration, through the process of globalisation, that is, the transnationalisation of the world economy.

The term integration, at international levels, is used to describe governmental actions - regionally or multilaterally across the world - to reduce the barriers to trade and economic exchanges and mobility of factors of production and harmonising national economic policies for common world good. But increasingly, the concept of international economic integration and interdependence, is being used to explain the interdependence of national economies, irrespective of whether it is brought about by acts of governments or by the independently conceived and executed actions of micro-economic agents. (M Panic, 1988, National Management of the International Economy, McMillan).

The current talk, since late 1980s and early 1990s, of globalisation and integration is really an effort of transnational corporations (TNCs) to expand their activities to the developing countries.

And just as the term 'multinational corporations' was or is still used to hide the reality of 'TNCs' - corporations based in one home country, with management and control, if not all shareholders from that country, but having branches, subsidiaries and production units in other countries - the word 'globalisation' is being used to wrap together and hide the reality of the current stage of the activities of the TNCs, namely the attempt at transnationalisation of the world, and more so that of the developing countries.

Transnational corporations

The talk of integrating developing countries into the world economy, and the talk about globalisation, is really about the expansion of TNC activities to the developing world and on TNC terms. That the globalisation process talked about is really this, was made clear by Sylvia Ostrey, former Chief Economist of the Organisation for Economic Cooperation and Development (OECD) and former Canadian Trade Policy official, in 1990, prior to the Brussels meeting, when the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) negotiations was being stalled by the US and European differences over agriculture.

Ostrey wrote then ('Help the Three Systems sing in Harmony', International Herald Tribune, 19 April 1990): 'The primary agent of globalisation is the transnational enterprise. The primary driving force is the revolution in information and communications technology.... In a globalising world, competition among transnational enterprises in sophisticated products and services... is also competition among systems... For the global corporation competing in the international economy, it means competing under the same set of rules - that is the same set of domestic rules in different countries.'

That plea was for governments to act, agree upon a set of trading rules in the Uruguay Round negotiations, and facilitate the globalisation of the world economy by the TNCs: a call for governmental or intergovernmental actions to transnationalise the world economy. The globalisation, she was talking and advocating, was not a spontaneous force, but a deliberate set of policies to be adopted by governments to further the transnationalisation of the world economy.

Initially, the GATT, through successive rounds of tariff negotiations (see box above) - from the initial Geneva and Torquay tariff negotiation rounds right through the Dillon and Kennedy rounds - embarked on a course of gradual tariff reductions and liberalisation of trade between the US and Europe, subsequently involving Japan. The rest of the membership, mostly developing countries were onlookers, benefiting to some extent from the concessions exchanged among the industrial nations, through the most favoured nation (MFN) principle, but gaining no direct rights through trade liberalisation in areas of interest to them.

Until the Tokyo Round of negotiations and accords, the aims of the industrialised countries were basically to facilitate and accommodate new production, in existing or new sectors and lines, within the industrialised world.

Changing perceptions

The industrialised countries in all these earlier negotiations did not focus on the markets of the developing world, but rather on each other's markets, and because of the TNCs and their productive activities, trade liberalisation measures were designed to further the intra-industry trade among themselves. Their more or less equal technological and other capabilities and production of goods resulted in intense product differentiation and intra-industry trade as well as intra-firm trade. All the successive tariff cuts and other measures were aimed at facilitating this, with the corporations in effect lobbying their governments.

It must be remembered that in the immediate post-war period the US had allowed Europe to discriminate against the US while receiving full benefits. Similarly for a long time within the GATT, the developing countries which were not major markets, were allowed to benefit from the concessions exchanged by the industrialised countries among themselves, without having to give any reciprocal concessions or benefits.

But the rise of new competition from the newly industrialised countries (NICs) of the Far East (South Korea, Hong Kong, Singapore and Taiwan) and the second tier of NICs (Malaysia and other ASEAN members) began to change the perceptions of the North. Also, with slower growth and stagnation in their own countries, and the change of stance in macroeconomics - that came in 1980 with financial assets and their protection taking precedence over, and to the detriment of manufacturing capital - the transnational corporations began to eye the markets of the major developing countries.

No more Koreas or Taiwans

There was both the effort to protect domestic markets (through non-tariff measures) against the new competition from the NICs, as well as the drive to penetrate those markets, and those of the major developing countries, there was thus the drive of TNCs of the North both to break down the trade barriers in the South against imports, as well as efforts of the TNCs to establish themselves within those countries to better compete with domestic enterprises.

The Uruguay Round was really about this. The US objectives spelt out in Congressional hearings were very clear: ensure that there are no more Koreas or Taiwans to challenge and compete with the US.

Hence the push for ending the special and differential treatment of the developing countries, for tightening disciplines in the traditional goods area and ensuring that the developing countries are bound by them. Hence the moves to extend the ambit of GATT negotiations to include new areas such as services and agriculture and new issues such as intellectual property rights (in the parlance of GATT, 'Trade-related Intellectual Property Rights or TRIPs) and liberalise them.

This liberalisation drive in services which is currently being continued through the World Trade Organisation (WTO), the successor of GATT, embraces service sectors such as financial services and basic telecommunications and is aimed at facilitating the control by foreign capital of the key sectors of domestic economies of these developing countries.

Secure framework

The TRIPs, while motivated and pushed by the pressures of the US film and music industry (against copying and sale of video- and audio-cassettes and compact discs) are designed to establish a secure framework for TNCs to supply a distant market with their products (on whose imports they get a monopoly through the intellectual property rights protection of processes and products) or to set up production ventures and supply the market or license a local producer.

Side by side with the trading rules to promote transnationalisation, the major industrialised countries, particularly the US which really controls the International Monetary Fund (IMF) and the World Bank, has been pushing these institutions to further this same goal of globalisation through their own policies. They have been attempting this through what became known as the Washington Consensus.

The TNCs, however, still do not have unrestrained right to invest and set up enterprises in the developing world. Hence the efforts now to set up an investment treaty inside the WTO and enforce the right through trade retaliation.

All these moves which are characterised as 'globalisation' are pushing the theories of free market and free trade - that have never been practiced before by the industrialised countries - on to the periphery, the developing countries.

Chakravarthi Raghavan is the chief editor of the South-North Development Monitor (SUNS) and the Third World Network's representative in Geneva.