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Schriftenreihe des Europa Institutes Budapest, Band 19:161–169.


Economic Globalization


Globalization as a Category of Politics and Technology

The concept of globalization had become the center of attention through the appearance of modern means of information-technology. These means made it possible to “disconnect” certain elements of time from the spread of information, as well as its local deviations. It became possible to follow simultaneous processes taking place at various parts of the globe at different times which were nevertheless closely related. The same processes are catered to by politics through liberalization and deregulations. The governments of states – mostly the small and medium-powers among them, – judge that they now exist in a world in which their freedom of decision-making has been severely curtailed.

Perhaps the most obvious manifestation of the misuse of the concept can be found in the protests pursued under the flag of globalization by various social associations and movements, opposing anti-humane practices in the prevailing social-economic system. For the second time (until 2000) young people of various social organizations used the annual meetings of the International Monetary Fund and of the World Bank to organize their protests. In their opinion, these institutions are transmission belts for politics aimed at world domination by certain great powers, especially the United States of America, in various regions of the world; they are allegedly cooperating in financial dealings, maintaining or even reinforcing the differences in economic development and are, therefore, participants in the process of keeping the majority of the population in poverty. At the same time, they are supposedly aggravating contradictions accompanying the processes of socio-economic developments.

Let us begin with the process of the spread of information. Concerning the role of the spread of information in the evolution of science, it seems sufficient here to emphasize several elements of the thoughts of Ferenc Glatz ( F. Glatz: Wissenschaftspolitik um die Jahrtausendwende. Beispiel Ungarn. Bp., Akadémiai Kiadó, 1999. 142 S.) He describes our age as one that is characterized by a challenge of a new wave of the industrial–technological revolutions, dominated by information processing. This process is part of Globalization. This represents a challenge for the political institutions of states, as well as for individuals and communities. All of them have to face a new type of world-wide integration.

The first signs of globalizations – writes Glatz – included new production-strategic-military systems that have emerged at the beginning of the20th century. They have been completed in our days. The information revolution emerging during the last few decades enabled these systems of production, politics and culture to dominate the world. The revolution in the culture of informatics opened a new chapter in the history of human conduct. However, we want to emphasize the fact that our subject continues to be economic globalization.

Information about past happenings had a decisive importance for economic decision-making. The less detailed is our information, the greater the risk embedded in economic decisions. And the more complete is our knowledge, the more capable of bridging barriers presented by distances, economic decisions could be the better grounded. But technology is not economics. The logical systems related to technology are fundamentally different than those regulating economic processes. The peculiar manifestations of economic processes are at the point where limited available means are distributed among competing goals, based on expectations of the maximum attainable results.

There can be little doubt that possessing well-founded information provides better chances for weighing economic decisions. Today this is being emphasized in relation to international capital transactions, especially in the conduct of business at the stock markets. However even in these relations this concept is valid only for certain types of businesses. We may emphasize as a general rule that at the contemporary state of information technology available on the macro- as well as the micro levels, the concept can be employed more quickly and with less mistakes, in making economic decisions.

All this may be related to globalization, especially when processes where decisions made at the same time at different locations must be coordinated as important segments of economic decisions. Their importance for the entire process may be found in the way by which the processes of globalization impact on an entire economic system. This impact becomes more significant in our times, because the law of the self-generating movement of capital is being separated more and more from the laws of the capitalist market system of productions.

However, we should distinguish between globalization and regionalization. We understand that globalization means the establishment of standards on a world-wide basis. Regionalization, on the other hand, means a situation in which various groupings of states – more specifically, neighboring states – establish closer relations, when these states employ policies of discrimination (or preferences) against all other states.

We must agree when certain economists – especially the Austrians – explain the establishment of the European Community or of the European Monetary Union as a process of “Europeanization.” It is appropriate to emphasize this explanation because many economists today consider it to be the major manifestation of globalization. Yet, this process is no different than that which had occurred in North America and led to the creation of the United States in the 19th century.


