The many facets of globalization - United...

2). There is also no common understandingof whether it has produced a quantitative ora qualitative change in global economic andpolitical structures. Furthermore, global-ization has often been used as a rhetoricaldevice to advance specific interests or agen-das at the expense of others. That is to say,globalization has been invoked by differentpressure groups as a concept justifying theideas and actions of both its proponents anddetractors.

Though there is some agreement amongscholars and experts that globalization is pro-ducing greater interconnections and inter-dependence, there seems to be little con-sensus on the degree of integration it engendersand on its pervasiveness. Different viewshave emerged on this issue. As way of sim-plification, four different positions can be ac-counted for: "The first identifies globalizationwith an increasing homogenization within theglobal system, which would ultimately leadto assimilation. The second – the ‘strongglobalization view’ – contends that homogeneityremains highly unlikely within the global sys-tem, but that a range of qualitative andquantitative changes have combined to in-troduce a new condition, or set of processes,into world affairs that warrant the novel term‘globalization’. The third position – the‘weak’ globalization perspective – maintainsthat many of the undoubtedly important de-velopments of recent decades signal a sig-nificant increase of internationalization with-in the international political economy that hascomplex but variable consequences for poli-tics, economics and society, but that has notushered in a distinctively new era in human

1. Globalization: an overview

lobalization is one of the most de-bated issues of our times elicit-ing both great enthusiasm anddeep concern. It has engen-

dered images of a peaceful borderless worldcharacterized by prosperity for all, or it hasbeen depicted as the progressive advancementof "frightening" multinational corporationsand their control over world-wide natural re-sources, manufacturing, finance and cul-ture. The image of globalization as a prom-ise or threat is, in fact, one of the most pow-erful and persuasive images of our times(Veseth, 1998). Yet, despite the vast litera-ture on this subject and the ongoing discus-sion, globalization remains an ill-definedconcept.

Some view it as the international system thathas succeeded the end of the Cold War,while others prefer to continue using the term"internationalization" to describe the currentchanges in the international economy. As theSecretary-General of the United Nationshas observed, "some emphasize the in-creased mobility of factors of production,goods and services across borders and the re-sulting emergence of a truly global market.Others see primarily the results – and futurepotential – of an explosive progress in in-formation technology, while still others viewglobalization primarily from societal andcultural perspectives" (UN, 1999, A/RES/163). It is not clear, therefore, whether theterm “globalization” is generally "employed[to refer to] a historical epoch, a process, atheory, or a new paradigm" (Reich, 1998, p.

7

THE MANY FACETS OF GLOBALIZATION

G

Chapter I

The many facets of globalization

WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE

1.1. Globalization: a complex phenomenon, involving a variety ofglobal trends and tendencies

Globalization is not a new phenomenon. In-terdependence and interconnections amongnations and peoples have a long history,which can be dated in parts of the world asearly as the XVI century, or even earlier dur-ing the time of the Roman, Hellenistic andeven Persian Empires. The present processof increased international interconnectionsand technological innovation may be compared,in some respects, to the transformations ofthe mid XIX century to early XX century. Dur-ing that period governmental policies aswell as new technologies such as the telegraph,the steam engine, the railways and steam-driven vessels brought about a dramatic in-crease in world trade, international compe-tition and interdependence (ibid.). Viewed fromthis perspective, globalization may be con-sidered as an advanced stage of the histor-ical process of interdependence, which althoughcurrently accelerating with unprecedented mo-mentum, is by no means irreversible, as itwas not in the 1920s. Two world warsabruptly reversed the progress made in fos-tering international trade as autarchic sys-tems came to replace open economies, and,for decades, a political and ideological divideseparated peoples on all continents. Though,as with any historical process there may bea sudden change in the direction of events,in the next few years increased interde-pendence and cross-border integration, es-pecially in specific economic areas, are morelikely than not to continue given the com-mitment of many countries to further tradeliberalization.

Although it is not easy to define globaliza-tion, we shall refer to it as increasing andintensified flows between countries of goods,services, capital, ideas, information and peo-ple, which produce national cross-border in-tegration of a number of economic, social andcultural activities. Thus, globalization in-cludes a variety of trends and tendencies. Itis not a single process, but a combination ofdifferent processes. It has increasingly tak-en on a multidimensional character: not on-

affairs. The final – rejectionist – position de-fends the view that nothing of any great orirreversible significance has taken place"(Jones, 2000). Most observers have dis-missed the most radical views, i.e. that glob-alization is leading to assimilation or that itis not upon us. The crucial debate is thus be-tween the "strong" and "weak" globalizationpositions.

This chapter is aimed at shedding light onthe concept of globalization, analyzing whatit implies, and what opportunities it canbring to people around the globe, as well asthe costs it may entail. It also takes stock ofthe challenges affecting public administra-tion in an increasingly interconnected world.An overview of the main causes and char-acteristics of globalization will serve to high-light the complexities, as well as the chal-lenges and pressures that States are in-creasingly facing in a globalized world.

8

Box I.1

THE WORLD ACCORDING TO KEYNES IN 1919

The world depicted by John Maynard Keynes in 1919 in “The EconomicConsequence of the Peace” resembles, in many ways, an account fromour times: "What an extraordinary episode in the economic progress of manthat age was which came to an end in August 1914! The greater part of thepopulation, it is true, worked hard and lived at a low standard of comfort,yet were, to all appearances, reasonably contented with this lot. Butescape was possible, for any man of capacity or character at all exceed-ing the average, into the middle and upper classes, for whom life offered,at a low cost and with the least trouble, conveniences, comforts, andamenities beyond the compass of the richest and most powerful monarchsof other ages. The inhabitant of London could order by telephone, sippinghis morning tea in bed, the various products of the whole earth, in suchquantity as he might see fit, and reasonably expect their early deliveryupon his doorstep; he could at the same moment and by the same meansadventure his wealth in the natural resources and new enterprises of anyquarter of the world, and share, without exertion or even trouble, in theirprospective fruits and advantages; or he could decide to couple the secu-rity of his fortunes with the good faith of the townspeople of any substantialmunicipality in any continent that fancy or information might recommend.He could secure forthwith, if he wished it, cheap and comfortable meansof transit to any country or climate without passport or other formality,could dispatch his servant to the neighbouring office of a bank for suchsupply of the precious metals as might seem convenient, and could thenproceed abroad to foreign quarters, without knowledge of their religion,language, or customs, bearing coined wealth upon his person, and wouldconsider himself greatly aggrieved and much surprised at the least interfer-ence. But, most important of all, he regarded this state of affairs as normal,certain, and permanent, except in the direction of further improvement,and any deviation from it as aberrant, scandalous, and avoidable"

Source: Keynes, 1919, ch. 2.

ly economic, but also political, social andcultural. As such, we may speak of differentglobalizations or dimensions of globalization.

2. What is driving globalization?

The forces that lie behind globalization andwhich have interacted among them produc-ing greater interdependence and integra-tion, may be summarized as follows:

• Trade and investment liberalization poli-cies;

• Technological innovation and the reductionin communication and transportation costs;

• Entrepreneurship;

• Global social networks

2.1. Trade and investment liberalization policies

Technological innovation and entrepre-neurship cannot alone explain the process ofglobalization. We should not forget that theimpetus towards greater economic integra-tion has stemmed from the efforts of gov-ernments to remove barriers to trade and in-vestment. Increased global integration in anumber of economic areas began to intensi-fy in the 1980s when many governmentssupported economic liberalization. "The lat-ter has included financial sector deregulation,the removal of controls over foreign ex-change and enhanced freedom of trade. Fi-nancial deregulation has resulted in the pro-gressive elimination of capital controls, theremoval of controls over interest rates, andthe lifting of traditional barriers to entry in-to banking and other financial services" (Ca-ble, 1995, p. 3).

State efforts to uphold free trade and to en-courage the reduction of trade barriers havebeen reflected in the eight successive nego-tiating rounds of the General Agreement onTrade and Tariffs (GATT), which culminat-ed in 1995 with the establishment of a mul-

tilateral trading system – the World TradeOrganization (WTO). The latter has not on-ly led to the reduction of barriers to trade ingoods, but has also proceeded to liberalize serv-ices and capital flows. The WTO has also fo-cused more closely on an ever-growing rangeof policy measures affecting the terms andconditions of market access, such as standardsand regulations, subsidy practices, and in-tellectual property rights (WTO, 1998 AnnualReport).

