The Hindu Business Line : The local face of globalisation

Globalisation is more than free trade. It is an ongoing process that represents the continuing effort by the peoples of the world to interact and share trans-nationally in pursuit of their objectives.

C. Gopinath

The current global recession is making many governments hunker down and focus on their national economies. Stimulus packages are targeted at creating job schemes through infrastructure projects. Where schemes are targeted at helping or protecting industries, they are being structured in a way to help ‘domestic’ industries, which can at best mean domestic firms in the industry.

Such interventions are leading some people to claim the end of (at least) economic globalisation. Business researchers are debating whether companies do better when they focus on a limited region or go global. Cultural purists in parts of the world have started arguing that there is a dilution of their culture and have initiated vigilante movements. Governments are frowning upon offshoring to keep jobs at home.

At times of difficulty, it is but natural that governments are in no mood to preach global views. Communities in distress, union demands, and elections wonderfully focus the mind to the local. Industry and jobs protection come to the top of the agenda. National needs appear to rout global demands. But that is only a piece of what the globalisation process is all about.

We have even seen the swinging back and forth like a pendulum when it comes to activities of global institutions. Just a few years ago, with economies booming and governments returning loans, we were all wondering if the IMF was becoming irrelevant and needed to revise its mission. Now, governments are getting together to think about how to increase the IMF’s funds so that it can continue helping economies!

Five connected domains

Globalisation is more than free trade. It is an ongoing process that represents the continuing effort by the peoples of the world to interact and share trans-nationally in the pursuit of their objectives. This has been going on for a long time and will continue with different intensities.

To understand globalisation, we need to really appreciate five domains that can be considered as sub-systems of the environment in which activities can be analysed. These are: The economic, political, social, business and technological. The ‘economic’ would include macroeconomic trend of interest rates, tax structures, and so on. The political domain covers government activity, including court decisions influencing policies.

The social domain includes concerns of ethnic groups and their value and beliefs. The business domain involves firms as they look for markets and sources of inputs. The physical domain includes the natural resources, the physical environment and the technological capabilities of translating knowledge to use.

These domains are not silos. The interactions between the domains show us how global connections play a role even when we think the focus is domestic. When the US auto companies cried for help and the government responded, the first cry was that it was a reversion to domestic as against global. But closer examination reveals the global connections. For example, the ‘foreign’ companies that had established themselves in the US market were not doing so badly, not seeking government bailout and changing the nature of local competition. Some of the foreign companies are aided by their governments. One foreign company, Fiat, was attempting to rescue Chrysler. Political pressures by elected representatives responding to the needs of local communities was making the company reconsider which plants it will close, domestic and overseas.

New hybrid and battery technology around the world for entering new markets was creating opportunities for scientists and engineers to think differently. Different domains in different countries were coming into play. These are small examples of how global interactions continue to play a role.

global solutions

Look at the kind of issues still crying out for global solutions due to their global impact. The financial crisis in the US was in an industry that everybody recognises is very global in its reach and connections, but it is also an industry that faces intense national regulations and scrutiny. The national and global co-exist simultaneously. Even while each country tries to re-write its regulation on what and how the financial institutions can do, the companies that operate in the industry extend their products and services across the globe.

Population growth and water needs, terrorism, immigration, illegal drug use, diseases, environment sustainability, governments terrorising their own people — these are a sample of issues that not only impact more than one country and require collective action but they also involve several domains.

For example, illegal drug use involves several government efforts not only to police distribution and usage, but involves financial systems used to launder the money, communities that see increased crime disrupting social processes, diversion of economic resources, drug networks, and so on.

Not only do many domains come together, but require governments to also come together to find solutions. Even in the economic domain, few governments can ignore the reactions of their trading partners even when they re-focus on their economies.

The noises China has been making about how its debtor, the US, has been managing its finances is making many governments wonder about how the two would react with regard to managing their currencies and therefore the implications for all. There is nothing local anymore.

Too broad A process

At the back of the debates for and against globalisation is the issue of whether it is good or bad for the group making the case. The measurements of the costs and benefits also tend to be limited to the range of activities of the interested parties. Globalisation is too broad a process to be measured in terms of jobs created or lost, or terrorist activity that has grown or been contained. The key question is not one of whether globalisation is good or bad but how an individual or organisation can contain the costs and reap the benefits.

Sure, recent actions by various governments protecting their industries and economies may seem to challenge globalisation. But as Mark Twain, the American humorist, once famously said after an obituary of his appeared by mistake, “The reports of my death have been greatly exaggerated.” The reports of the end of globalisation face a similar situation.

(The author is a professor of international business and strategic management at Suffolk University, Boston, US. blfeedback@thehindu.co.in)

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