Globalization and Polarization

The view we can obtain today about the current world-order makes it obvious that globalization and polarization are present at the same time. There have always been – and will be in the future – general phenomena concerning the globe. These phenomena are independent from the way the human population grew, the way various civilizations have come into being, and the process by which relations among them have been established. It is also evident that conflicts and exclusions have never come to an end at any level of civilization, nor have the tensions based on different characteristics ever ended.

We may consider the conflicting movements in civilizations as representing the dynamics of gravitational and repulsive forces, of common and conflicting interests, or forces of impact emanating from a given power source and being supportive-, neutral- or oppositional, intent on balancing or subduing them. When we consider all this from the point of view of the question, “weather globalization or polarization represents the major route of socio-economic developments,” we may provide the following answer, at least as a starting point; in the sphere of economics, globalization had been a real process in the course of the 19th–20th centuries, while polarizations had become the determining factor in the 20th–21st centuries. We can hardly contest the fact that economic globalization has been realized, in its fullest form, by classic capitalism, when the mechanism of gold, as the means of foreign exchange, determined the international division of labor. However, we must also add that this was true only as far as the socio-political conditions characteristic of the age were concerned. The promoters of globalization at that time have been the countries of the Euro-Atlantic world. These countries were qualitatively distinguished from the ”barbarian” parts of the world, the latter of which were intended to serve the interests of the colonial powers.

The end of the colonialism in the 20th century created a new situation. The cohesion of the Atlantic world expanded the boundaries of the globalized world-economy, since countries that had accepted the major defining concepts of Western civilization, – individualism and free trade – were now included in its realm. At the same time, it also became clear that the so-called “barbarians” brought into a common denominator by colonialism meant, in fact, the realm of non-Western civilizations. It is true that their economic development was behind that of the West, but their culture differed from Western civilization only in its components. This also made clear the fact that globalization and polarization are both present in the world; that there are societies which not only refuse to accept Western cultural values, but reject them outright.

In the 20th century, polarization appeared, in a simplified way, as manifestations of a North-South, or a West-East conflict. The problem concerning North versus South was considered to mean the differences between the rich and the poor countries, while the West-East issues were allegedly the consequences of the conflict between Socialism and Capitalism. The former meant differences existing in economic development, while the latter was considered to center on ideological conflicts.

On the threshold of the 21st century it became more and more obvious that such simplifications will not explain the political-economic-social background of polarization. In fact, the major defining factors of polarization are not ideologies, but civilizations. If we accepted this fact, we would not go far with traditional definitions of the West-East conflicts.

During the Cold War, the world was polarized along the lines of an ideological spectrum. If we accepted this view, then we may admit that the only difference today is that the ideological dividing line has been replaced by cultural divisions. But such opinions only direct attention away from the essence of the situation. In fact, Japanese, Hindu, Chinese, Muslim and African civilizations are fundamentally different from each other in their religions, social structures, institutions and defining values. The reality is that there are many non-Western type societies. They differ from one another in that they are organized along various religious lines. Similarly to Christianity, Islam, Hinduism and Confucianism, each are related to a major civilization.

We must ask the question; “why do we contrast globalization with polarization?” This is exactly the theoretical framework by which one considers the production methods characteristic of each civilization as being hardly different from that of the West. We are facing a peculiar problem in our days; we are not in possession of sufficient economic data that would provide answers for the fundamental material conditions of social development valid for the entire globe. Even the declaration issued by the UN at its millennial meeting could not go beyond this critical point, one that could raise questions about the Western-oriented approach to the problem. The process of globalization, based on the overwhelming power of the West, may be characteristic of the approach to the problem in question. One could argue about this presentation that it is also basically Western-oriented. Yet today we do not possess a hold on which to hang an alternative theory. We will probably have to wait for decades before one may be constructed.