It is of great importance to underscore thepolitical source of economic globalization inorder to avoid interpreting this phenomenonas a deterministic force about which little canbe done. Economic globalization is not ablind force. It is still individual governmentsthat are setting the policies and the rules ofthe globalized economy. Thus, we shouldnot forget that the State has played a piv-otal role in allowing greater interdependenceand economic integration of specific activi-

9


Box I.2 DIFFERENT VIEWS ON GLOBALIZATION

“Globalization is the inexorable integration of markets, nation-states andtechnologies to a degree never witnessed before -in a way that is enablingindividuals, corporations and nation-states to reach around the world far-ther, deeper and cheaper than ever before. Globalization is not simply atrend or a fad but it is, rather, an international system.” (Friedman, 2000, p. 9).

"Globalization is an increase in interconnections, or interdependence, a risein international flows, ... such that the world is, in some respects, becominga single place." (Mittleman, 2000, p. 3).

“Globalization is the internationalization of finance and production; accel-erating applications of transformational technologies; and the growinginterconnections among the people of the world.” (Jones, 2000, p. 21).

“Globalization is the growing interdependence of the world's people. Andglobalization is a process integrating not just the economy but culture,technology and governance.” (UNDP, 1999, Human Development Report, p. 1).

Economic globalization is "the increasing integration of input, factor, andfinal product markets coupled with the increasing salience of multinationalenterprises (MNEs) cross-national value-chain networks." (Prakash and Hart,2000, p. 2).

"Globalism is a phenomenon with ancient roots and globalization is aprocess of increasing globalism, now or in the past" (Keohane and Nye, 2000,p. 108).

"The economy is predominantly international, not global and thereforestates, although in a slightly different way, still play a central role in its gov-ernance.” (Hirst and Thompson, 1996, pp. 178-189).

ties through the elaboration and adoption ofmarket-oriented policies and regulations, atboth the international and local levels. Eco-nomic globalization can be said to resultfrom policy decisions made by individualcountries that allow global market forces tooperate.

The problem is which countries set the rules,whom do they favor and how can the leastpowerful also influence policy-making in theinternational arena, and do it in ways thatwill benefit them. Some countries do nothave as much leverage as others do in set-ting the international economic and politi-cal agenda due to significant power imbal-ances among nations that are reflected in in-ternational institutions. As a consequence,the present form of globalization is largelyshaped by the rules advanced by one part ofthe world – namely the most influential – andthese rules do not necessarily favour devel-oping countries and countries in transition.

2.2. Technological innovation andthe reduction in communicationand transportation costs

Technological innovation, as well as the con-stant reduction in transportation and com-munication costs is responsible for drasticallytransforming the ease, speed, quantity, andquality of international information flows, aswell as physical communications (Cable,1995). In particular, information technologyand multimedia communications are pro-ducing shrinkage of distance and accelera-tion of change. Due to technological ad-

vances in the past 70 years, transportationand communication costs have declineddrastically. The end of State monopolies - whereand when it has happened - and thereby theintroduction of greater competition in thetelecommunication sector, is also responsi-ble for a sharp decline in communication costs.

As shown in graph 1 below, the average costof freight and port charges per ton has de-creased from over US$ 90 to approximatelyUS$ 30 constant dollars between 1920 and1990. The decrease in average revenue perpassenger mile between the years 1920 and1990 has gone from US$ 0.7 to US$ 0.1 asshown in graph 2 below. Moreover, a three-minute call between New York and Londonhas decreased from almost US$ 300 to lessthan US$ 1 dollar over that period, as shownin graph 3 below, or it can be free over theInternet. The cost of computers has alsodramatically decreased over the past years,as well as that of wireless communications.This implies that many transactions can beprocessed in no time and at relatively low cost.

Indeed, there is no field of technologicalprogress, which has evolved more rapidly, inthe past 20 years than information technol-ogy (IT). Taking shape through the conver-gence of semiconductors, computers, tele-communications and software technologies,the information revolution has producedrapid and sustained falls in the cost of pro-cessing, storing and transmitting information.Thus, it promises to make the informationand knowledge base of humankind avail-able anywhere, anytime, in any language.Businesses and individuals, mainly in the de-veloped world, can now perform a wide num-ber of activities through the informationhighways in a matter of seconds. The grow-ing interest in this relatively new channel ofcommunication is reflected by the number ofInternet sites, which rose by 118% in onlytwo years, i.e. between 1997 and 1999 (NUA,1999).

During the past decade, two significant de-velopments have greatly accelerated theglobalization of information flows. The firstis that computers have invaded millions of

10


Box I.3 What is Globalization?

• Globalization is increased global integration and interdependence.

• It is not a totally new phenomenon.

• It has a multidimensional character: economic, political, social and cultural.

• It is characterized by unprecedented rapid flows of goods and services; private capital; circulation of ideas and tendencies; andthe emergence of new social and political movements.

Source: DPEPA/DESA, 2001.

households. The second is the emergenceand development of the Internet technologies.The former demonstrates that the role of com-puters has been extended dramatically, notonly as a tool for state and business organ-izations, but also as a household electronicappliance for information retrieval and pro-cessing, for education, for entertainmentand for communication. The latter leads toa great leap in the technical and humanability to access, interpret and use informa-tion. It presages the advent of a national in-formation infrastructure (NII) and a globalinformation infrastructure (GII) in the com-ing information age.

It has been estimated that in March 2000 therewere 400 million personal computers and about1 billion telephones in the world; 276 millionInternet users worldwide with a growth rateof roughly 150,000 persons per day; 220 mil-lion devices accessing the World-Wide Webwith almost 200,000 devices being addedevery day. Total world bandwidth (transmissioncapacity of computer networks or othertelecommunications systems worldwide) in1996 amounted to 200 trillion bits per sec-ond. In 2001, there will be a bandwidth of9,000 trillion bits per second. It is also esti-mated that, 10 years from now, there will be 1billion personal computers and 3 billion tele-phones in the world.

Governments, organizations and businessenterprises are seeking to harness the Internetto advertise and disseminate information.There are millions of web-sites, homepagesand diverse documents on the Internet,which cover thousands of subjects. At pres-ent, web pages total 1.5 billion with almost2 million pages being added every day. IT hasgreatly stimulated the globalization of in-formation. Information flows on topics rang-ing from politics and business to sports cir-culate among organizations, cities, nations,regions and individuals day and night.

The Computer Industry Almanac has re-ported that:

• By the year 2002, 490 million peoplearound the world will have Internet access,

that is 79,4 per 1,000 people world-wide; • By the year-end 2005, 765 million peoplewill be connected to the Internet, that is118 people per 1,000;

• By 2010, Chinese online users are ex-pected to outnumber US users;

• NUA reports that 60 per cent of the worldonline population will be outside the US by

11


Graph I.1.Declining Sea Transportation costs since 1920 in US$(average cost of freight and port charges per ton)

0

20

40

60

80

100

1920 1930 1940 1950 1960 1970 1980 1990

Source: IMF, 1997

Graph I.2.Declining Air Transportation cost since 1930 in US$

(average revenue per passenger mile)

0

0.2

0.4

0.6

0.8

1920 1930 1940 1950 1960 1970 1980 1990

Source: IMF, 1997

Graph I.3.Declining Telecommunication costs since 1930 in US$

(3 minutes NY/London)

0

50

100

150

200

250

300

1920 1930 1940 1950 1960 1970 1980 1990

Source: IMF, 1997

N/A

2003.The Internet (see graph I.4 below), as wellas other communication devices, such as thecellular phone and fax machines, have con-tributed to shrinking distance and time, andhave allowed people to connect and com-municate instantaneously. The option of be-ing able to access the Internet from specialmodels of cellular phones may also representa breakthrough in the communication sec-tor, especially for developing countries thathave not developed an extensive cable sys-tem and are now able to use cellular phonesin their daily work activities.

However, as in the case of economic global-ization, there is nothing deterministic aboutglobalization via the spread of IT technolo-gies and the Internet. It takes proper pub-lic policy frameworks to make it happen. Forexample, as mentioned above, States have apolicy choice to make in the area of deregu-lating their telecommunication sector. And,increasingly, geo-locating and firewall tech-nologies allow them to shape the freedom ofthe spread of the Internet. A careful trade-off between perceived advantages and dis-advantages is needed here. How to handle

the IT revolution promises to constitute oneof the most important policy decisions thata State will have to take at the beginning ofthe new millennium. The so-called digital di-vide is a by-product of underdevelopment, andlack of financial and human resources. It mustbe stressed though that public policy is alsoinstrumental in the present magnitude of thisdivide and in the pace at which it can bebridged.

