Globalisation, wealth and the Clash of Generations
Christopher Lingle, a professor of economics from Universidad Francisco Marroquín in Guatemala and a senior fellow at the Centre for Civil Society in New Delhi, gave a presentation on globalization and cultural change at an event hosted by Beyond Borders on 11th September 2007.
Following is a summary/compilation based on his presentation.
Globalization is not something new, nor did it start with colonialism, it’s an ancient process which is now accelerating; it is a choice of political leaders to open domestic markets.
Act of trade itself is a ‘positive sum game’ and not a zero sum game, as is sometimes contended. For a successful transaction to happen, the seller of a particular item must value the return more than the item, whereas the buyer must value the item more than price he’s paying for it.
Trade therefore- so long as it’s voluntary – offers net benefits to the person and the community which engages in it. Globalization similarly offers net benefits. There are costs yet the benefits tend to outweigh these costs.
Globalization has a few misconceptions; one is the idea that it’s only helpful for big multinationals – McDonald’s, Star Bucks, etc. This is not true. In fact globalization potentially expands every ones market potential, including small businesses and entrepreneurs who are able to take advantage of niche opportunities that are available in a global market. Big players in markets are made to compete, thus delivering better products and services to the consumers.
There is also the notion that globalization is always from ‘them to ‘us’, when in fact it’s very much a two-way street. ‘Ayurvedic’ medicine for example, was unheard of in the west until recently.
It’s important to realize the value of imports as well as exports. Now in his days, Adam Smith was arguing against ‘mercantilism’ which is essentially a gold fetish, the thinking that ‘if we import, we loose gold’ and the idea that gold is wealth. This is the ideology which gave birth to colonialism and imperialism. By thinking that loosing gold is loosing wealth, mercantilists decide to colonize to get what they want.
Adam Smith argued that first, wealth is not gold; wealth is the productive capacity of the economy. The way you expand wealth is by first opening the economy to imports. If this happens, the consumers will have access to products at lower prices, which means they save money to spend on other things, like say local products. Local producers will pay less for inputs which means they can be more competitive and produce more cheaply.
This can be established by applying the same logic of a day to day operation of a simple household. Yet somehow export-led economic growth has been sold as a good idea; all the countries who have tried this method however – Japan, most East Asian countries – have crashed. China who is playing the same game will suffer the same fate.
This two-way process of globalization will inevitably have an impact on culture.
Samuel Huntington, asserted future conflict will be as a result of a clash of civilizations’, but the cultural change brought about by globalization is not that of civilizations it’s in fact, ‘a clash of generations’.
A clash between younger generations who want their cultures to be modernized against an older generation which wants things the way they are.
Special interest groups existent in most democracies often tend to be powerful either through commanding financial resources, or by being vote banks politicians want. This has made it possible for them use the government and the political system as an instrument of protection; therefore special interest can be a force in keeping things the way they are.
The flow of information and ideas through channels such as the internet facilitated by rapid changes in technology leads to ‘creative destruction’ – the brilliant idea someone has which can benefit the entire community but which also has a disruptive effect on someone who previously held a competitive advantage.
This can potentially free up capital for more productive use, yet often those who are hurt by the process demand for ‘protection’. If this is granted, it destroys the value of the ‘good idea’ and destroys in essence, the future – “protecting today’s jobs destroys tomorrow’s jobs”.
Both ‘special-interest’ and those who demand for protection tend to be a small part of the community, which blocks the progress of the larger community.
Young people, often more receptive and in the middle of changing technology are likely to see through this and demand for change.
Opponents of globalization often appeal to protectionist and collectivist tendencies; trade unionists in the United States for example don’t want to compete with India or Sri Lanka in textiles, because they feel protective about their jobs, a concern they try to pass of as ‘workers’ standards’.
Globalization has been erroneously termed as ‘Americanization’. It is not. In fact it is internationalization. There are more Chinese restaurants or karaoke bars than there are Mc Donald’s outlets in Colombo.
Culture is best interpreted as a set of enabling institutions and arrangements which communities adopt, on the mutual need to first survive and then to thrive. This is developed from an evolutionary process by interacting with each other.
People tend to stick with aspects of culture so long as it enables them to survive and thrive.
Markets and globalization, however, tend to provide a ‘civilizing’ influence, because engaging in trade in markets require a degree of trust and trade requires people to interact with other people whom they might not necessary have liked otherwise.
This might lead to a breakdown of some aspects of cultures, such as exclusivity, (keeping women out, people from a certain ethnicity/religion out, etc.) because trade makes it desirable that you interact with them.
Importantly however, despite these influences people tend to have a choice in the process. For example, Japan and Holland despite being ‘exposed’ to globalization for longer periods, have preserved essential parts of their culture. Cultural influences too tend to go both ways; United States has been heavily influenced by the Hispanic culture.
Globalization is also a process which brings about modernization, and modernization in turn tends to lead to ‘self-determination’. The anti-colonial movement was largely based on that, and due to influences in globalization there is a tendency for a movement from national self-determination to individual self-determination.
The import fact is that there is choice. People – increasingly individuals – decide what they like about their culture and retain it, while changing aspects they don’t like or feel block their ability to thrive.
There is a connection between globalization and prosperity, and increasing wealth is a matter of political will and choices, which can be done by creating capital-friendly institutional infrastructure, placing importance on the ‘rule of law’ and de-politicizing the economy (decrease bureaucracy – the opportunity for corruption, making tax/judicial/police system less arbitrary, guaranteeing private property rights, etc.), and also, Liberalizing capital markets, increasing foreign and domestic competition and deregulating and privatizing without monopolies.
Promoting economic growth requires stable economic conditions, which requires structural change. Structural change requires changing incentives which requires changing legal institutions (rule structures) which in turn requires changing the political culture. Changing political culture requires ‘cultural change’.
When this process slows down, by way of other ways which were discussed or the slowing of economic growth , young people especially see that they have fewer opportunities and either migrate to places where these opportunities exist, or tend to demand for change.
The most important clash therefore is with generations and within communities as opposed to outside.
Globalization, modernization and prosperity come with certain costs, out of which cultural change is one. However, the process tends to be slow and the people will only change if the benefits outweigh the costs. It’s not something that can be forced into people.
The provocative content discussed at the event generated a lot of interest and different reactions, two very different narrations of the event can be read here (rather distorted) and here. The event was also covered in the Daily Mirror. Some comments and more information about the event that was can be found here. Pics can be found on our flickr.
We should do this kind of thing more often.