Contributing writer Dickson Igwe
Globalization, foreign investment, and Virgin Islands development! A snapshot of the thoughts on globalization of a veteran economist; Alan Greenspan was chairman of the US Federal Reserve for two decades, before his retirement in 2006 Thomas Friedman, Pulitzer Prize winning New York Times Columnist, on August 9, 2012, in an Op Ed piece, ‘’AVERAGE IS OVER,’’ alluded to the fact that today’s world is, ‘’ seamlessly connected.’’
In other words, businesses look for the best places to get work done, and the most cost effective venues wherever they are. Globalism is a process that determines that products and services are designed and created everywhere, and supplied and sold everywhere. Increasingly, the world is becoming economically homogeneous and commercially interconnected, and this process will continue unrelentingly, far into the future.
Friedman further alluded to a new type of global business citizen with mixed loyalties. These are increasingly multinational personalities and corporate leaders, with 90% of their customers abroad.
Today’s entrepreneur ,’’ has cheaper and easier access to above average software, automation, robotics, cheap labour, and cheap genius, than ever before.’’ Another thing: globalization means that as of this August 2012, ‘’ there is no job that does not require more and better education.’’ The right type of education and skills set is the oxygen of globalism: it is everything!
In a related vein, another New Yorker, Alan Greenspan, Chairman of the Federal Reserve Board for nearly 20 years, until his retirement in 2006, was one of the minds behind 21st century globalization. He was also a major mover and shaker in the greater liberalization of the contemporary world economy. In his book written in 2007, at the beginning of the Great Recession, titled, ‘’THE AGE OF TURBULENCE, ADVENTURES IN A NEW WORLD, ‘’Greenspan described how China began its journey towards a capitalist model as early as 1978.
The most powerful banker of his era, Greenspan traced the start of globalization to the Pacific and, ‘’China’s shift in protecting the property rights of foreigners.’’ In other words, the Communist Nation’s gradual move towards adopting a capitalist model by embracing open markets and foreign investment helped create the modern global economy. ‘’
Alan Greenspan. Photo courtesy top-people.starmedia.com
That globalism actually began in the Far East is an interesting assertion! This change in China’s social and economic culture, ‘’was substantial enough to induce a veritable explosion in foreign direct investment- FDI- into China, from a level of just $57million in 1980. After 1980, Foreign Direct Investment in China drifted upward, reaching $4billion in 1991, and then accelerated at a 21% annual rate reaching $70billion in 2006.’’
The inflow of investment from the USA and Western Europe primarily, ‘’ joined with the abundance of low cost labour, resulted in a potent combination that exerted downward pressure on wages and prices throughout the developed world.’’ In other words, globalization started as a result of capital flows across international borders, and the profitable and productive use of that capital as evidenced by the Chinese model.
But even before China’s slow march towards capitalism, an incremental process that began in the late 70s, the story was the same for the Asian Tiger economies: Taiwan, South Korea, Hong Kong, and Singapore.
Beginning in the early 70s, technology and investment from the developed world, and a culture of thrift and enterprise, allowed these countries to become export miracles, catching up with their Pacific neighbor Japan, and outgrowing Western economies. And despite a major downturn in the 90s, these countries continued to outstrip the West in economic growth, and still do to this day.
But add to that cocktail, a global economic model driven by the silicon chip and information technology, and international trade and banking deregulation. Then, dizzying developments in science and technology, and the new economic thinking that encouraged the pulling down of artificial barriers to trade.
All of these factors, mixed with a laissez faire modus Vivendi in international banking enabling financial capital to chase the best returns from around the world. The flow of capital from the rich world went from trickle to waterfall in a matter of two decades. And that in return resulted in strong economic world growth, and greater interdependency, while building a new resilience into the global economy; a global culture that lasted up and until the Great Recession of 2007.
This new global period was further highlighted by Greenspan, when he explained how there had in recent years, ‘’been a shift of a significant share of the world’s GDP to the developing world, a trend with dramatic ripple effects.’’ Plus the fact that not only do, developing countries have much higher savings rates than do industrial nations,’’ but, ‘’ open markets and free trade has elevated hundreds of millions from poverty.
Large segments of the developing world’s population have come to experience a measure of affluence, long the monopoly of so called developed countries. ‘’ Now Greenspan’s assertions must be taken in with a pinch of salt. Before he retired in 2006, Greenspan was at the helm of a financial establishment that was deregulated and cowboy, with a casino type dynamic; and this led to the financial catastrophe of 2007: the collapse of the housing market, the bursting of the credit bubble, and a financial implosion that resulted in the severe recession that followed.
However Greenspan was, and still is, a believer in globalization, and put it this way in his magnum opus: ‘’ the world of a global capitalist economy is vastly more flexible, resilient, open, self correcting, and fast changing than it was 25 years ago. New technologies not only opened up a whole new vista of low cost communications, but also facilitated major advances in finance that greatly enhanced our ability to direct scarce savings into productive capital investments, a critical enabler of rapidly expanding globalization and prosperity.’’
Yes, Greenspan possessed great faith in a system he helped create. And in his book, he further credited globalization aided by the microchip, for keeping inflation under control and interest rates in single digits. He alluded to the pre World War Two era, when protectionism, ‘’ led to a virtual collapse of world economic activity.’’ However, after the war ended, the embrace of free market capitalism by Truman, Eisenhower and Kennedy, led to a booming USA that spread prosperity to the rest of the Western World. To be continued…
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