IT opens new opportunities for increasedgovernment transparency, efficiency and ef-fectiveness of its services. It gives the citi-zens a powerful tool for conducting the pub-lic discourse, organizing themselves andchallenging, as the case may be, the exist-ing political parties, professional associa-tions, non-governmental organizations, andagencies of State administration – both lo-cally and globally.

IT is rapidly transforming all the sectors ofthe global economy. It helps to redefine suchconcepts as competitiveness, quality, deliv-ery, responsiveness and innovation. IT hasopened the way to advances in productivityby minimizing waste of raw materials,

12


Graph I.4. Top 15 Countries in Computers-in-Use Year-End 2000 & 2001

0

20

40

60

80

100

120

140

160

180

200

United States Japan Germany United

Kingdom

France China Canada Italy South Korea Brazil Australia Russia Spain Taiwan Netherlands

Year-End 2000(#M)

2000 % Share ofTotal

Year-End 2001Projected (#M)

United States

Japan

Germany

UK

France

China

Canada

Italy

South

Korea

Brazil

Australia

Russia

Spain

Taiwan

Netherland

Source: Computer Industry Almanac Inc., 2001

labour and time. With modern transporta-tion means such as jumbo jets and contain-er vessels and computerized reservationssystems, the globalization of production andservices has become a reality. Global infor-mation networks are rapidly transforming theways an enterprise operates. In the last 20years, both manufacturing and services havebecome increasingly globalized – a global pro-duction system has emerged. It goes with-out saying that IT is the central driver of thisnew world trend.

On the negative side, it must be said that theInternet is also being used in detrimental ways.It has become an easy communication devicefor all sorts of criminal and terrorist activi-ties. This shows that the Internet can be usedboth in social and "anti-social" ways. The In-ternet in fact, as any other device, is not a"good" or "bad" tool per se. It is a facilitator.Whether it has a positive or negative impacton society depends on how it is used – per-haps abused – and how its use is regulated.

2.3. The role of entrepreneurship inaccelerating globalization

Thanks to technological innovations andgreater economic liberalization, entrepre-neurs, especially multinational corporations,have taken full advantage of more open mar-kets to spread production processes all overthe world (WTO, 1999, Annual Report). Theopening up of economic opportunities allowsthe movement of foreign capital, technologyand management, largely from transna-tional corporations (TNCs), to host countryentrepreneurs and corporations. As nation-al economies open, mergers between businessesfrom different countries and purchases or in-vestment in equity of businesses in onecountry by owners from other countries arebecoming more common. Although TNCsare not new economic actors, what has dra-matically changed is the way they operatearound the world and their increased levelof economic power. According to the Com-mission on Global Governance, the numberof TNCs is presently estimated at 37,000 world-wide (Commission on Global GovernanceReport, 1995).

2.4. International social networks:increase in number and strength

Modern technology, transportation, andtelecommunications are transforming, inmany ways, how organizations and people op-erate, cooperate and interface. From a socialpoint of view, new technologies have facili-tated greater global integration and aware-ness through the establishment of worldwidenetworks. Concern for democracy, humanrights, the environment, and poverty is be-ing enhanced by the birth of cross-border so-cial and political networks, whose membersare non-state actors such as non-govern-mental organizations (NGOs) as well as pri-vate persons who want to participate in pub-lic matters, locally and globally.

To be sure, the growing role of non-statetransnational actors adds a novel dimen-sion to globalization. TNCs are becomingincreasingly powerful actors within the in-ternational arena due to their growing eco-nomic power. The creation of internationalorganizations, such as the WTO, bringsabout new influential institutional actors inthe global landscape. Furthermore, thegreater role of global civil society is anoth-er distinctive feature of globalization, par-ticularly if we consider its increasing rele-vance in the international policy agenda andprocess (Ostry, 2000). International NGOs workto aggregate global values and interests likethe protection of human rights. Some NGOswork to protect the interests of nationalgroups affected by global forces.

The increased relevance of non-state globalplayers, such as TNCs and international so-cial networks, has set in motion much dis-cussion about the role of the State and its gov-ernance capacity in a globalized world, andwhether it will be able to manage effective-ly a diverse range of pressures. In fact, theState is increasingly being pulled in differ-ent directions, and must respond to de-mands, which come from local, as well astransnational groups. Strengthening theState’s networking capacity will be crucialin a complex and interconnected world.

13


The State is increasingly

being pulled in different

directions, and must

respond to demands,

which come from local,

as well as transnational

groups

Some see an emerging role for the State asan "orchestrator", catalyst of ad hoc alliancesof diverse capacities and of diverse skills pos-sessed by these many actors for achieving adhoc developmental goals.

3. The global village: economic and social dimensions of globalization

3.1. Economic globalization

Economic globalization is mainly character-ized by the rapid expansion of internationaltrade, foreign direct investment and capitalmarket flows. The last 50 years have seen tradeexpand faster than output by a significant mar-gin, increasing the degree to which nationaleconomies rely on international trade in over-all activity (WTO, 1998, Annual Report). Thedecline in transportation costs and technologicalinnovation, in particular the Internet, havecontributed to an increase in the volume oftrade, financial flows and speeded-up eco-nomic transactions by decreasing the time andmethods of delivery and payment of goods andservices. In addition, the declining trans-portation costs have led to a greater mobili-ty of people across borders and have signifi-cantly augmented tourism world wide, aswell as a growing migration of workers.

Economic globalization is characterized by:

• Flows of labour, goods, and capital acrossnational borders;

• The emergence of global production arrange-ments mainly through the activities of TNCsand related foreign direct investments;

• The emergence of globally integrated mar-kets for goods, services and capital.

The increase in international trade is reflectedin the following data:

• On an annual basis, merchandise exportsgrew by 6 per cent in real terms from 1948to 1997, compared to annual output growthof 3.7 per cent. Put differently, trade multi-

plied by the factor 17, while GDP grew ap-proximately six-fold during this period. In thecase of manufacturers, trade multiplied 30times, while GDP grew eight-fold (ibid).

• Among rich or developed countries theshare of international trade in total output(exports plus imports of goods relative to GDP)rose from 27 to 39 per cent between 1987 and1997. For developing countries it rose from10 to 17 per cent (World Bank, 2000, WorldDevelopment Indicators).

Foreign direct investment (FDI), which is re-lated to investments made by firms in for-eign countries to establish and run businessoperations, has also greatly increased.

• US firms invested US$ 133 billion abroadin 1998, while foreign firms invested US$ 193billion in the US.

• Overall world FDI flows more than tripledbetween 1988 and 1998, from US$ 192 bil-lion to US$ 610 billion, and the share of FDIto GDP is generally rising in both developedand developing countries.

• Developing countries received about aquarter of world FDI inflows in 1988-1998on average, though the share fluctuatedquite a bit from year to year (World Bank,2000, World Development Indicators). Between1980 and 1997, private capital flows to de-veloping countries as a group soared to $140billion from $12 billion.

• The report on financing for developmentprepared for the UN Secretary-General,notes that during the period 1993 to 1998,20 countries accounted for over 70 per centof all FDI inflows to all developing countries.It further notes that the majority of low-in-come countries have been largely bypassedby private finance from abroad – least de-veloped countries as a group received 0.5 percent of world FDI inflows in 1999. On the oth-er hand, firms from developing countriesthemselves increasingly invest abroad. FDIfrom developing countries increased from 2per cent of total FDI outflows in the early 1980sto 10 per cent at the end of the millennium

14


Declining transporta-

tion costs have led to

a greater mobility of

people across borders

and have significantly

augmented tourism

world wide, as well as

a growing migration of

workers

(UN, 2001, A/55/1000). For African coun-tries this is a double blow. Not only the in-flow of FDI is relatively miniscule, espe-cially outside primary commodities, but it hasbeen estimated that 40 per cent of Africanprivate wealth is held overseas (UnitedKingdom, 2000, para. 153).

• Foreign exchange trading in the world’s fi-nancial centers exceeds 1 trillion US dollarsa day, a multiple of 50 times or more of theamount of daily world trade and greaterthan the total stock of foreign exchange re-serves held by all governments (Cable, 1995, p. 4).

• The liberalization of capital movements cou-pled with information technology advanceshas made it possible to transfer largeamounts of capital across national bordersin seconds.