However, in this case why are we working on a presentation that will pronounce an economic system valid for the globalizing world? The answer to that question may be found in the fact that such a process can hardly occur in a quick, one-step revolutionary manner. Some of the components of the changes have appeared already in the 20th century, and they are accelerating at the turn of the millennium. We have plenty of information for a realistic approach that will provide recognition of the major characteristics of the new economic science. We must also add; if we accepted the notion that globalization and polarization have both existed simultaneously, then the contradictions and struggles may also be explained which, in the 21st century, may take the form of conflicts among entire civilizations. Perhaps these are the most important possible outcomes that we may consider at the time of the transformation of the world order.

There have always been in the past and will always be in the future isolated regions remaining at a relative distance from the process of modernization. Therefore, they remain outside the communications network which, using modern means, are becoming more and more the determining factors in economic processes. In addition, there have always been – and will be in the future – life processes taking place in closed social circles that are not touched – at least not organically-by the intensifying contacts among cultures. Consequently, we cannot consider the processes that we observe as extending their influence over everything and everyone.


Economic Relations of Vertical Globalization

Civilizations differ from each other in that they serve various cultural values. The economic manifestations of social life, such as life styles, methods of enrichment and production, etc., are parts of cultural values. They also exist in close organic relations with cultural values that are not economic in nature. Such connections are shown in at least two ways. First of all, the creation and maintenance (keeping them operational) of non-material cultural values cost material goods. The latter have to be withdrawn from the economically determined circulation of material goods. Secondly, non-material cultural values are in organic connection with the social function of economics. This does not occur as the participants in economic life observe the norms accepted by society, but it happens through the definition and expression of expectations in the sphere of cultural values, as these are taking shape in society. In the final count this is the factor which determines the legal order of economic life.

Such an explanation of cultural values illuminates the complexity of community life. Human beings live both as producers and consumers and are subject to principles that are also the defining factors in cultural values. This is one factor making the economics of the global world impossible to define in its uniqueness, independently of the concepts of time and place. In reality, economic life takes place in a given social and natural environment, organized into a whole by cultural values, in the interests of aims considered the greatest good by society.

In the West, the organic unity of nature, society and economic life had been forgotten during the 18th century, when natural philosophy declaring the supreme value of human freedom became dominant. This philosophy opened the way for egoism, selfishness, materialism, and for the desire to become rich. All this was institutionalized by the theory of the human rights of the individual. This was the classic definition of “homo economicus,” which defined social well-being as the economic condition of the sum of each member of society separate from the whole.

However, all this has existed in Western civilization extending over the relatively short period of capitalist production methods as a normative system. A leading role was played in this process by the successes of the colonization of the world and the immediate economic advantages derived from them. However, in the course of the 19th century, the examination of social problems led to the rejection of the concept of homo economicus as an example to be followed. The concept of pure economic rationality became the sole determining factor of social behavior. The changes that had occurred in the 19th century concerning the relations between society and economic life, took place in the alterations of public opinion. In the course of the 20th century, the changes have lead to fundamentally different conclusions concerning economic life and the natural environment. This brought into prominence the issues of environmental degradation consequent of economic practices, and the fundamental issues of the endangerment of the very bases of human existence. If we examined these issues surrounding the circumstances of the existence of non-Western civilizations, the relations of economic life to non-economic factors will bring new elements to light. The new elements will come out in an especially illuminating way in relations to religious life, life styles, civil society and individual enrichment, economic activity and social responsibility. In non-Western societies there is special significance in the organic relations of economics with community life, as well as with the manifestations of non-economic activities. This should not be conceived as if economic activities had no individual elements. They also have mechanisms that may be examined in their own separate, closed compartments. But we must realize that economic life is fitted into a social context different from that in Western civilization. We are not about to discuss these elements in each separate case, as such an examination would have no real use. Because in the case of each civilization, characterized by general social progress, such changes show up in the transformation of social structures, and this naturally affects the forms of economic life.

One of the questions of our times that has not yet been fully explored, – or is not even being raised – is what sort of influence is exerted by the process of modernization originating in the West on various civilizations, and to what extent does this process enrich – or modify – the organic relations between economics and various manifestations of life?

