Tuesday, January 17, 2006

On globalization and local issues

> Another news about uttaranchal.
> Outsiders(other states) can now purchase land in Uttaranchal.
> Would it be wise of us to sell our lands to outsiders?
> What say?

My Response -

To answer your question, we must start at the most general question - is free market economy or globalization good, neutral or bad. Only once we have formed our opinion on this topic we would be able to come down and answer - if free land purchase in Uttaranchal is good for the local residents or not.

On globalization, free-market economy and capitalisim -
This is one of the most complex question and no matter how much I have tried to read on this subject I havent been able to conclusively conclude on this.

On one side are people such as Jagdish Bhagwati & Martin Wolf who are die-hard fans of globalization and on the other side are people such as Joseph Stiglitz who after seeing the free market forces at work are against the concept of globalization. Then there are people like Amartya Sen and Arundhati Roy who would fall somewhere in between of this debate. Then there are publications such as the Economist which take the side of the free market but would in general give a very balanced picture. Then there are organizations such as Swadeshi Jagran Manch and Baba RamDev who would want us to avoid all phoren (sic) goods.

Macroeconmics would give you a theory of 'Comparative Advantage' which would show that under certain set of assumptions its always better for countries to trade.

Issues involved are quite complex. Take the example of agricultural subsidies. The popular argument is that developed countires, most notably US, France and UK subsidize the farming sector and dump these agricultural commodities in the international market. Hence, the logic goes, the goods being exported from poor countries in Africa & Asia cannot compete in the international market. This practice has lead to the scenario of poor countries being cut-off from the maket and people living in povety. Simple & straight forward you would say.
But a conflicting report on the same topic suggests that it is because of these subsidies that poor people in such countries are able to feed its people. Argument is that the poor countries have anyways not been producing enough to export, on the contrary they have been importing these cheap agricultural commodoties to feed the people. So in essence the subsidies are free gift from the developed economies and ending this would make the emerging countries worst off.

Now whome to listen to?

Stiglitz in his book - 'Globalization and its discontent' makes a strong case against World bank, IMF and globalization in general.

Privatization - again a sensitive issue - Ceratinly the case of California blackout proved that privatization may not be the correct solution in all cases.
Another example is of pharma industry where a small segment of disease would be ignored if the market is not big enough to justify the heavy R&D.

One of my favourite book - 'No Logo' argues that the concept of branding has lead great inequality and causes suffering in the third world.
The classic example is of Nike producing sneakers at the cost of $3 in south-east Asia and then selling these for $40 and above.
Manufacturing outsourcing business shifting across countries as the cost economics change - Canada, Mexico to Thailand & Philipins and devastating the local communities from where the units migrate.
Case of Macdonald's able to feed junk food to the world based on branding and the case of MacLibel. ( http://en.wikipedia.org/wiki/McLibel )
Counter-culture movements across the world and Greenpeace activitsm.
I had once asked my marketing professor about the arguments of the books. He said that such arguments and ideologies are usually not taken seriously by the business community and MBA teachings but these have the power to come back and haunt the business. The business academia should be making a effort to answer the questions raised by these kinds of books.
Economist by the way had a great article on this book and had attempted to answer the anti-globalization and anti-branding issues raised by the book.
(btw the biggest irony was that a clothing brand was started by someone called - 'No Logo' )

Another of my favourite author Noam Chomsky has written extensively on this.
To quote from Wikipedia - ""Chomsky believes that these austerity and neoliberal measures ensure that poorer countries merely fulfill a service role by providing cheap labour, raw materials, and investment opportunities for the first world. Additionally, this means that corporations can threaten to relocate to poorer countries, and Chomsky sees this as a powerful weapon to keep workers in richer countries in line."" I was introduced to his writings by Makarand Paranjape in the course 'American Literature' at IIT-D

Even mainstream commerical books such as Chetan's - One Night @ Call center echoes the sentiment that the US is dumping mind numbing work into India so that the young working professionals are sucked into the consumerism phenomenna.

btw have you noticed that the key ingredients to the economy are supposed to be capital & labour as per macroeconomics but whenever we talk about globalization people only seem to talk about the capital part, choosing to totally igore the labour angle. It is all about India opening up its economy to FDI, letting go of the quota regime, never about US opening up its border to allow free flow of people, there are still annual quotas for the same.

Now coming to the issue of outsiders purchasing land in Uttaranchal. Is it good or bad ? Again I cant say anything on this. Stopping others from coming to the state would imply that you are ok with the idea of stopping outsiders from giving employment opportunities to the people of state. Unless the demographics of the state is changing drastically or there are other environmnetal issues I see nothing wrong in this move.

Bal Thakre often gives statement to the effect - Mumbai is for Marathis not for outsiders. I certainly do not subscribe to this point of thinking. If we trace history then Bal Thare should be going to Central Asia from where the Aryans originated. Most of us then would not have claim to India as we were the outsiders, Dravidians being the original inhibants of this county

At the end, I guess it all boils down to if you have gained something out of globalization. Have you ??


Blogger Rajeev said...

Hi Vishal,

I do not agree with you that capital movement must necessarily followed by movement of labor. Capital movement creates localized oppurtunities which according to me is good.

I think the fact that globalization is necessary cannot be ruled out, the debate is ofcourse how much do you globalize.

And as far as america dumping mind numbing work in search of cheap labor, dude nobody is pointing a gun at u and forcing you to do that work. Nobody stopped narayn murthy to create google but he chose to create infosys didnt he? now whose fault is it?

11:35 PM  

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