A major transformation has also occurred inthe territorial organization of economic ac-tivity. The way multinational corporationsoperate across borders has in fact greatlychanged. The pattern of production has as-sumed a truly global nature in that the pres-ent organizational structure of companies hasbecome increasingly horizontal. This impliesthat the production process does not take placevertically within the same corporation andthat finished products are then exported. In-stead, manufacture of the various componentsof a product takes place in different regionsof the world, either through affiliates orthrough outsourcing to foreign companies. Forexample many American products are nolonger manufactured within the same com-pany nor within the same country. The com-ponents may be produced in India, while someparts are assembled in Mexico and others inBulgaria, and then sold in the US or othermarkets around the world. This interna-tionalizes the local labour markets and re-wards with quality jobs and wealth-creationopportunities the concentrations of highly ed-ucated skilled, networked professionals, a factthat has profound public policy implications.

3.2. Social globalization

Globalization of technologies has enabled

inexpensive, instantaneous communicationand massive diffusion of information affect-ing styles of politics, culture and social or-ganization. The globalization of technologyhas contributed not only to the explosivegrowth of information exchange via the In-

15


Box I.4

DEFINING AND MEASURING FOREIGN DIRECT INVESTMENT

Foreign direct investment (FDI) occurs when an investor based in one country(the home country) acquires an asset in another country (the host country)with the intent to manage that asset. The management dimension is what dis-tinguishes FDI from portfolio investment in foreign stocks, bonds and otherfinancial instruments. In most instances, both the investor and the asset it man-ages abroad are business firms. In such cases, the investor is typically referredto as the "parent firm" and the asset as the "affiliate" or "subsidiary".

There are three main categories of FDI:

• Equity capital is the value of the multinational corporation's investment in shares of an enterprise in a foreign country. An equity capital stake of 10 per cent or more of the ordinary shares or voting power in an incorporatedenterprise, or its equivalent in an unincorporated enterprise, is normally considered as a threshold for the control of assets. This category includes both mergers and acquisitions and "greenfield" investments (the creation of new facilities). Mergers and acquisitions are an important source of FDI for developed countries, although the relative importance varies considerably.

• Reinvested earnings are the MNC's share of affiliate earnings not distributed as dividends or remitted to the MNC. Such retained profits by affiliates are assumed to be reinvested in the affiliate. This can represent upto 60 per cent of outward FDI in countries such as the United States and theUnited Kingdom.

• Other capital refers to short or long-term borrowing and lending of funds between the MNC and the affiliate.

The available statistics on FDI, which are far from ideal, come mainly fromthree sources. First, there are statistics from the records of ministries and agen-cies which administer the country's laws and regulations on FDI. The requestfor a license or the fulfillment of notification requirements allows these agen-cies to record data on FDI flows. Typically, re-invested earnings, intra-compa-ny loans, and liquidations of investment are not recorded, and not all notifiedinvestments are fully realized in the period covered by notification. Second,there are the FDI data taken from government and other surveys which eval-uate financial and operating data of companies. While these data provideinformation on sales (domestic and foreign), earnings, employment and theshare of value added of foreign affiliates in domestic output, they often arenot comparable across countries because of differences in definitions andcoverage. Third, there are the data taken from national balance-of-pay-ments statistics, for which internationally agreed guidelines exist in the fifthedition of the IMF Balance of Payments Manual. The three main categories ofFDI described above are those used in balance-of-payments statistics.

Source: WTO, 1996, Report on "Trade and Foreign Direct Investment".

ternet, but also to the expansion of educa-tion opportunities and the constitution of trans-national networks. Information, which hadbeen the monopoly of the few, is becomingaccessible to wider and more diverse audi-ences. The relative ease of accessing infor-mation has increased citizens’ ability toshare views, to become aware of their rights,to make their demands known and to increasetheir influence generally. As a consequence,citizens are joining together to demand im-proved levels of services and higher standardsof behaviour from their governments. Pub-lic opinion moves to the forefront as a basisof the legitimacy of governments.

The reduction in transportation costs over re-cent decades, especially air and train fares,has significantly facilitated the movement ofpeople around the globe and has allowed agreater awareness of international issues. Peo-ple nowadays have greater access to andknowledge of other cultures, as well as so-cial problems and issues. Social protest hasalso taken on a different form. It is not anylonger confined to one particular country orto local issues; it transcends national borders.The recent events in Genoa at the G8 sum-mit, in Prague in September 2000 at the In-ternational Monetary Fund and World Bankmeeting, and in Seattle at the World TradeOrganization meeting in 1999, are examplesof these new forms of transnational organ-ized movements and of globalization itself.

International and regional organizations,such as NGOs and transnational networks,based on shared interests rather than on geo-political similarities have proliferated in thelate XX century. NGOs, however, are by nomeans an "invention" of the past decades (somenotable NGOs, such as Save the Children,were founded at the beginning of the XX cen-tury, while others even earlier as in the caseof the International Red Cross, which wasfounded in 1868). What has changed is per-haps the increasing number of NGOs and theirgrowing political leverage. Four decades ago,there were fewer than 1,000 NGOs, whichoperated mostly at the local level. Now at thebeginning of the XXI century, the United Na-tions reports that almost 30,000 NGOs op-

erate internationally. Moreover, NGOs arebeing increasingly invited to many global fo-ra such as United Nations conferences andmeetings and the recent World Economic Fo-rum held in Davos, Switzerland or the recentG8 meeting held in Genoa, 2001. In otherwords, NGOs are becoming actively involvedin policy dialogues.

Although NGOs are generally undertakingremarkable tasks and advancing relevant worldcauses such as the alleviation of poverty, theprotection of children’s rights, or the protectionof the environment, NGOs have also been crit-icized for a number of reasons. It has beensaid that some compete against each otherand, once institutionalized, become closed tonew ideas and positions. It has also been ar-gued that powerful NGOs are mainly basedin developed countries and may not be as trans-parent and accountable as they expect oth-er public and private agencies to become. Butmost fundamentally, it should not be forgottenthat, despite their relevance in articulatingand expressing a diversity of interests andconcerns, NGOs should not be confused withpolitical parties, as they are not democrati-cally elected. Therefore, their opinions andpositions regarding different social and po-litical issues are not representative of the peo-ple’s will, as they have not received a man-date to represent them. However, increasedaccess of its members to information and net-working creates a pressure for increasedrelevance and improved internal governanceof NGOs. This is bound to make them moreresponsive to the changing global circumstancesand to the opinion of their constituencies.

Social globalization is a phenomenon whichposes new challenges for the nation-State. Infact, the State becomes increasingly involvedin a web of intricate interests and needs inorder to respond to a growing number of de-mands on issues which are not solely limit-ed to its territory. This requires the State tohone its role as mediator and develop newskills to deal with diversity.

16


Four decades ago,

there were fewer than

1,000 NGOs, which

operated mostly at the

local level. Now ...

almost 30,000 NGOs

operate internationally

4. The opportunities of globalization

4.1. Greater economic opportunities

Greater economic openness, foreign direct in-vestment, and transfer of technologies pres-ent potential opportunities for economicgrowth. Free trade promotes specializationamong different regions, allowing them to ap-ply their own comparative advantages; italso expands the consumption opportuni-ties of countries by providing increased op-portunities to buy goods and services fromother countries.

It is very important to keep in mind that in-ternational trade is not a zero-sum game withabsolute winners and absolute losers. On thecontrary, trade benefits all countries be-cause it enhances the choices of the con-sumer and the quality of products. If com-petitive, it lowers prices and raises realwages. It is also worthwhile to underline thatcontrary to what is commonly believed,"countries are not in any degree in econom-ic competition with each other", or that "anyof their major economic problems can be at-tributed to failures to compete on world mar-kets" (Krugman, 1994, p. 6). Firms compete;countries do not. "If the European economydoes well, it need not be at the expense ofthe United States; indeed, if anything a suc-cessful European economy is likely to helpthe U.S. economy by providing it with larg-er markets and selling it goods of superiorquality at lower prices" (ibid.). Moreover,the evidence is very strong that real GDPgrowth is related mainly to domestic pro-ductivity growth, not to balance of trade orto productivity relative to competitors. "Eventhough world trade is larger than ever be-fore, national living standards are over-whelmingly determined by domestic factorsrather than by some competition for worldmarkets" (ibid.). Trade is largely static, whileproductivity, which is driven by technicalchange, is dynamic and for that reason is pri-marily responsible for economic growth.Therefore, focusing on international com-petitiveness may lead to unwise decisions on

domestic, as well as foreign policies.Economic globalization has also providedopportunities for developing countries inthat it opens new markets for export and at-tracts foreign capital, which aids development.Economic globalization is also conducive toa transfer of technologies and know-how,which increases productivity. Foreign in-vestments in developing countries have al-so increased employment. Another positiveeffect of globalization is greater competitionamong firms, which has benefited con-sumers who have access to products at in-creasingly lower prices.

