Many people consider globalization nothing new – societies have been interconnected for years. But globalization took different forms in the past and the contemporary conjuncture is new. The world has never experienced globalization at this level of intensity before or the speed at which it is transforming and integrating societies.
It has become a broad heading for a multitude of global interactions, ranging from the expansion of cultural influences across borders to the enlargement of economic and business relations throughout the world. For the economist, globalization is essentially the emergence of a global market. Globalisation has to work for people and not only for profits.
The main question now is do we have to govern and guide globalisation, and if so how do we do it? Do we need to replace the IMF or World Bank or do we need to just reinvent them? If none of the above works, will we have to create a whole new system than what we are currently using? Dr Arno van Niekerk from University of the Free State also rose the question of should there be more regulation or just better regulation?
The protectionism which emerged in international trade after the Second World War gave way to gradual liberalization, comprising both unilateral liberalization and rules-based multilateral liberalization spearheaded by GATT. After the Financial crisis there has been an increase in regulating the markets. Is that the correct method or are we just creating a safer system, shouldn’t we aim to regulate in such a way that we prevent another crisis to emerge in the future?
Along with the wave of trade liberalization, capital from developed countries provided developing countries with new opportunities to fuel future growth. Most developing countries have been people-rich and capital-poor. Their domestic savings have been inadequate to meet their need for resources. Global capital markets and direct investments by multinational companies helped to fill the gap. Should South Africa govern the imports of Chinese textiles or not? Does the cheap clothes that the Chinese bring into South Africa affect the local textile market?
The interconnection and synergy between the forces are clear: trade expansion creates additional demand for finance, transport and communication, whereas improvement in the latter areas makes trade more efficient. Trade openness, the extent of capital inflows, penetration of communication infrastructure and capacity to handle bulk transport are good indicators of a country’s readiness to benefit from globalization.
Another key question that arises is should regulations be more tailor made and county specific? Each country, based on its individual endowments and circumstances, will have to design and implement national policies in a range of areas that ensure the country takes advantage of the opportunities that globalization provides and at the same time deals with the risks that it introduces.
In terms of the national economy, there are three distinct advantages:
- The demand for a country’s product is no longer constrained by its own markets;
- A country’s investment is no longer constrained by what it can save itself;
- A country’s producers can have access (at a price) to the most advanced technology.
Corresponding to these opportunities, some of the challenges are:
- Lack of complete access to product markets caused by both trade barriers and hefty subsidies in developed countries on commodities of interest to agricultural producers;
- Limited access to financial resources and for some countries high conditionality attached to concessional resources;
- The constraints on acquiring technology in terms of resources, both human and financial, and inadequate infrastructure.
There are tensions between achieving market integration and minimizing market instability
Achieving the right balance and pace of adjustment as well as building powerful domestic institutions are challenges to policy makers/regulators. The policy makers/regulators monitor the regulations but who monitors them? Do we need a system where every person has a voice or do we just need to have a new regulating policy or body?
Globalization is an unstoppable phenomenon, presenting opportunities to those who are prepared and threats to those who are not. It is not easy for countries to manage globalization for their own benefit. What is needed is creative and innovative thinking that does not create a top down system. Regional cooperation through which the countries look beyond their borders to tap and leverage other’s strengths could be an effective approach in this endeavour.