Globalization: Recipe or Bane? This Research Paper Has Been Prepared in Two Parts: One Dealing with Overall Globalization and Its Ramifications and the Other Concerns Pakistan. (Cover Story)
Asad, S. Hasan, Economic Review
In the changed environment of globalization, there is no room for rent seekers. Industrial magnates used to skim off entire capital within a very short period after investing only 20 to 25 per cent of equity, ending in huge non-performing loans (Rs. 279 billion in March 2002.). Tax evasion and state patronage had been order of the day. Our tycoons were engaged in "processing" rather than "basic" manufacturing, relying upon imports and enjoying windfall without regard to productivity or technological improvement. Now a radical shift in approach is inevitable. Is it a tall order?
Globalization became mantra of 1990s after the dismantling of USSR and, therefore, the communism as an effective force and the affirmation of superiority of capitalism as a viable economic system. Yet, its genesis dates back to the late 18th century when the colonial powers (centre) launched trading activities with their colonies (periphery) in order to improve their well-being (wealth of nations). In doing so, they exchanged their manufactured goods for raw materials produced in the colonies and, therefore, the latter's terms of trade were unfavourable. After the Second World War, the trading arrangements were made to improve the lot of the periphery with massive economic assistance programmes from the US and its allies. Therefore, the volume of international trade soared significantly since 1945.
Globalization broadly refers to promotion of free trade between centre (North) and periphery (South). Now the world is a global village with cities of the North and the South interlinked by fast transport and communication system, resulting in rapid shrinkage of the world. There has been large scale flow of private capital as well as migration of the people. Whereas the North encourages the flow of capital but abhors migration from the South (a point raised by Malaysian Prime Minister, Mahathir Mohammad) barring in such sectors as computer technology where thousands of Indians are working in Silicon Valley of the US. Private capital inflows into developing countries and into the former Eastern bloc increased six fold from $53 billion at the beginning of the 1990s to $302 billion in 1997. Large parts of Asia and Latin America were suddenly transformed in the minds of international investors from poor "developing countries" into "glistening emerging markets". At the same time, new financial instruments such as hedge funds and derivatives created an explosion of foreign exchange trading, with an outstanding $1.5 trillion now changing hands everyday.
According to Hilary French, globalization has become a common buzzword. To some, it is synonymous with the growth of global corporations whose far-flung operations transcend national borders and allegiances. To others, the term is closely linked with the information revolution and the mobilization of money, ideas and labour that computers and other new technologies have been instrumental in bringing about. Yet, to French, "globalization is taken to mean a broad process of associated transformation in which numerous interwoven forces are making national borders more permeable than ever before, including growth in trade, investment, travel, and computer networking". (p. 184, Reference 1). He uses the term ecological globalization to mean" the collective impact that these diverse processes have on the health of the planet's natural systems". (p. 184).
James H. Mittelman discusses globalization in terms of international division of labour. To him, "division of labour theories are a valuable tool for examining global restructuring, especially because they identify major trends that constitute the changing social geography of capitalism". (p. 290, Reference 2) ... the dominant conceptualisation of globalization rooted in liberal economic theory serves the interests of the beneficiaries of an expanded market" (p. 291) Mittelman argues that "globalization does not sideline the state but rather forces it to accommodate domestic policies to the pressures generated by transnational capital. …