"Integrating with the world economy is a pow-erful vehicle for growth and poverty reduc-tion in developing countries, but it would bestill more powerful if the rich countries fur-ther increased the openness of their owneconomies” (Stern, 2000, p. 5). In fact, weshould recognize that many sectors like tex-tiles and agriculture, which could provide re-al new opportunities for developing countries,have not been liberalized. We should also rec-ognize the concern about intellectual prop-erty rights, and the use of anti-dumpingpractices, which seem to discriminateagainst producers in developing countries.

4.2. Greater global social awarenessand opportunities for democracy

The widespread use of modern communica-tion devices – such as the Internet – and themedia have meant a greater awareness of hu-man rights violations, child labour abuses,corruption, and violence. The advancementsin information and communication tech-nologies and the reduction of transporta-tion costs, have provided people with new toolsto support and disseminate the causes ofdemocracy, human rights, transparency,and alleviation of poverty. This increasedawareness has led to international pressureon specific countries to abide by certain rulesand democratic values. In some ways, itmay be said that globalization is a positiveprocess in that it forcefully brings to the at-tention of the international communityabuses and undemocratic practices. Due totechnological advances, non-state actors

17


The evidence is very

strong that real GDP

growth is related mainly

to domestic productivi-

ty growth, not to bal-

ance of trade or to pro-

ductivity relative to

competitors

have been able to form effective global alliances,which are not subject to control on the partof repressive national governments and actas advocates of specific policies.

The new information age is also widening therange of information available to anyoneanywhere, enhancing and modernizing theexchange and sharing of information, train-ing and education. The potential of on-lineeducation for reaching individuals living inremote areas is of great importance, especiallyfor developing countries. Greater access toeducation is in fact a basic prerequisite forpeople to be able to participate in a well-in-formed way in public life and make informeddecisions. Information technology, the satel-lite, the cellular phone and the global mediaare also contributing to the integration of thefastest growing developing countries in theglobal economy. The future expansion and useof these technologies may further increasesuch opportunities. "From struggles aroundhuman rights, the environment and workersstrikes around the world to genuinely triv-ial pursuits, the Internet has emerged as apowerful medium for non-elites to commu-nicate, support each other’s struggles and cre-ate the equivalent of insider groups at scalesgoing from the local to the global" (Sassen,1998, p. 12).

5. Current trends and challenges affecting publicadministration in a globalizing world

Despite the immense advancements in allspheres of human activity, the increasedglobal wealth, and the opportunities un-leashed by globalization, the world todaystill faces great challenges. These in turn af-fect public administration in a number of ways.The State and its institutions are, in fact, in-creasingly subject to pressure both from thedomestic and international arena. New chal-lenges and old threats suggest that theState, especially in developing countries,needs to be strengthened and to operate dif-ferently from the past. The challenges thatare affecting how the State operates and

that call for major innovations in public ad-ministration are manifold. Poverty, in-equality, civil wars, and the spread of dead-ly diseases, including HIV/AIDS, are com-promising the prospects of many developingcountries for a better future. It is importantto emphasize that all of these problems arenot caused by globalization, as some may ar-gue, but rather by local under-developmentthat does not allow people to take full ad-vantage of the opportunities of integratinginto the world economy.

Furthermore, while it is true that globalizationcarries many opportunities in its trail, it isalso true that it has costs for the peoplewho are integrating into the world economy.Every change has adjustment costs. However,refusing to embark on a process of changeon these grounds is short-sighted. Technicalchange also entails costs, which are even high-er than those produced by globalization, butnot for this reason has it been or should itbe rejected. "Modern technology and in-creasing economic integration have been apositive force in eradicating poverty and de-velopment throughout times" (Sen, 2001). Thus,"the predicament of the poor across theworld cannot be reversed by withholdingfrom them the great advantages of contem-porary technology, the well established effi-ciency of international trade and exchange,and the social as well as economic merits ofliving in open, rather than closed, societies– what is needed is a fairer distribution ofthe fruits of globalization" (ibid.). In otherwords, integrating into the world economyhas costs, but not integrating has greater costsin terms of lost opportunities. The challengethen is how to ensure that people can ben-efit from globalization, while minimizingthe costs of adjusting to a changing domes-tic and international environment (UN,2001, A/56/127-E/2001/101).

5.1. Alleviation of poverty and in-equality

It is becoming increasingly evident that sofar globalization has benefited only a rela-tively small number of countries and that someregions of the world are still not integrated

18


Integrating into the

world economy has

costs, but not integrat-

ing has greater costs in

terms of lost opportuni-

ties

into the world economy. Moreover, as maybe seen in the next chapters, some States havenot yet adapted to increasing interdepend-ence and as a consequence many have suf-fered from the adjustment costs of globalization.As stated by Helleiner at the 10th Raul Pre-bisch Lecture organized by the United Na-tions Conference on Trade and Developmentin December 2000: "The challenge – both atthe national and global levels – is, throughconscious policy choices, to make the new glob-alized system ... work for maximum humanwelfare. The task before us all is to make glob-alization functional, to ‘civilize’ it" (Hellein-er, 2000, p. 5). In order to turn globalizationinto an opportunity for all, we need a newvision for the future, a vision that goes be-yond what Soros calls "market fundamen-talism" (Soros, 2000). In fact, "in recentdecades an imbalance has emerged betweensuccessful efforts to craft strong and well-en-forced rules facilitating the expansion ofglobal markets, while support for equally validsocial objectives, be they labour standards,the environment, human rights or povertyreduction, has lagged behind" (UN, 2000, Mil-lennium Report, A/54/2000). It is becomingquite clear that, while globalization hasgreat potentials, without appropriate do-mestic conditions it can have negative effectsfor many people.

Eradicating poverty and ensuring sustain-able development should form the raisond’être of public administration. Half theworld, nearly 3 billion people, lives on lessthan US$ 2 a day while the richest 20 percent of the global population receive more than80 per cent of the global income. Inequalitystill persists between countries in the worldat large, while intra-country inequality of-fers a mixed record, with some countriesand regions improving their condition, whileothers have fallen into greater inequality. Ac-tually, whether inequality is increasing or notis besides the point. As stated by Nobel Prizewinner Amartya Sen: "the basic concerns re-late to the massive levels of inequality andpoverty – not whether they are also in-creasing at the margin" (Sen, 2001).

It is a fact that a significant part of hu-

manity does not have the capacity to influ-ence its own living environment, let alone theinternational political arena. The impressivetechnological advances only benefit a smallproportion of the world’s population. De-spite globalization, many of the poorestcountries remain marginalized from worldtrade and investment. Social and economicpolarization is still widely spread. Therefore,it may be said that a sophisticated, global-ized, increasingly affluent world currently co-exists with a marginalized global under-class (Commission on Global GovernanceReport, 1995, p. 139).

But how is poverty and inequality in the de-veloping world linked to globalization, andis it a consequence of globalization per se?According to some observers economic glob-alization leads to a “race to the bottom”characterized “by the progressive movementof capital and technology from countrieswith relatively high levels of wages, taxationand regulation to countries with relativelylower levels” (Spar and Yoffe, 2000, p. 37).This is said to force countries to reducewages and social spending. However, otherobservers have maintained that globalizationhas favoured higher standards in the protection

19


Box I.5

POVERTY IN AN UNEQUAL WORLD

The world has deep poverty amid plenty. Of the world's 6 billion people, 2.8billion - almost half - live on less than $2 a day, and 1.2 billion - a fifth - live onless than $1 a day, with 44 percent living in South Asia. In rich countries, fewerthan 1 child in 100 does not reach its fifth birthday, while in the poorest coun-tries as many as a fifth of children do not. And while in rich countries fewerthan 5 percent of all children under five are malnourished, in poor countries asmany as 50 percent are.

This destitution persists even though human conditions have improved more inthe past century than in the rest of history - global wealth, global connectionsand technological capabilities have never been greater. But the distributionof these global gains is extraordinarily unequal. The average income in therichest 20 countries is 37 times the average in the poorest 20 - a gap that hasdoubled in the past 40 years. And the experience in different parts of theworld has been very diverse. In East Asia the number of people living on lessthan $1 a day fell from around 420 million to 280 million between 1987 and1998 - even after the setbacks of the financial crisis. Yet in Latin America, SouthAsia, and Sub-Saharan Africa the numbers of poor people have been rising.And in the countries of Europe and Central Asia in transition to marketeconomies, the number of people living on less than $1 a day rose more thantwenty-fold.

