Globalization - Winners and losers

continued from » Global Cities


This chapter will give an overview of “losers” and “winners” of the globalization, and as the undoubtedly ‘winner’ China. The reason for China to be a big winner will also be revealed.

There are several problems that came along with globalization. Values and principles get lost due to rapid economic growth; for instance, democracy, human rights, social justice, cultural diversity and ecological sustainability. (cf. Deutscher Bundestag 2002)

Since the recent economic crisis, the effects of globalization on every scale (local, national and international) can’t be denied. This event led people (in developed countries) think about their future and their fear was obvious: they were afraid of the condition of the labor market as well as of the economic growth of newly industrialized countries like China, South Korea, etc. (that could imply job losses or worsening of the job market in general). Meanwhile people in developing countries have their “usual” sorrows like poverty and starvation. (cf. Dicken 2011, p.2f.)

After World War Two, the economic development was very positive (especially in Japan and Germany) that led to a boom and consequently to prosperity. In those days, there were more ‘winners’ than ‘losers’, nowadays, it is the other way around: there are way more ‘losers’ than ‘winners’ and counting. ‘Winners’ need to prove if they can remain ‘winners’ in the long run. (cf. Zinn 2000, p.9) External trade, capital imports and exports (bank loans, FDI ...), etc. are getting more important in terms of economic development, just like TNCs and multinational enterprises. (cf. Zinn 2000, p.11)

“The processes of winning and losing in the global economy are highly interconnected. Development and underdevelopment are, in a real sense, two sides of the same coin, although the relationships are more complex than is often suggested”. (Dicken 2011, p. 477f.)

Development is defined (here) as an economic growth process with increasing prosperity and underdevelopment relates to the uneven distribution of prosperity. (cf. Coe 2007, p.61) The global economic development is quite uneven due to the globalization process, so does globalization has more negative effects than positive ones? Is this process too fast or too slow? These questioned were sussed out by the BBC World Service. They started a survey by asking 34,500 people from 34 countries what they think about the aforementioned questions. About 65% of them think that the development was too fast and the advantages or burdens have been distributed unfairly. (cf. Dicken 2011, p.4)

The uneven development weakens already weak states so that the imbalance of distribution is more significant. (cf. Dicken 2011, p.476)

Developed countries are leading in trade, investment, access to latest technologies, etc. Developing countries depend on the positive development in developed countries (global networking): If rich nations suffer, poor nations suffer more. However, a good economic development doesn’t imply a boom in developing countries because there are many factors which lead to growth beside the economic development meaning internal and external conditions (including the country’s history, culture, political institutions, etc.). (cf. Dicken 2011, p.478f.)

According to the World Development Report 2001 and 2009, there have been positive developments in all regions around the globe except South-Sahara-Region (between 1998 and 2007). Especially, Asian regions (for instant in South Korea, Singapore, Hong Kong and Taiwan) are said to have “[…] the most significant development in the global economy in the past 50 years”. (Dicken 2011, p.483)

China and the US - Cooperation

Who are the ‘winners’ of globalization?

‘Winners’ are the so-called “elite transnational capitalist class” (TCC) whose members are mostly from developed countries (global players). (cf. Dicken 2011, p.491)

“This transnational capitalist class displays a number of significant characteristcs:

-Economic interests increasingly globally linked rather than exclusively local and national in origin.

-Behavior based on specific forms of global competitive and consumerist rhetoric and practice.

-Outward-orientated global, rather than inward-orientated local, perspectives on most economic, political and culture ideology issues.

-Similar lifestyles, especially patterns of higher education (for example in business schools) and consumption of luxury goods and services. […]

-Self-projection as citizens of the world as well as place of birth.”

(Dicken 2011, p. 492)

Another group of winners are the consumers so that prices are tend to be decreasing also because of growing competition. (cf. Dehesa 2006, p.179)

Also, skilled labor are ‘winning’ because “they can adapt more quickly to the new technological revolution and to the internationalization of production and distribution and can specialize in more competitive industries or services with greater technological inputs which allow them to increase their productivity and their relative wages”. (Dehesa 2006, p.179)

Globalization - Losers

Who are the ‘losers’?

The biggest group of ‘losers’ are low qualified or unqualified workers who are also called ‘net losers’ in this context, due to the fact that they don’t have enough knowledge, qualification or skills to keep up with the technical development. (cf. Dehesa 2006, p.180f.)

