A false dawn

Globalisation, usually portrayed as a public or at least an economic good, will result in keeping poor countries poor and wasting our remaining natural resources. John Gray reviews three news publications

Globalization and Its Enemies by Daniel Cohen, translated by Jessica B. Baker. MIT Press, €28

How We Compete: What Companies Around the World Are Doing to Make It in Today's Global Economy by Suzanne Berger and the MIT Industrial Performance Centre. Currency/Doubleday, €22

End of the Line: The Rise and Coming Fall of the Global Corporation by Barry C. Lynn. Doubleday, €20

For the past two centuries leading social theorists have believed that modern development can have only one outcome. In the 19th century Karl Marx, Herbert Spencer and Auguste Comte asserted that the advance of science and technology was leading to a single type of social organisation, and unless modern societies foundered in a reversion to barbarism they were bound to converge in a global system.

There was wide disagreement on the nature of the system that was coming into being. According to Comte it would be a kind of technocracy, while Marx believed it would be egalitarian communism and Spencer laissez-faire capitalism. Despite their different political visions these thinkers were at one in assuming that with the advent of industrialisation prosperity could be ensured for all. Once this had been achieved, war would cease and a universal economic system would replace the diverse and conflicting regimes of the past.

Similar beliefs shaped the thinking of many 20th-century social theorists. In the thirties FA Hayek resuscitated a version of Spencer's theory of the free market as the endpoint of social evolution, while Sidney and Beatrice Webb believed an early version of the universal society of the future was embodied in the Soviet Union. During the 1960s, theorists of the "end of ideology" such as Daniel Bell anticipated that centrally planned economies and market-based affluent Western societies would come together in a managerial mixed economy. Toward the end of the century the idea became fashionable that societies everywhere were embracing "democratic capitalism".

None of these expectations has been borne out by events. Industrialisation is spreading everywhere, but at varying rates of rapidity and with disparate consequences.

The former Soviet Union converged with the Third World rather than the affluent West and has been replaced not by liberal democracy but by a hypermodern version of traditional Russian authoritarianism. Versions of liberal democracy have spread into parts of the former Soviet bloc, but in Iraq, democracy is producing a type of elective theocracy not unlike that which exists in Iran. China has abandoned central economic planning for a type of state capitalism close to nationalism.

Europe has opted for a combination of social democracy with a neoliberal economic system, while under the Bush administration the United States has tilted toward a mix of protectionism, an unsustainable federal deficit and crony capitalism.

Though the world's diverse societies are continuously interacting, the process is producing a variety of hybrid regimes rather than convergence on a single model. Yet a belief that a universally accepted type of society is emerging continues to shape the way social scientists and public commentators think about the contemporary condition, and it is taken for granted that industrialisation enables something like the way of life of rich countries to be reproduced everywhere.

Supporters of globalisation and many of its critics assume that it creates similar conditions wherever it spreads. Whether they welcome the prospect or resist it, both accept that global market forces are forcing societies onto the same path of development.

In Globalization and Its Enemies, Daniel Cohen provides a refreshing antidote to some of the most misleading features of this consensus.

His starting point is the seemingly paradoxical claim that for most people in the world it is not a reality but a mirage. As Cohen sees it, the ongoing wave of globalisation – the third in a series that began in the 16th century with the conquistadors and in the 19th with British imperial free trade – occurs largely in a realm of virtual reality and leaves much of everyday life untouched. Nineteenth-century globalisation involved large-scale movements of population to new lands, while the present phase involves mainly commodities and images.

"Today's globalisation", he notes, "is 'immobile'". Goods are produced and marketed on a planetary scale but those who live in rich countries encounter other societies chiefly through television and exotic vacations. Immigrants make up only around three percent of the world's population today, whereas in 1913 it was about ten percent. Trade has expanded greatly in the past 30 years but a great deal of it occurs between rich countries. The 15 long-standing members of the European Union make up around 40 per cent of global commerce, but two-thirds of their imports and exports are traded within Europe itself.

The belief that financial globalisation is promoting economic development in poor countries is also delusive. Global financial markets have few incentives to equip poor countries to be globally productive. The belief that financial globalisation is promoting economic development in poor countries is also delusive. Global financial markets have few incentives to equip poor countries to be globally productive.

However, the reason is not that rich countries are victimising poor countries. The poverty of developing countries is often blamed on unfair terms of trade, and there can be little doubt that protectionist practices in agriculture both within the EU and in the United States, for example, have hindered poor countries; but Cohen argues that on the whole trade is not as unequal as has been widely thought. The basic reason that poor countries stay poor is that they have little that rich countries want or need.

