Globalisation and Digitalisation

Senior company executives of global organisations and founders of start-ups are the main beneficiaries of globalisation and digitalisation. The losers are the workers in traditional economic sectors in industrial countries like USA. Research has shown (Der Spiegel 2016) that imports from China alone have resulted in the loss of 1.5 m manufacturing jobs since the early 1990s in USA. Despite their advantage to the whole economy of cheaper goods, etc, it does not help those who have lost their jobs.

Populist politicians of the far left and right when have found a common enemy in globalisation. This is not dissimilar to what happened around 100 years ago, ie a period of internationalisation that ended in World War I; this was followed by the boom period called the Swinging 20s (boom period) and the Great Depression (political and socio-economic chaos) and World War II.

Globalisation started in the 1970s when China returned to the global stage and revolutionised the geographic division of labour to large numbers of cheap workers. This trend accelerated once the Berlin Wall and the Iron Curtain fell. Firms began producing goods in the cheapest places, eg lowest wages. This destroyed a vast number of jobs in industrialised (high wage) countries.

"...The flood of products from Eastern Europe and Southeast Asia in the 1990s push prices down, particularly as more and more economic sectors introduced state-of-the-art technology and digitalisation..."

Der Spiegel 2016

There have been 3 phases of globalisation( Enderlein, 2016)

i) until 2006 with unbridled growth

ii) financial and Euro crisis (with taxpayers assuming the lion share of the costs and burdens; while the elites got away relatively unscathed)

iii) in 2016 entering the 3rd stage (sovereign countries looking after their own needs first, eg tax systems, education, immigration, infrastructure development, social welfare benefits, wages and working conditions, etc)

inked with globalisation are

- distrust in elites and establishment-type institutions including democratically elected bodies; with people longing for security and self-sufficient economy as shown by protectionism

- the explosion in global debt. It now stands at US$ 152 t. Debt is climbing most rapidly in developing countries, eg corporate debt in developing countries is around us $ 340 b. (Der Spiegel 2016)

- tax advantages given to corporates like Apple (Ireland); Netherlands, Luxembourg and Belgium have provided special deals for organisations like IKEA, Star Bucks, Fiat and Amazon

- Internet companies have a tendency towards monopolies as they continually attract more users, which in turn makes the company more attractive to other users, eg advertisers. This is not dissimilar to what happened at the end of the 19th century in USA where the oil, steel and rail industries were controlled by a few, large corporations. Anti-trust laws were created to limit these monopolistic, market controlling practices. Similar efforts are needed to-day on a global scale to limit potential abuse of market power by organisations like Google, Apple, Facebook, Microsoft, Amazon, etc

- mergers and acquisitions using the cheap money to acquire their competitors and become more powerful like Bayer acquiring seed company Monsanto for US 66 b., ChemChina acquiring Swiss pesticide company Syngenta, etc

"...The growing concentration of companies weakens competition and harms consumers, while the same time increasing their leverage against the State..."

Der Spiegel 2016

- firms buying back their own shares which drives up their share prices, ie increasing the wealth of the wealthy like shareholders

"...the growing gap between rich and poor, an unbridled monetary and financial industry, overly powerful corporations are escaping national controls and shirking tax obligations: against this background, many people have lost faith in the idea that regulated markets lead to broad prosperity......their lack of blind faith in the idea free trade is always beneficial to all people at all times......fear national laws and regulations will be sacrificed in ways that benefit a small number of companies..."

Der Spiegel 2016

 

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