Whither Globalization?

Some thinking that highlights what happens if you ask difficult questions.

I was engaged in an international dialogue the other day about “Where now for globalization?” in the context of the current economic turmoil. What was intriguing was the extent to which senior figures from around the globe were focusing on the large corporate impacts and the ways in which either globalization is or is not entrenched in the way we operate.

What struck me most was the lack of a local viewpoint. By which I mean the ways in which an individual anywhere on this planet might react (or not) to global issues and the spread of corporate and other institutions across borders.

Sure the price of coffee beans in Costa Rica is going to affect the weekly shop at some point – coupled with exchange rate fluctuations and a host of other factors. But does this hide the need to look more locally at what we do?
Let’s take the hypothetical example. Global Coffee Inc. buys forward contracts on the production of the Costa Rican crop. Certainty of price for the grower and also for the supermarkets in the consumer countries. This forward pricing is backed up by a global commodities market that, in theory, matches supply to demand. But does the fluctuation in the commodities price follow through to the coffee cropper? The answer in general is NO. His benefit is that there is a market that is going to buy the crop at a steady price from one year to the next and so to that extent he has certainty over his income.
But what if the crop booms or fails due to climate or other factors?
Well in these circumstances the profits or losses are borne by the intermediary exchanges and traders who have bet on the crop production and set their trades accordingly. In a boom year the cropper may struggle to sell all his production. In a poor year he is unlikely to get very high prices as the commodities market absorbs the difference. So what is the benefit? Ultimately Global Coffee Inc. will make money provided it has been astute enough in placing contracts in the market. Some coffee croppers will have a steady (if unexciting) income. And the supermarket price of a packet of roasted beans or its instant equivalent, will vary according to the simple equations of supply and demand in the overall market. There is coffee to drink and the consumer pays little attention (leaving aside for a moment the Fair Trade options that exist).
That is where I think the views of globalization start to come unstuck. Of course it’s a thoroughly interlinked world and the ability for capital to flow into emergent markets is an important stimulus to growth. However I come back to the simple question “Why are we in business?” The answer is a lot more difficult to define if the source of the wealth is exploitation of resources in someone else’s back yard.
In another sector, logging companies worldwide are seen as a threat to virgin rainforest – whether in British Columbia or Borneo. Why are they in business? Because someone somewhere is demanding lumber for whatever reason. That reason has to do with why those customers are themselves in business and is to an extent dependent on the ways in which they see their own operations as meeting the demands of a group of stakeholders that ought to include society at large. Also governments see natural resources as theirs to dispose of rather than thinking more widely about who the stakeholders are on this planet of ours.
So beginning to ask questions of ANY company or organisation about why it does what it does is a good way to begin opening eyes to the consequences.
And the ways in which we can ask those questions are both global AND local. For instance we know about the effects on the rainforest of Palm Oil plantations and the ways in which these drain the soil over a 20-30 year period and are then burned out. But do we question the companies who use the stuff in never-ending quantities? They are doing this on our behalf without consulting anybody as to whether we will accept the alternative. More to the point do they ask themselves the question?
Time for a change of culture through a local and global campaign for some accountability to ALL the stakeholders. Then whoever is in charge can honestly say that they are operating for the benefit of many – not just a few. I leave you to decide what that means for you…