The poor of the world are not so much exploited as neglected and forgotten. At the same time the press and television are drenching them with images of the riches they lack. The irony of the current phase of globalisation is that it universalises the demand for a better life without providing the means to satisfy it.

Cohen is far more conscious of the material environment in which industrial production takes place than most other economists.

He gives very little attention to globalisation's environmental limits. He acknowledges that the current phase may be endangering the planet's ecological equilibrium. Yet he seems not to see clearly that ecological instability is an integral part of the vast economic change that is currently underway. As an example, China is undergoing the largest and quickest industrialisation in history. At the same time it is suffering unprecedented levels of pollution. Environmental crisis and the present phase of globalisation are different sides of the same process.

There can no longer be any reasonable doubt that the global warming the world is experiencing today is a side effect of fossil fuel use. The extraction and consumption of hydrocarbons has been integral to industrialisation and remains so; but it is also the chief human cause of planetary overheating.

Mounting evidence suggests a growing possibility of an abrupt climate change in which rising sea levels will flood many of the world's coastal cities and damage large areas of arable land. In such conditions there would be serious conflicts over dwindling resources of food, water and energy supplies together with large-scale population movements as millions flee areas that are no longer humanly habitable.

Despite moves in some countries to develop a broader mix of energy supplies, industrial societies everywhere are dependent on depleting reserves of oil and natural gas. Moreover, demand is inexorably increasing as globalisation advances in China, India and elsewhere.

The conjunction of intensifying scarcity in energy supplies with accelerating climate change is the other face of globalisation. It poses a large question mark over Cohen's belief that the main problem with globalisation is that it is incomplete, for it suggests that completing it may not be feasible. The current phase is only the extension to the wider world of the industrial revolution that began in England a couple of centuries ago, but already it is destabilising the environmental systems on which all industrial societies depend. Extending the energy-intensive lifestyle of the rich world to the rest of humankind would have an even more destabilising impact.

As the reverse side of globalisation, environmental crisis could well derail it. If there is a way forward it lies in the intelligent use of science and technology to develop less dangerous sources of energy; but it is a mistake to think that a large change in the way we live can now be avoided. Climate change cannot be prevented, only mitigated, and whatever is done to deal with its effects there is sure to be large-scale disruption and conflict. The defining feature of the industrial civilization that is spreading everywhere is exponential growth; but such growth is eventually self-limiting.

One of the many valuable features of Suzanne Berger's book How We Compete is its healthy scepticism regarding claims that different models of economic development ultimately converge. Convergence models assume that once globalisation is in place, the only way companies can adapt is by adopting the same business practices. In this view globalisation is self-reinforcing. Berger presents a wealth of evidence about the different strategies adopted by 500 international companies to survive and prosper in the global market.

Dell is strongly focused on distribution and outsources all manufacturing of components overseas, for example in India, while Samsung makes almost everything itself; but both are rapidly growing, profitable businesses. General Motors is finding it difficult to adjust to high-wage labour, while Toyota-which has kept production at home or in other advanced countries is doing well. Faced with similar challenges, companies can thrive or fail in different ways.

Berger is clear that, acting on their own, companies cannot make all the needed adjustments. Governments have a major part in creating an environment in which businesses can plan for the future, but how governments do this will depend on the type of capitalism they must deal with. These divergent capitalisms are competing and they learn from one another but the result is cross-fertilisation, not evolution toward a single model. What works well varies not only from company to company but also from country to country. The belief that globalisation means the triumph of one way of doing business is not only historically false. It is a dangerously mistaken basis for corporate strategy.

One of the central theses of Barry C Lynn's End of the Line is that nation-states remain pivotal in global society. Lynn challenges the belief that by increasing interdependence among the world's economies globalisation enhances their stability. On the contrary, it is having the effect of reducing stability.

For Lynn, the core of globalisation is not a global market, which has long existed in many commodities. It is the global organisation of production, which now takes place in far-flung networks that no one controls or really understands. A company such as Wal-Mart has become highly successful by outsourcing, buying billions of dollars of goods from China, for example. The long supply lines of the global production chain extend into many countries ruled by authoritarian regimes. Any serious threat to these regimes will have global repercussions. Free trade requires stability more than democracy, and this is especially true when production is globally dispersed. As in the past, states have divergent strategic objectives.

Models of economic development that anticipate societies converging in a harmonious universal system have deep roots in Western thinking. It is not surprising that they should have been revived in theories of globalisation in the aftermath of the cold war; but they reflect the conditions of the 19th century, when the environmental limits of industrial expansion were hardly suspected. They fail to take account of the fact that industrialisation on a global scale intensifies scarcity in vital natural resources while triggering a powerful ecological backlash. These developments, which form the other side of globalisation, will shape its future course.

© The New York Review of Books