Economic Globalization: Some Pros and Cons

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Abedian, Iraj

Economic Globalization: Some Pros and Cons

Dr Iraj Abedian
Director and Group Economist, Standard Bank
Johannesburg, South Africa

Presented at the workshop on Multiple Dimensions of Globalization
3 September 2002
at parallel events to the World Summit on Sustainable Development
(Johannesburg, South Africa, 27 August-3 September 2002)

These papers are as presented at the conference and have not been reviewed by the IEF Editorial Group

Introductory observations

Economic globalization is an irreversible reality. To attempt to stall it or to roll it back would be as futile as trying to roll back the industrial revolution or information technology inventions. In terms of the historic evolution of the socio-economic system and its broader social civilization, it is an inevitable phase in the ever-advancing civilization on earth. In its current form, however, it is unsustainable. It is evidently defective, it has no built-in corrective mechanisms, and it needs to be saved from itself.

The phenomenon has been in the making for centuries. More specifically, technological inventions in the field of communication, transportation and information management have accelerated its pace, propelling it into a tremendous force with incredible capacity to speed up development, or if left ungoverned, giving it a ferocious destructive capacity.

Positive Outcomes:

1. Acceleration of development process or welfare improvement: What the industrialized countries took 150 years to bring about, the East Asian countries achieved in just over 25 years.

2. Technological advancements have made it possible to further shorten this considerably.

3. Knowledge dissemination has created awareness, consciousness, and hence empowerment unparalleled in the past. The very rising grass roots opposition to the negative by products of globalization is an evidence of the positive force that economic globalization has created.

4. The capacity to generate wealth has accelerated beyond belief.

Negative Outcomes:

1. Rising socio-economic insecurity; mainly due to the rapid transitionary period currently underway.

2. Financial market instability across the globe with huge socio-economic and human costs.

3. Political and ideological tensions emanating from the undesirable manifestations of the evolving global order.

4. The mismatch between the economic and financial system and the historic institutions that have been designed to govern the global economic and financial system.

5. Etc..

The Dichotomy of Economic Globalization

Increasingly, the welfare of nations is becoming inter-dependent. This has been a process over centuries, culminating in today's evolving world order in which the powerful and the weak, the poor and the rich nations have become organically interrelated. However, the process of socio-economic globalization has highlighted some major fault lines in the existing socio-economic order - which is rapidly degenerating into a global 'disorder'.

Despite this evident inter-dependence, a substantial proportion of global society suffers from grinding poverty at the same time that humanity's capacity to generate wealth has reached all time heights. In essence, "a sophisticated, globalized, increasingly affluent world currently co-exists with a marginalized global underclass". (Commission on Global Governance, 1996, p. 139) This has in turn given rise to critical public policy issues related to the environment, global trade, health, human rights and other social issues. At the same time, the transnationalization of socio-economic life has accelerated the flows of people, services, information, and technologies that have the potential to improve social welfare of human communities, and particularly that of the poor.

What is missing?

Some key principles are absent that are indispensable for the functioning of any coherent economic system. Key amongst them are:

- Justice: Acceptance of systemic justice, and a fairly deep understanding of the very notion of justice in a global environment, is critical for ensuring that economic globalization is turned into a constructive and sustainable force. Sub-sets of this notion pertain to inter-generational justice, and intra-national as well as international justice. These concepts have direct bearing on issues of production/investment, distribution/accumulation, as well as social welfare.

- Micro-institutions of a 'coherent and compatible value system' are missing: Here one refers to the moral and ethical underpinnings of a socio-economic system both for microeconomic functioning of economic enterprises as well as the overall performance of each national economy. Trust, fairness, equity, sustainability, reliability, and the like constitute the foundation for the proper functioning of the economic order.

- Governance structures: By extension, systemic justice, together with other components of the value system, would need to define a fair and internally consistent (or generally accepted) framework for economic and financial governance of the global order. What is needed, I believe, is nothing short of a fundamental restructuring of the global governance institutions guided by the principles of equity, celebration of cultural diversity, and the establishment of collective and transnational security and prosperity. To this end, special attention would have to be paid to issues related to law enforcement, dispute resolution, and sustainable global development.

In short, we need to acknowledge the rising complexity in a rapidly integrating community life on the planet Earth.

Concluding Remarks

In the light of the above observations, let me conclude with the following:

(a) In the current state of global society, it is easy to be overwhelmed by the extent of human suffering, the prevalence of grinding poverty, and the mounting uncertainties.

(b) When all said and done, what is needed is a total restructuring of the ethical and moral foundation of the social infrastructure, based on a richer and more robust individual understanding.

(c) A social order founded on the twin pillars of moral and material advancement is the only sustainable form of prosperity within a globalized economic order.

(d) In the coming decade, this remains our collective task and challenge. As we proceed, our vision should remain 'universal', our actions however need to focus on local solutions.

I am optimistic that we will achieve the objective, hard as no doubt it will be.

Last updated 14 September 2002