2005: The Limits of Globalization

The Limits of Globalization

Speech at World Economic Forum Krysnica, Poland, September 2005, by Michael Breisky

1. What is Globalization? According to the Polish writer Andrzej Stasiuk, Globalization means the end of melancholy in the East and the end of privileges in the West.

Other definitions: It is a system relying on the availability of cheap oil (how long?); or it is the establishment of one sole and world-wide context for every issue, as technological progress connects now everything to everything else around the globe.

In economics Globalization means the world-wide dominance of market-forces, made possible by a) the end for customs and quotas, transnational division of labour and out-sourcing, b) global information network, as estrablished by the combination of English and Microsoft, c) the global access to venture capital. The world has become a single market and should in theory (Milton, Thomas Friedman) be able to solve all economic problems.

2. Globalization may be irreversible, but it has its severe problems:
a) Problems of scale: Globalization tends to neglect local context, leading to Reductionism. As a result it is able to achieve practical results only within a certain band width, losing sight and practicable effects outside it. As Globalization exceeds this band width today, it favors a general trend to “bigness”: nobody does business with antipodes for peanuts, unless many, many tons of them. Result: small and medium size enterprises are at a disadvantage, while most mergers & acquisitions fail or do not produce the synergies the investment bankers continue to promise (remember Mercedes/Chrysler!).

b) Problem of Price-theory: the market tells about lowest and highest prices, but not about best prices. If I ask for an apple and get a tasteless apple, my wife tells me: “Go back to the market!” and ask for tasty apples. And if I come back with tasty apples, I might be told to go back to the market again and find an apple that has not been shipped around the globe, just for washing and waxing. Similar: to get good shoes, shirt or holiday-trip, many additional (specifying) questions are needed. So prices lack information about the quality of a product and about the social or biological sustainability of the production process. The key-problem of Globalization: the number of additional questions one would have to put to the market in order to ensure good quality exceeds practicability; and there will always be a producer who saves costs by “forgetting” the quality not explicitly asked for. Cheap merchandise and production process that are unsustainable to society and the environment conquer the markets, therefore.

c) Problem of information-overload: Where Globalization arrives in parallel with cultural pluralism, there is also the socio-economic problem of information overload. The basis of this problem is the anatomy of human brain and the evolution of reasoning:

Evolution provided us with two systems of processing of information: the ancient holistic system, scanning with our vision and other senses the outside world for everything unusual or odd, leading to un-reflected reactions; and the more recent abstract or linguistic system, the basis of our reason and leading to reflection. Both systems work like team of burglars: the “look-out” will find out about chances and dangers in the immediate environment, so the “specialist” can concentrate on locks and safes. And here is the problem of our times: the reflecting system has not increased its capacity since stone-age; it is – measured by bytes – a billion times weaker than its unreflecting partner. But while technological progress makes mankind reach further than the eye can see, the ”look-out” within is still relying on eye-sight and hear-say; and he remains silent about distant dangers. Consequently, the “specialist” cannot interpret the silence by the “look-out” as something good, he must now do most of the “checking” himself, even if this precipitates his own exhaustion. So the “specialist” ends up by doing poor reflective work, allowing also the person to succumb in an un-reflected way to the many challenges the five senses continue to “report”. In any case, the necessity of globalized man to ask a myriad of questions exceeds by far his capacity for abstract reasoning and reflecting,. With other words: Unrestrained Globalization leads to Angst, Xenophoby and – last not least – to pessimism about the qualities of market forces.

3. The solution to Problem is not a return to the past, but the supplementation of Globalization by “Locallization”, in particular by sub-national Regionalism. Regionally oriented societies and economies will know without explicit asking what is obvious and will, therefore, make better use of unreflected knowledge and the limited capacity for reflected reasoning. However, this goal can hardly be achieved by restrictions to market-forces, but rather by raising citizen’s awareness about the over-all advantages of a regional focus. According to a recent conference about regional money in Bavaria, even highly developed economies can keep around 30% of all monetary transactions within a sub-national region, just by using local vouchers – without the help of laws, tariffs and duties! I think this figure should give encouragement to Regionalism, while giving confidence to the supporters of Globalization.