Source: World Bank, 1999/2000, World Development Report.

tween openness and government expenditure.On the contrary, governments of openeconomies tend to spend a significantly larg-er portion of their GDP and collect the ad-ditional taxes needed for this task. Openingto the world economy might be accompa-nied by a reduction in the size of governmentonly if policy-makers believe that small gov-ernment is a condition for open markets. Inreality, there is no evidence in the decade ofthe 1990s that openness led to a reductionin the size of government.

The majority of the "globalizers", then, ac-tually registered increases in expenditure andtax revenue. Therefore, there is no evidencethat globalization weakens the State. The ILOhas reached the same conclusions and hasemphasized that "up to now some of thecountries with the most open economieshave the highest levels of social spending (forexample, most of the Nordic countries, Aus-tria, Germany, the Netherlands). Open na-tional economies in the global economy do nothave to have lower social spending. On thecontrary, a higher level of social protectionwould appear to be necessary in countries thatare more exposed to external risks or haveto undergo difficult structural adjustments"(ILO, 2001, p. 45). In this respect, it is im-portant to anticipate that the State will havea very significant role to play in a globaliz-

of working conditions and environmentalstandards, as well as higher wages thanthose offered by local employers. By refus-ing to operate under specific conditions,some corporations have contributed to the im-provement of working and environmental stan-dards.

The relationship between globalization anddevelopment is quite complex and should beanalyzed in a non-ideological, impartial way.First of all, openness to foreign trade is farfrom being the only or most important fac-tor in fostering development (actually, tradeis a small factor in the economy), nor is glob-alization solely responsible for creating dis-parities between rich and poor. As a matterof fact, human development, the reductionof poverty and increased output of goodsand services depend on national policies, asmuch as or more than the international en-vironment. Therefore, domestic policies,both in developing and developed countries,are greatly responsible either for their pooreconomic performance or for the persistinggap between rich and poor.

As shown in Part Two of this Report, the cross-section evidence on the relationship betweenopenness and the size of central govern-ments, as measured by expenditure and tax-ation, shows that there is no conflict be-

0

10

20

30

40

50

60

Graph I.5. Tax Revenues as % of GDP, 1999

Source: OECD, 1999.

20


Mexico

South Korea

Japan

United States

Australia

Turkey

Ireland

Portugal

Spain

Switzerland

New Zealand

Iceland

Britain

Hungary

Canada

Czech Republic

Germany

Poland

Netherlands

Norway

Luxembourg Italy

Austria

Belgium

France

Finland

Denmark

Sweden

ing economy. For the citizens to take advantageof the opportunities of globalization, they needaccess to high quality education, health care,information and communication technolo-gies (ICT), social safety nets, and infra-structure. The role of government is to se-cure for the citizens affordable access tothese services.

If globalization has exerted negative effectson certain countries, it is because manycountries lag in developing a strong insti-tutional framework, as well as solid social poli-cies and networks to cope with negative ex-ternalities, as discussed in the followingchapters. External factors, such as the glob-al trading environment, are also crucial increating greater opportunities or in posingconstraints on a country’s economic growth.Once more, the trading rules have so far ben-efited more the industrialized countries thanthe less developed ones. For example, the Eu-ropean Union has lifted barriers on importof raw materials from Africa, but not on re-fined products, which would compete with lo-cal European products. As stated in akeynote address by United Nations Under-Secretary-General and Executive Secretaryof ECA, K.Y. Amoako: "For all the talk onfree trade, the World Bank estimates that hightariffs, anti-dumping regulations and tech-nical barriers to trade in industrializedcountries cost sub-Saharan African coun-tries $20 billion annually in lost exports. Inother words, we lose more because of tradebarriers than we gain because of aid! If richcountries want unfettered access to our mar-kets, we require that they open their mar-kets to us so that we can earn, rather thanbeg, our way out of poverty. Democratization,transparency, accountability and good gov-ernance at the national level must be repli-cated at the international level!" (Amoako,2000, p. 1).

In the words of Secretary-General of theUnited Nations, "we should be concernedabout jobs, about human rights, about childlabour, about the environment, about the com-mercialization of scientific and medical re-search. We should also be concerned aboutthe desperate poverty in which so many peo-

ple in developing countries live. But global-ization should not be made a scapegoat fordomestic policy failures. The industrializedworld must not try to solve its own problemsat the expense of the poor. It seldom makessense to use trade restrictions to tackle prob-lems whose origins lie in other areas of pol-icy. By aggravating poverty and obstructingdevelopment, such restrictions often make theproblems even worse. Practical experience hasshown that trade and investment often bringnot only economic development, but higherstandards of human rights and environ-mental protection as well. Indeed, the peo-ple in developing countries generally insiston higher standards, once they get thechance to do so" (Annan, The Wall Street Jour-nal, Nov. 24, 1999).

5.2. Advancement of human rightsand democracy

Globalization and greater openness to the worldeconomy can benefit fully a country and itspeople only in the presence of solid democraticinstitutions, which help redistribute thegains from open trade and from greater ex-change. However, despite the progress madeby many countries in building democratic in-stitutions and protecting human rights,democracies are still fragile in some regionsof the world and protection of minorityrights is not guaranteed. In some parts of theworld, civil society at large and especially mi-norities are still not fully integrated intothe social and economic fabric of the coun-tries they live in. Many suffer from dis-crimination, deprivation of basic rights, andabuse from the authorities. Promotingdemocracy and, in many cases, democratizationis a pre-requisite to ensuring the respect ofhuman rights, but it is not sufficient. Prop-er values and broad encompassing interestof the governments is needed. Freedom ofspeech, association, assembly, religion, andpolitical participation, among others, arecornerstones of a constitutional democracy.Freedom from arbitrary arrest, unlawful de-tention, let alone torture and slavery, are rec-ognized as inalienable universal rights.

Advances have been made in this field in the

21


We should be con-

cerned about jobs,

about human rights,

about child labour ...

But globalization

should not be made a

scapegoat for domes-

tic policy failures

Kofi AnnanUnited Nations

Secretary-General

past decades especially since the 1980s whenthe so-called "third wave" of democratizationspread to many parts of the world. So far anincreasing number of countries have ac-knowledged and recognized the rights con-tained in the Universal Declaration of Hu-man Rights adopted by the United NationsGeneral Assembly in 1948. Yet, there are stilltoo many cases of human rights violationsin many parts of the world. This poses a greatchallenge to national and international gov-ernance institutions.

5.3. Protection of the environmentand sustainable development

Environmental degradation poses signifi-cant challenges to public administrationsworld-wide. Economic liberalization and thelifting of barriers to trade and commerce inmany countries around the world has pro-vided the corporate sector with greater op-portunities for investment and profit, aswell as higher access to new markets, espe-cially in the developing countries. The open-ing up of "new frontiers" has, however, alsoaccelerated the depletion of natural re-sources and has produced higher levels of in-dustrial pollution. Although, as is wellknown, environmental degradation is not aconsequence of globalization per se, greateraccess to and exploitation of previously pro-tected areas is creating further risks for the

environment. Worldwide unsustainable con-sumption patterns, especially in the G-8countries, is resulting in increasingly high-er demands of energy. Examples of envi-ronmental degradation can also be found inthe former centrally planned economies ofEastern Europe. The challenge with whichStates are confronted, in this respect, is tocombine openness to the world economy withpolicies aimed at protecting the environ-ment.

“Already 20% of the world’s population con-sumes 86% of its total resources, while thepoorest 20% of the population consumes on-ly 1.3% of these same resources. ... Eachyear between 5 and 7 million hectares of agri-cultural land are lost as a result of soildegradation or urbanization. Another 16 to20 million hectares of tropical forests are sac-rificed as a result of inadmissible practices.More than 1 billion people have no access toclean drinking water. About 2.8 billion peo-ple have no access to sanitary facilities. Tan-gible evidence of these problems includes thequality of our air, the taste of our water, andthe vast expansion of congested living areas anddespoiled countryside” (Ospina, 2000, p. 32).

