Challenges of globalisation and Alternative Perspectives
The developed countries particularly Europe and USA have started talking of de globalisation now in order to protect their borders by creating restrictions on movement of labour intensive services sector where the developing countries like India has comparatively competitive advantage. — Dr. Dhanpat Ram Agarwal
Globalisation broadly implies integration of economic activities including free movement of goods, services, capital and technology. However in practical parlance, we find that the rules of international trade and investments are generally lopsided and are guided, influenced and controlled by transnational corporations. In the legal framework it appears to be fair and reasonable with an avowed objective of raising the standard of living and removing poverty at global level but in reality unfair trade practices are followed. The results are visible in the form of growing inequality between North and South. WTO and IMF are the main intergovernmental organisations which govern the rules of trade in goods, services, transfer of technology, exchange rates, balance of payment and the movement of capital in the form of debts, portfolio investment and the foreign direct investment. The market access to goods, services and foreign investments are granted generally in favour of the developed countries and against the developing countries on one pretext or other such as non-tariff barriers, labour standards, environment standards and several other health and safety standards. The long cherished demands of the developing countries which were contained in Doha Development Agenda have been put in back burner. Thus WTO has practically become non-est. like UNCTAD after snatching all the benefits in the favour of TNCs and the process of extortion and exploitation through the menace of intellectual property regulations and other provisions relating to free movement of capital intensive services sector for control on the banking, insurance and capital market continue. The developed countries particularly Europe and USA have started talking of de globalisation now in order to protect their borders by creating restrictions on movement of labour intensive services sector where the developing countries like India has comparatively competitive advantage. Digital technology is also causing imbalances in trade in services through e-commerce and financial services.
The major challenges and the alternative perspectives of globalisation can be summarised as below:-
1. Climate change and Decarbonisation— In the post industrialised world the CO2 level has increased from 350 ppm (parts per million molecules) in per-industrial era of 1850-1900 to 414 ppm leading to increase in earth’s temperature to 1.1 degree Celsius as per AR-6 Report of IPCC and can exceed by 2 degree Celsius. The Scientists have suggested that efforts for decarbonisation are needed to maintain the maximum 1.5 degree of temperature by reducing the use of fossil-fuels to achieve the Net Zero target by 2050. Paris Agreement provide for phasing out of the use of oil, gas and coal but it is not easy to shift to renewable sources of energy through Green technology of solar, wind and green hydrogen so quickly. India has submitted a road map for net zero by 2070 with an immediate target of producing 500 GW of electricity by 2030 and has moved towards solid waste management and circular economy. However the global community particularly USA and China should adopt the challenges of climate change more vigorously as the per capita generation of CO2 and other green-house gas is very high in their countries as compared to India.
2. Geo-Political Conflicts - The post-colonial period particularly after the Second World War divided the world into Capitalist Block led by USA and Europe and the Communist Block led by USSR and the Cold War continued until 1990 when the Soviet Russia broke down with the collapse of communism. However the unipolar world which believed in the theory of open market as one size fits all could not sustain for long and there was Asian Financial Crisis in 1997 followed by economic crisis in Argentina and several other Latin American countries. There were temporary remedial measures through IMF and World Bank for such banking and financial crisis which was a phenomenon under the globalisation which was blindly followed by many countries including India. India had faced severe Balance of Payment crisis in 1990 and had adopted New Economic Policy by following the policy prescription of IMF and the country had to face lot of challenges and the menace of the same is visible on its small and medium enterprises causing tremendous problems of unemployment in the country. The biggest shock of globalisation is now felt in the developed countries particularly after the banking crisis in USA in 2008-09. G-7 countries have now accepted the role of developing countries and G-20 was formally recognised in 2009. So the world is no longer unipolar but has moved towards multipolar where China and India have emerged as major economic power along with European Union. Thus the geo-politics is changing and is now visible in the form of Russia-Ukraine War, which is practically a cold war between USA as NATO Alliance and Russia (Plus China). Several other political changes are taking place coupled with geo-economics in the form of BRICS plus and QUAD. De-dollarization is also moving fast as many countries including India are moving towards international trade on bilateral basis in their home currency.
3. De-globalisation— There is a change in the perception about Globalisation that it will automatically lead to a balanced growth. It was a design by virtue of which the Developed countries wanted to get market access in the developing world and once their purpose has been fulfilled and when the developing countries have started exporting goods and services in their countries, they have become protectionists. We notice such changes and the reversal of the trend as deglobalisation when USA withdrew from NAFTA and UK withdrew from EU through Brexit. Protectionism is continuing in the slogan of America First and similar steps being undertaken for giving preference to local content in Government procurement and in several other local consumption, the prediction of Joseph E. Stieglitz in his book, “Globalisation and its discontents” and the “Global Divide” is coming to light. The process of localisation and decentralisation is also desirable as pert the Swadeshi Thoughts and hence better late than never.