Also, capitalists in developing countries are ‘losers’ because “[…] since most of them are operating in markets where there is little competition with lax (where not corrupt) regulatory frameworks, where they can lobby governments and obtain high profit margins. These profits, nevertheless, will be reduced or even plummet with the arrival of foreign direct investment which can produce locally, with higher technology, productivity, and export potential, offering better conditions of quality and price, and with the increasing imports of goods and services from more competitive third countries against whom local firms can only compete by lowering margins”. (Dehesa 2006, p. 181)

As a big ‘winner’ of globalization, China will be presented in the following.

To get a fully understanding of China’s economic pursuit race, China’s economic history from 1949 to 2000 will pointed out before some information about China’s success of the 21st century will be given.

After the World War Two, Mao Zedong declared the People’s Republic of China (PRC) on October 1st in 1949. This ‘new’ republic after the example of the USSR involved changes like the transition into planned economy. (cf. Boewer 2000)

An agrarian reform disposed property of big landowners as well as involved the socialization of industry and trade. (cf. Baumann 2008, p.83) In 1958, Mao wanted the so-called ‘great strides forward’ (chin.: dà yuè jìn) to rise ahead in agriculture and steel production. (cf. Veeck 2007, p.273ff.) Mao failed and China’s population suffered from famines (at least 30 million people died). (cf. Spiegel 2008, p.51)

After Mao’s death in 1976, Deng Xiaoping took over and changed the economy gradually with reforms. First, the planned economy changed into socialist market economy. (cf. Gresh 2006, p.194) Xiaoping’s reforms had several steps. The first step included agriculture. People’s communes had been dissolved so that farmers got all freedom back to do with their land whatever they wanted. This led to increasing prosperity and consumerism, so in the 1980s China’s economy grew. (cf. Boewer 2000) In those days, China’s economy was based on internal trade to replace imports. (cf. Klohn 2008, p.231)

As a next step (during the 1980s), the industry was about to change. Reinforced production for exports helped China to be a location for foreign capital investment. (cf. Schmidt-Glintzer 2009, p.99) Special economic zones at the south coast have been erected to make it easier for investing in China. (cf. Baumann 2008, p.100) Labor-intensive factories have been outsourced to China because there are 1.3 billion Chinese who were willing to work for low wages. (cf. Boewer 2000; Spiegel 2008, p.71) After bloody protests for freedom and democracy, there was a short slump of external trade relations. (cf. Schmidt-Glintzer 2009, p.99)

The following step (1990s) included socialist market economy; to form this kind of economy China reduced its trading barriers and allowed FDIs. (cf. Gresh 2006, p.195) FDIs have been very important to increase exports and to improve technical standards. To make China more attractive for FDIs tax cuts with reference to staff, rent and tariffs had been launched. (cf. Breslin 2007, p.84ff.)

China - 'Winner'

With China entering the WTO in 2001, China has been taking profit of globalization and its chances due to China opening-up policy and liberalism. (cf. Gresh 20006, p.202; cf. Baumann 2008, p.107)

The aforementioned special economic zones especially Shanghai, Beijing-Tianjin region, and Pearl River Delta near Hong Kong (Guangdong) have been catchers for FDI. (cf. Baumann 2008, p.102)

Steel production is one of China’s most important industries due to China’s demand of infrastructure and industry development. In 1996 100 million tons were produced, in 2006 423 million tons. (cf. Klohn 2008, p.234) The automobile industry is also very important due to the fact that some producers see a new market in China to expand to. (cf. Baumann 2008, p.105; cf. Klohn 2008, p.234)

China is in change to get rid of cheap producing industries: wages and rents are rising rapidly in coast regions. Investors relocate to cheaper provinces (west China) or to other states in Southeast Asia. (cf. Baumann 2008, p.103) China tends to change production to high-tech-products by transferring know-how. (cf. Enright 2008, p.34) China’s role models are Japan and South Korea (producing high-tech). (cf. Spiegel 2008, p.72)

While, there have been a huge economic growth at the east coast, China’s west is still suffering. (cf. Baumann 2008, p.112) This uneven development shows that even a ‘winning country’ has ‘losers’.

China’s government is trying to close that gap by investing in infrastructure and supporting foreign investors if they settle there. It is said that up to 200 new huge cities will occur in this region within the next decades. (cf. Baumann 2008, p.112ff.; cf. Spiegel 2008, p.79)

This rapid economic development led to ecological problems: rising air pollution, water pollution and shortage, soil erosion, floods, dust storms, etc. (cf. Baumann 2008, p.116ff.; cf. Klohn 2008, p.235; cf. Gresh 2006, p.200ff.)