Though there is still much discussion aboutthe entity of human-induced climate change,experts agree that industrial pollution andthe emission of fossil fuels are damagingour global ecosystem. According to a recentReport of the United Nations Intergovern-mental Panel on Climate Change (IPCC)"available observational evidence indicatesthat regional changes in climate, particularlyincreases in temperature, have already af-fected a diverse set of physical and biologi-cal systems in many parts of the world (UN,2001, IPCC, p. 3). The report, to which nu-merous scientists and a great number of ex-perts worldwide contributed, also states that"climate changes during the 21st century havethe potential to lead to future large-scale andpossibly irreversible changes in Earth sys-tems resulting in impacts at continental andglobal levels" (ibid., p. 6). Events such asdroughts, floods, avalanches, heat wavesand windstorms are subject to increase. Nat-ural systems at risk include glaciers, coral

22


Graph I.6. Population living below US$1 per day

in developing countries in 1990 and 1998

Number of people below US$1 a day

(millions)Poverty Rate (%)

19901998

(estimate) 19901998

(estimate)

East Asia 452.4 278.3 27.6 15.3

Excluding China 92 65.1 18.5 11.3

South Asia 495.1 522 44 40

Sub-Saharan Africa 242.3 290.9 47.7 46.3

Latin America 73.8 78.2 16.8 15.6

Middle East & N.Africa 5.7 5.5 2.4 1.9

Europe & Cent Asia 7.1 24 1.6 5.1

Total 1276.4 1198.9 29 24

Source: OECD, 2000

reefs and atolls, mangroves, boreal and trop-ical forests, polar and alpine ecosystems. Because of their vulnerability, it is the poor-est and least adaptable parts of the world thatwill suffer most from climate change in thenext 100 years. "Most less-developed regionsare especially vulnerable because a larger shareof their economies are in climate-sensitive sec-tors and their adaptive capacity is low dueto low levels of human, financial and natu-ral resources, as well as limited institution-al and technological capability" (ibid.). Ac-cording to the IPCC report, the damagesthat could derive from climate change are man-ifold, including:

• Decreased water availability for populationsin water-scarce regions;

• Dangers for human health, i.e. increase invector-borne diseases such as malaria intropical countries, or heat stress morbidityand mortality in North America;

• Decrease in agricultural production, es-pecially in Africa and Latin America;

• Widespread increase of flooding for manyhuman settlements;

• Rising sea levels, which will affect partic-ularly Small Island States resulting in thedisplacement of millions of people;

• Collapse of many eco-systems (ibid.).

The IPCC report concludes that, despitethese negative previsions, there is hope forthe future provided that environmental poli-cies are sustained. In particular, it is strong-ly recommended that climatic risks be includedin the design and implementation of na-tional and international development ini-tiatives. Countries have the capacity to re-duce global warming and to reverse envi-ronmental degradation. But it is essential thatall countries uphold the commitments madeat summits in Rio and Kyoto. In this respect,"the ten-year review of the decisions of theRio Summit in 2002 will provide an histor-ical opportunity to the global community toreinvigorate the spirit of Rio. This 2002

Summit must address the major challengesto sustainable development, particularly thepervasive effects of poverty on a large pro-portion of the Earth’s inhabitants, juxta-posed with excessive and wasteful con-sumption and inefficient resource use thatperpetuates the vicious circle of environ-mental degradation and people’s impover-ishment" (UNEP, 2000, Annual Report, p.5).The "Malmö Declaration", which resultedfrom UNEP’s First Global Ministerial En-vironment Forum in Sweden in May 2000,stated that: "We can decrease poverty by halfby 2015 without degrading the environment,we can ensure environmental securitythrough early warning, we can better inte-grate environmental consideration in economicpolicy, we can better coordinate legal in-struments and we can realize a vision of aworld without slums" (UNEP, 2000, First Glob-al Ministerial Environmental Forum). How-ever, whether these goals will be achieved ornot largely depends on the political leader-ship and will of the developed countries – whoare the greatest consumers of energy and pol-luters – as well as of the developing world.

5.4. Mobility of workers and migration

The increase in migration of workers, espe-cially from developing countries to the de-veloped world, is posing serious challengesto public administration systems around theglobe. Although migration is by no means anew phenomenon and is actually less extensivethan in the past, it should not be underes-timated and deserves to be addressed froma developmental approach. States must be-come more attuned to these new realities andfind incentives to retain skilled workerswithin their borders, while also ensuringthat social networks are in place to supportworkers who suffer sudden unemployment.It is known that globalization has producedgreater economic insecurity, especiallyamong vulnerable groups of society in bothdeveloped and developing countries. Peoplefear losing their jobs as companies can eas-ily relocate to regions of the world where wagesare lower. Although this is a serious socialproblem in the short-run, governments can

23


It is known that global-

ization has produced

greater economic

insecurity ... It is also

important to keep in

mind that in the long

run the benefits deriv-

ing from restructuring

the economy more

than compensate for

the costs of transition.

play a significant role in providing relocationgrants and in promoting re-training pro-grammes for the unemployed. It is also im-portant to keep in mind that in the long runthe benefits deriving from restructuring theeconomy more than compensate for the costsof transition.

It is also worthwhile noting that although cap-ital crosses borders rapidly, the same can-not be said for labour. In fact, even thoughlabour has become more mobile, it is only theskilled workers who have legal access toand can benefit from a globalized economy.The migration of skilled workers representsa problem because of its "brain-drain" effecton developing countries, whereas the mi-gration of unskilled workers is a quite con-troversial issue in political and social terms.As indicated by the Executive Secretary ofECA: "Several hundred thousand highly ed-ucated Africans live and work abroad, whileAfrica spends $4 billion of its Overseas De-velopment Assistance (ODA) per annum onbuying foreign expertise. Over 100,000 ex-perts from developed countries are current-ly employed in Africa. The brain drain is de-stroying the core of Africa’s knowledge-pro-ducing institutions and universities. Very fewof these academic refugees are going to themore flourishing countries within the conti-nent, most of which have adopted restrictiveapproaches to immigration at times border-ing on xenophobia” (Amoako, 2000). In somecountries, high unemployment rates andpessimism regarding the prospects for im-provement in the foreseeable future have ac-celerated a wave of emigration, which is cre-ating problems at both the country of originand destination.

Migration and brain-drain have taken on pro-portions which compromise the prospects ofmany developing countries to build a betterfuture, and also victimize the individuals con-cerned. The countries witness the loss ofscarce high-level skills developed at highcost. For migrants themselves, the time-con-suming process of trying to obtain a visa mayonly be the start of a protracted journeythrough the uncharted seas of an informaljob market, in which they are all too often

victims of exploitation. The employment sit-uation in many developing countries andneed for high-level skills constitute a press-ing problem, to which the countries affect-ed and the international community must turntheir attention; both are vitally concerned withthese questions. Another critical question inmany developing countries, but also in thewestern world, is related to the workingconditions in many multinational corporationsand local firms.

5.5. Demographic trends: ageingpopulation and impact of HIV/AIDS

It is crucial that public administration remainsvery aware of what is taking place on the de-mographic sphere so as to adjust itself andits services accordingly. In mid 2000 theworld population reached 6.1 billion and iscurrently growing at the annual rate of 1.2per cent or an increase of 77 million peopleper year. Particularly rapid growth is expectedamong the group of 48 countries classifiedas least developed.

One of the most alarming health crises is re-lated to HIV/AIDS, which is threatening toreverse a generation of accomplishments inhuman development. Some 50 million peo-ple have been infected with HIV since the ear-ly 1970s; 16 million have died. The impactof the HIV/AIDS epidemic is worsening interms of increased morbidity, mortality, andpopulation loss.

Globally, the number of elder persons (60 yearsand older) will more than triple, increasingfrom 606 million today to nearly 2 billion by2050. At the same time, international migrationis projected to remain high during the XXIcentury with the more developed regionsexpected to continue as net receivers of in-ternational migrants on an average gain ofabout 2 million per year over the next 50 years.Because of low fertility, this migration hasa significant impact on population growth inthe more developed regions.

These demographic trends are posing a se-rious challenge to national and internation-al governance systems. In developing coun-

24


Migration and brain-

drain have taken on

proportions which

compromise the

prospects of many

developing countries

to build a better future

tries, governments will have to deal with awide range of problems related to the expo-nential increase in population and the prop-agation of deadly diseases. In the developedworld, administrative systems will have toundertake a number of reforms in order tomeet the needs of the increasing number ofelderly and an increasingly diverse society.

5.6. Bridging the digital divide

Information technology opens new vistas forhumankind. IT promises to improve ourstudy, work and leisure. IT offers possibili-ties to broaden and accelerate the global in-tegration of information networks, of economicactivities, and of social, political and culturalpursuits. Currently, however, many developingcountries and countries with economies in tran-sition are only passively integrated, if atall, into the global economy. The unequal ac-cess to IT is creating what is known as thedigital divide generally between rich andpoor countries and also within countries.

