1. What is globalization? Africa in the Global Economy Renata Serra Spring 2008

1. What is globalization?
Africa in the Global Economy
Renata Serra
Spring 2008
What does globalization mean?
 Many



use the term ‘globalization’ to imply:
Increasing internationalization processes
Liberalization of economies and societies
Westernization (1989 is the key date)
 G.
strictly speaking is however distinct
concept and implies de-territorialization:

Trans-border phenomena take place in no
particular space: it is the ‘trans-world’ space
• Ex: Telephone calls, internet, electronic finance,
and the depletion of stratospheric ozone
Qualities of truly global phenomena
 Time-space
compression
 Round-the-clock operations
 Border-less – borders are not obstacles
 Inter-connected-ness, interdependencies
 Is

this the end of geography and territory?
No, because there is much in the world that is
not globalized!!
The end-less debate
 Enthusiasts:


Novelty of the de-territorial element
Increasing inter-dependencies
• Information and technological innovations!
 Skeptics:


G. is an ideological construct (neo-liberal)
G. is neither new nor unprecedented
• There were higher rates of migration and trade, in
relative terms, during 1870-1914 than now
The main drivers of G
 Transport
revolution
 Technology

Internet continues to double every 100 days!
 Economic
policies
 Changes in economic regulation and
governance

Multilateral arrangements
Economic globalization

Global production chains



Integration of financial markets
Increased trade flows



Including in services (travel, insurance, financial, computer and
information services)
Relocation of production processes across national
borders (surge in FDI)
Outsourcing of a wide range of activities


TNCs account for 20% of world production, 70% of world trade
and 54 millions direct jobs
Ex. Outsourcing of radiology services to India
But also contagion of financial crises!!
Political globalization

Rise in trans-national/international organizations

UN but also civil society, pressure groups and social
movements

Global governance
 Increased regionalism (EU)
 Peace and security as global public goods
 The nation state is less autonomous

Skeptics: the business of politics is still in the hand of
the nation state. The latter has never been so strong
Cultural globalization? Yes

Technological advances  unrivalled export and
import of cultural products, exchange of
information, new media


Popular culture is truly global
Companies rather than nation states drive cultural G.


Shared and cross-cutting cultural identities
Global goals transcend the objectives of nation
states
 ‘Global consciousness’ may lay the basis for a
‘global civil society’

Commitment to global human rights
Cultural Globalization? No

Historical role of national culture and nationalist
movements


Crucial in the decolonization process, e.g. Africa
National identity today as political/ideological
tool
 Modern technologies serve the purposes of
ethnic communities
 Flows of ideas enable knowledge of diversity but
also emphasize distinctiveness/idiosyncracies
Global public goods (GPG)

Public goods: non-rival and non-excludable
(typically under-provided)
 Global goods: effects reach across borders,
generations and population groups.
 Global public goods are both a:



driver of G
an outcome of G
Governance gap is the result of:

Increasing externalities but lack of recognized global
actors
Examples of GPG
 Equity,

justice and peace
Can a collective system emerge?
 Health

Increased international travel + new diseases
 Environmental

protection
Climate change, bio-diversity, water
 Knowledge

Issues of unequal access and pricing
G. and development

“G is good” argument:




Increased competition, more jobs and greater welfare
Importation of knowledge for health advancement
Pressure against un-democratic governments
“G is bad” argument:




Unequal: few benefit at others’ expenses
Dominance of global production channels and TNCs
Increases in global risks
Western-centric: no alternative discourses
Sub-Saharan Africa (SSA)

By many standards, SSA is the least integrated
region:

Trade/GDP increased little, against massive world increases
• SSA’s share in world X was 1.5% in 2000 (against 3.9% in 1980)





Marginal FDI flows (mainly to Gabon, Nigeria, and South Africa)
ODA declined from 4 billions US$ in 1995 to 1 billion in 2002
Number of internet users is about 1% of world total
17 mobile phones/1000 people (123 in LA&C, 530 in OECD).
Recent setbacks despite global progress:


The number of poor people has increased
Health and education have deteriorated in some parts
SSA predicaments: causes

External factors
• 1980s oil crisis, deterioration in the terms of trade,
huge debt overhang, Sahelian droughts, civil wars
and conflicts

Internal factors
• State weak capacity, corruption, bad policies

Roles and responsibilities of the international
community
• Neo-colonialism
• SAPs and dominance of externally driven policies
G: what’s in it for Africa?
 Optimists


G. can bring both benefits and costs, the
secret is to learn how to “navigate it”
Cosmopolitanism has been an African trait for
long time; one needs only to re-actualize it
 Pessimists


African renaissance should involve a new
African ideology/discourse of resistance
Reviving African history, culture, social
relations, and entrepreneurial spirit
Global convergence…
Yes, but
… but Africa’s falling behind…
… and gaps between skilled and
unskilled wages increase
Inequality across countries: why

Rules of the game may not be fair
 Even when they are, the interpretation or
implementation may favor one side


Poor countries are disadvantaged to start with



E.g. Limited use of compulsory license within TRIPs
High commodity dependence
Weak or inappropriate institutions
Global markets are imperfect and create risks

Volatility is particularly detrimental to poor countries
Inequality across individuals: why
 Individuals/households

may differ in their:
Distribution of skills
• High skills are better compensated

Distribution of assets
• Education especially, but also land and capital

Degree of geographical mobility
• Ability to move where opportunities are better

Ability to cushion risks
• This is crucial given volatility

Ex: financial crises are especially detrimental to the poor
Why does inequality matter?
Inequality may be harmful to growth
1.

2.
3.
4.
Countries with low initial asset inequality
have grown faster e.g. East Asian countries
Inequality may lead to social tensions
Inequality undermines good public policy
Inequality is particularly harmful in poor
countries, which lack effective mediating
institutions and protective mechanisms
1. Inequality may be harmful to growth
2. Inequality may lead to socioeconomic instability

Tensions between global markets and socioeconomic stability (see economist Dani Rodrik):

Asymmetry in individuals’ capabilities to ‘go global’
• D for unskilled labor is more elastic

Threat to domestic norms and social arrangements
• Demand for procedural fairness e.g. no child labor

Threat to the welfare state and its social provisions
• Precisely when social insurance is highly needed

The risks of not resolving these tensions are
social fissures and resurgence of protectionism
What to do?
 If
G creates asymmetries, then corrective
institutions and policies are needed
 Economic theory tells us that market
imperfections and asymmetric risks
require global solutions
 A global social contract?

We are definitely not (yet?) there!