Transcript | 2. lecture: Is globalisation bad or good? - University for modern Slovakia

At least since the World Trade Organization meeting in 1999 in Seattle anti-globalist demonstrations have become a part of almost every meeting of the International Monetary Fund, World Bank, G8 or G20 leaders. Capitalism, which after the fall of communism seemed to be clearly jubilant, is increasingly and more frequently questioned, without existence of any meaningful alternative to it. This is the most probable reason for growing popularity of various conspiracy theories that see plots and conspiracies of various kinds behind all problems; the common denominator is that they are always about the conspiracy of small group against all others.

Is therefore, globalisation good or bad? Let me answer with the question. Is the changing of the seasons good or bad? Globalisation, as well as the changing of the seasons, is a reality. It is here and will be here whether we like it or not. Therefore fight against globalisation seems to me as naive and absurd as to fight the changing of the seasons, to fight against the cycles of day and night.

This does not mean, however, that we should be indifferent to the nature of globalisation or that we should not think about how to behave and what to do. In the same way as with the change of seasons we change clothes, footwear, and tires on our cars, in the context of globalisation it is important, how we respond to it, how we prepare, how we count with its consequences, challenges, obstacles, and opportunities.

Globalisation offers huge amount of opportunities but also creates many threats. Globalisation has allowed billions of people to improve their lives like never before in a short time (more about this in the next lecture). It has led to such an interconnected world and the world economy, that the wrong policies and mistakes, especially if spreading from the most powerful countries and are accumulated for a longer time, have the ability to affect the whole world negatively. The experience of the recent global financial crisis and still lingering global economic crisis is also about this.

Globalisation offers enormous opportunity to improve the life. Perhaps most important is that whether globalisation will mean a chance for us, or threat depends mainly on ourselves. We are the ones who are most likely to influence the outcome and this applies almost wholly on the individual level, and largely at the level of companies and countries. At the individual level, in particular education and real qualification are the most important in shaping our chances for success in global competition. Of course it also depends on our industriousness, endurance, activity, flexibility, willingness, and ability to risk healthy, but also on the certain dose of luck. Quality education, including language training and English as a compulsory language in which various subjects should be taught from the early age should be the basis. This should be a priority of the educational system of each country which cares about its citizens and which does not want to admit that its citizens have become second category handicapped players in the global competition.

Remember the example of outsourcing services, which we mentioned in the previous lecture. Millions of people in India, but also in other developing countries improved their standard of living due to the fact that globalisation and computerization enabled them to do work previously done by their counterparts in developed countries. But to do so, they had to have an education and know a foreign language, especially English.

Here I have to make a methodological note. Quite a lot of people consider globalisation as bad because they perceive the world, including the world economy and globalisation as the game with zero end (zero sum ​​game) and not as a mutually beneficial game (win-win game). In zero end games when one party gets something, the other party must lose exactly the same. In mutually beneficial game, both (or more) parties thrive.

How does it work therefore with the globalisation outsourcing? At first glance it might seem that this is zero-end game. In the United States or Western Europe the number of jobs in manufacturing or in services is reduced, and these are transferred to India and Slovakia. But is it really so? It is not. Positive effects are on all sides. In the home country (from where the work is transferred) the profitability of companies increases, and thus grows its competitiveness in the future, the income of its shareholders increases as well. Redundant workers lose their jobs, but if the economy is healthy and has a dynamic and flexible labour market, they become employed soon in other places, usually with a higher added value and more sophisticated work. In general, it helps to restructure the country's economy and maintain its competitiveness.

In a country where investments arrive, the positive effects are obvious - more people have better paid jobs and their standard of living and quality of life are growing. This increases their demand for products and services, e.g. among others also for products and services the of the parent company which had outsourced the production (or services). The positive effect for all consumers is that globalisation reduces the costs and thus prices of products and services and makes them affordable to the increasing number of people.

Concise and nice indirect evidence that the economic globalisation is not a zero-end game, is the following fact - the opponents of globalisation consider investments movement on both sides to be zero-end game - in countries from where investments derive (due to loss of jobs), as well as in countries where investments arrive (due to the repatriation of profit).

Note: Correct answers to the test questions are intentionally not included in the text of the lecture. The reason is to motivate students in their additional self-study and partially (as revealed from the students’ responses and requirements) to make the test questions more challenging.