When we emphasized above that globalization has dominated the course of the 18th – 19th centuries, and polarization characterizes the 20th – 21st , we were thinking, first of all, of the system of international relations and its horizontal expression. When we examine the vertical connections, our attention is being turned on the different levels of development between Western and non-Western civilizations. Considering the issues from this point of view, we can observe that globalization in Western civilization in the 20th – 21st centuries is certainly a determining factor. The situation in the case of non-Western civilizations is different. In their cases, perhaps in different ways and according to different measurements, economic motivations are on the increase; this is a natural consequence of their explosive demographic growth.

Globalization in International Economic Relations

In the sphere of international economic relations, four kinds of relations exist which are intertwined in many ways. These are;

– 1. the world-wide interrelations among capital (money) markets;

– 2. the expansion of transnational companies and the integration of markets – of goods (services) – through various methods and according to diverse measures;

– 3. the strengthening of regionalization and the intensification of the interdependence among national economies.

– 4. The emergence of world-wide regulations of a system of protection of an ever more endangered natural environment.

If we defined globalization as a form of interdependence of a world-wide economic system, then this explanation will be limited only as far as the capital (money) markets are concerned. This process of globalization is mostly the consequence of the cohesion of Atlantic (states). Consequently, the definition is valid for various eastern civilizations only to the extent that these civilizations joined the process of modernization. But it must be emphasized as a general rule that even in these cultural environments the local, or foreign, financial institutions (residing in place), have not been absorbed – or did so to a minimal degree – into the economic systems of the respective countries.

A peculiar picture emerges when we examine globalization in relations to transnational companies. Four elements are worth mentioning;

– 1. There is no area where one single company would control the world-wide marketing of a product or group of products.

– 2. The share of goods, or groups of goods or services in circulation produced by transnational companies, are widely different in various sectors in the world. Their share varies between 70-100 %.

– 3. The process is dominated by companies operating in parallel with each other; their number differs in various sectors and they regulate the market openly or in covert form (by dividing the markets among them, and by policies of pricing, etc.).

– 4. There are areas of the economy which are not suitable for activities on an international scale; this concerns mainly local services.

The expansion of transnational companies in the process of globalisation differs from regional relations among countries, in that in their case market- and not political preferences serve as the determining factors. The expansion and international structure of multinational companies are determined, on the one hand, by the most favourable conditions for industrial (or production) development, and on the other, by the most favourable market conditions.

Regional cooperation among states has become more desirable by the exploitation of advantages provided by geographic location, the limits provided by state borders for the rational organization of economic processes, or the counterbalancing effect of these and the improvement of international competitiveness of the respective parties. These factors present problems for international territorial coordination, and it is justified to treat them as part of the process of globalization only as they provide an institutional background for the interrelationship of economic processes on a world-wide basis.

Ferenc Kozma’s findings concerning the transnationalization of imperial companies and the integration of various states in the process of regionalization are worthy of attention. Under certain conditions – he writes – this means war between them and they are inclined to become each other’s parasites (the process of becoming transnational often diverts energies from regionalization) and again under other conditions they become complementary and supplementary to each other. The networks of transnational companies represent the global element in the frameworks of geographic regions in comparison with the ideas and regulations concerning the integrative processes as the companies enter their structures. These are exactly the characteristics that bring gains for the respective regions and, at the same time, introduce foreign elements into their activities – the latter of which are, of course, represent disruptive factors. The most important alien elements are the efforts, value systems and ideas that the centers of the transnational companies introduce to the territory of a region; their effects may impede and disturb the process of activities in the respective region by their very existence. According to Ferenc Kozma, the relationship between the huge transnational companies and regional integration repeats the process that had already existed in the early 20th century between the sectors of oligopoly and the national economic systems. The greatest difference concerns the fact that the centers of decision of the transnational powers lay outside the circles of the power of regional integration; the only method of influencing them is the conclusion of a compromise. At the same time, the respective regions protect the giants of their own area, and have no courage to curtail the transnational capital that flows toward it from competing economic centers, because it is frightened of the possible loss of resources. This coexistence started an especially interesting process; various regions created a system of organic relations, especially because of the deep penetration of the transnational sector into their affairs.