4. De-Dollarization— United States had made US Dollar an international currency of reserve while the Bretton wood system was being introduced in 1944 on an assurance that it would exchange one ounce of gold against US$ 35 but in 1973 it withdrew its guarantee and refused to meet this commitment and since then, the global community is looking for an alternative currency but has not succeeded so far. SDR is only a mechanism whereby the member countries keep their foreign exchange equivalent deposited with IMF but SDR is not a medium of exchange. Today almost 60 per cent of the global trade is through the US Dollar and the balance is shared by Euro, British Sterling Pound, Japanese Yen and Chinese Yuan. Indian Rupee has a very negligible presence of less than 2 per cent in the international trade. However there is a trend for moving towards other currencies and China is playing a vital role because of its larger share in the international trade. India has recently started Vostro account with about 18 countries for rupee trade in the international transactions.
The US hegemony for economic sanction through SWIFT (Society for Worldwide Interbank Financial Telecommunication) is an impediment to the freedom in international trade which is only a messaging system for financial messaging network used by banks and financial institutions for the financial transactions and it is not a payment system. China and Russia has already adopted an alternate messaging system called the cross border interbank Payment System (CIPS) and , the Financial Messaging System of the Bank of Russia (FMSBR) respectively and gradually Swift will also become less effective tool in the hands of USA. India has the Unified Payment Interface (UPI) which is now mainly for domestic transactions but is being gradually expanding for international remittances as well.
4. Democratisation of Financial Architecture- Reforms are required in the functioning of IMF and World Bank as both the organisation run on a disproportionate voting system on the basis of the contribution made by the developed countries and the appointment of the President of World bank is decided by USA and for the Managing director of IMF by European Union. The rules for the fiscal discipline about Fiscal deficit and for current account transactions encroaches on the sovereignty of any nation who has borrowed money in case of emergency for resolving its debt obligations and or for resolving its balance of Payment problems. This condition along with various other conditions imposed for liberalisation of its economic policies cause harm to its domestic economy. Hence there is a need for dismantling of the existing Britton wood system and replace it with a new economic Order through a dialogue in G-20.
5. Growing Income, wealth and social Inequality- Globalisation has led to imbalances in the global economic system and the gap between the rich nations and the poor nations are increasing. There is a need for Global South to come together and develop a new system whereby the growing inequality can be minimised as it is leading to several other social problems within and across the countries. The world should behave like a family and not like a market where the principles of ‘Survival of the Fittest” becomes the rule which is not good for Human civilisation. The chart below shows that the bottom 50% of the global population shares only 8.5% of the global income and only 2% of the global wealth as against whereas 10% shares 52% of the global income and 76% of the global wealth. The New world should have more equitable and sustainable growth where Environment and Social Governance (ESG) is to be measured along with the economic growth. Apart from Income and Wealth inequality there is a growing problem of social inequality as well. High level of social inequality can lead to a sense of frustration, hopelessness and resentment which can lead to violent crime. In USA there is a significant disparities in income, education, health care and access to other resources between white Americans and Black, indigenous and people of colour (BIPOC) populations.
6. Technological changes including Artificial Intelligence- cyber security, data security, digital divide and increasing uncertainty on employment and livelihood is a major challenge to be properly addressed.
7. Global Shifting of Power and Governance in a Multipolar World- The world is gradually shifting towards new governance as the earlier institutions of governance have failed miserably to meet their goal of peace and prosperity. Changes are required in the system of United Nations. New Inter-governmental organisations are emerging for climate change, cyber security, health related issues and for many other global problems relating to cross border terrorism and to deal with demographic challenges arising out of migration and geo-political reasons.
8. Demographic changes- Gaps in working age population in different countries, emerging problems of migration and other social issues on Health particularly after Covid-19 are some of the major issues relating to population and Human Resource. India has become the most populous country in the world.
9. Rules of International Trade- The WTO led trading system has resulted into several unfair practices of monopolisation in the name of competition and has given rise to several disputes and differences on Subsidies, Tariff and Non-Tariff Barriers and on technology transfers, conflicts on most favoured nation status under multilateralism and on FTAs and Regional Trade Blocs. Similar Issues relating to IPRs -Piracy, counterfeiting and practical deadlock on Doha Development Agenda needs to be resolved on priority basis to remove the prevailing illegitimacy in the system.
Conclusion- The Global community is looking for a change in the present structure of globalisation and for a new world economic order by dismantling the existing architecture created by Bretton Woods system. The World will have to choose whether it wants a market led society or a family pattern of society where the well-being of larger section will be priority with due protection of nature and environment and for access to food, health and education for all who have hitherto been deprived for decades. G-20 nations should think over it under India’s presidency.
Dr. Dhanpat Ram Agarwal, Director, Swadeshi Research Institute and National Co-Convenor, SJM.
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