Technological penetration is still very low indeveloping countries and in recent democraciesif compared to the developed world. In thisrespect, only those who have access to the In-ternet and a variety of communication devicesare globally connected, whereas a great partof the world cannot reap the benefits of glob-alization and are left at its margins. Manydeveloping countries are still struggling tohave nation-wide electricity, and infra-structures are still inadequate. In addition,the cost of computers is, in relative terms,very high for many inhabitants of the de-veloping world. Most enterprises in these coun-tries have neither the capacity nor themeans to be active players in the globaliza-tion process.

The digital divide, however, is not a phe-nomenon which characterizes exclusivelydeveloping countries. An increasing gap inopportunities is also being witnessed inmany industrialized countries due to this di-vide. It is mostly the young middle classwho have access to information technology,whereas the poor as well as the older gen-erations are being left out of the information

revolution with great repercussions on theiremployment opportunities. Recent surveysindicate that, in the industrialized world, typ-ical network users are middle-class, youngadult or adolescent, and male. The poor, dis-abled, older or poorly educated have not beenintroduced into the new technology and maycontinue to be excluded from it. In many de-veloping countries, access to the Internet re-mains a distant dream. Knowing how to ac-cess the Internet, as well as to master computersoftwares and other communication devices,is today a must in the skilled work place. Welive in a society in which information is pow-er and wealth is based on knowledge.

On a more positive note, modern informationtechnology offers both countries and individualsdramatic opportunities to leapfrog into thefuture, speeding up their economic and so-cial development. While many developedcountries have spent enormous sums in-vesting in IT, many of the resulting IT prod-ucts and services have now become availableat prices that may soon be affordable to en-terprises and households in the developingcountries. The current trend of IT towardsdistributed processing and network com-puting is also very much in favour of devel-oping countries because it provides themwith low cost and low risk – as well as highbenefit – strategies to develop their informationcapacity and thus participate in the globalinformation society.

With rapidly declining costs for both computersand telecommunications, it has been possi-ble to place computer power on the desktopsof individuals and to communicate with any-one anywhere. This has given rise to a trendof end-user and network computing, whichallows an organization to take an evolu-tionary instead of revolutionary strategy.By means of wireless technology, developingcountries are now able to quickly build upbasic data-communication networks and in-formation infrastructures with less invest-ment, without having to wire thousands ofmiles of cables.

Because of the shift from mainframe to per-sonal computers and networking (access to

25


The unequal access to

IT is creating what is

known as the digital

divide generally

between rich and poor

countries and also with-

in countries

the Internet), IT can now provide more off-the-shelf software and user-friendly interfacesbetween people and machines; these havegreatly reduced the cost of applications de-velopment and eased users’ training. Previ-ously, the introduction of a new generationof computer and data-communication systemsin developing countries would have taken placeseveral years after their initial use in the de-veloped countries. Now, because of IT advances,acquiring new computers and software takesonly a few months. The challenge States arefacing is how to close the digital gap and cre-ate the opportunities for a wider participa-tion of all people in the information age.

5.7. Combating international criminal networks

The speed and ease of transactions throughthe Internet as well as the greater opennessof national borders have also been used innegative ways by criminal organizations, in-cluding terrorist groups. Corruption has al-so taken on a transnational dimension, andtrade has extended to the illicit commer-cialization of women, children and human bodyorgans. Oftentimes, the Internet is beingused to facilitate such "transactions’". More-over, due to the many advances in technol-ogy and communication devices, criminals havebeen able to trade in illicit drugs andweapons with greater ease than ever.

The threat that international crime, partic-ularly terrorism and drug traffic, pose to theworld and increased interdependencebrought by globalization should not beoverlooked. Terrorism, in addition to thecriminal taking of innocent life, can desta-bilize societies by undermining confidence ingovernment institutions and inspiring fearin the population. Drug traffic results in un-told harm to individuals and the consequentlosses of human capital. Given their nature,only States can combat these terrible crimes.The State, with all its institutions, has no doubta pivotal role to play in this fight.

6. Too much or too little globalization?

"The problem is not that we have too muchglobalization but rather too little" (UN,2000, Millennium Declaration, A/RES/55/2).The benefits of globalization have been un-equally distributed and many people have beenmarginalized from this process. Even incountries that have integrated into theworld economy not everybody has benefitedfrom globalization as States were not preparedto cope with some of its negative effects.

Thus, the foremost preoccupation should beto ensure that the benefits of globalizationare evenly spread throughout the developedand the developing world, while addressingits negative effects. The problem is notwhether to go global, but rather how to glob-alize. In other words, globalization has thepotential of increasing prosperity and humandevelopment for all, but this is predicated onhow it is pursued. In turn, this depends ondemocratic processes being in place at the sub-national, national and international levels,as well as on the balance of power and meas-ure of equality among the world’s nations.

Indeed, globalization may be said to bringgreater opportunities to many countries pro-vided specific conditions are met. It can fos-ter prosperity, only if free trade principlesare not upheld at the expense of consumers’health and the environment and if profits arenot gained at the expense of workers’ basicrights. That is to say, greater market open-ness cannot be divorced from a profound de-bate about common social goals and com-plementary policies. Human dignity and thepromotion of enhanced quality of life shouldbecome an integral part of the internation-al policy agenda. Accordingly, globalizationcannot mean the abandonment of all thingsto market forces. In other words, "the eco-nomic sphere cannot be separated from themore complex fabric of social and political life,and sent shooting off on its own trajectory.To survive and thrive, a global economymust have a more solid foundation in sharedvalues and institutional practice. It must ad-

26


The threat that interna-

tional crime, particular-

ly terrorism and drug

traffic, pose to the

world and the

increased interdepend-

ence brought by glob-

alization should not be

overlooked

vance broader and more inclusive social pur-poses" (UN, 2000, Millennium Report,A/54/2000, p. 3).

As emphasized in the Bangkok Declarationof February 2000, "globalization can be a pow-erful and dynamic force for growth and de-velopment. If it is properly managed, the foun-dations for enduring and equitable growthat the international level can be laid. For that,it is essential to persevere in the search forconsensual solutions through open and directdialogue that takes account of the fundamentalinterests of all (UNCTAD X, 2000, BangkokDeclaration).

“With globalization there is a growing needfor binding international regulations, a needfor international conventions and institu-tions that cover cross-border transactions”(Beck, 2000, p. 130). Appropriate regula-tions and conventions should ensure that glob-alization does not limit the freedom of peo-ple around the globe, but rather empower themto unleash their creative forces. But for peo-ple to be able to seize the benefits of global-ization another set of conditions should bemet, i.e. basic needs must be satisfied.

This is especially true in developing countrieswhere people can actively take part in theworld trading system and benefit from therapid transformations that mark the begin-ning of this millennium, but only if the qual-ity and access to education and health areensured; if physical infrastructures, includ-ing transport and communication networks,hospitals and water systems are built or im-proved; if poverty amidst plenty is reduced;and if the technology gap is narrowed – thatis to say, if people have greater opportuni-ties to make choices. As argued by Sen,"what people can positively achieve is in-fluenced by economic opportunities, politicalliberties, social powers, and the enablingconditions of good health, basic education, andthe encouragement and cultivation of ini-tiatives" (Sen, 1999/a, p. 5). In this respect,the State has a very important role to play.

It should be kept in mind that globalizationdoes not have the same impact everywhere

and that its effects vary according to domesticconditions, in particular to whether a coun-try has in place adequate institutions.Therefore, to label globalization in absoluteterms as either a totally positive or negativephenomenon is a reductive approach. Itshould not be demonized nor sanctified, norshould it be used as a scapegoat or a panaceafor all the major problems that are affectingthe world today.

In this context, "what we need is a better un-derstanding of how to translate our valuesinto practice, and how to make new instru-ments and institutions work more effective-ly" (UNEP, 2000, Annual Report, p. 1). Thisnow brings to the fore important questions.What is the role of the State in a globaliz-ing economy? How is globalization affectingthe role and functioning of the State? Havethe reforms aimed at reducing the role of gov-ernment and reshaping State bureaucracy inmany developing countries helped them toseize the benefits of globalization? What in-stitutional structures and policies are bestsuited to cope with globalization? What arethe responses that States, as well as re-gional and inter-governmental organizationshave provided and can provide for the futurein order to cope with the many challenges glob-alization is posing? These issues are ad-dressed in the following chapters.

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Globalization ... should

not be demonized nor

sanctified, nor should it

be used as a scape-

goat or a panacea for

all the major problems

that are affecting the

world today

The many facets of globalization - United...

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