Relevance: GS-1: Effects of Globalization on Indian society.

Key Phrases: Oxfam, GFC (2008), Global Recession, a resurgence of nationalism which rode on chauvinistic sentiments;

Context

• Globalisation has been present from the time humans got curious about other humans. But it got a real surge in the 1980s.
• In these 4 decades, it has encountered numerous Political and Economical challenges.

Key Highlights

Challenges to Globalisation

Economic Challenges

• The era of globalisation saw a significant rise in income inequalities.
  • 71% of the world’s population live in countries where inequalities have grown.
• The distribution of wealth became unequal.
  • As per Oxfam, in 2018, 26 billionaires held as much wealth as half of the population.
• The prosperity created by globalisation was captured by a few.
  • Technological growth has remained restricted to the west with cheap goods being purchased by the rest of the world.
  • The production has been shifted to places with cheap labour but the design and the planning have remained restricted to the west.
    • Eg. Nike shoes are designed in the US but are manufactured in Bangladesh and China.
• The Global Financial Crisis (GFC) of 2008 due to financial liberalization had a wide-ranging impact on the world economy. It led to
  • Contraction in international trade and investment flows.
  • Volatility in capital flows.
• The Global recession which followed GFC handicapped the global growth.
  • The unemployment rate skyrocketed.
  • The growth rate of advanced economies dwindled.
• As governments were sensitive to perceptions in international financial markets, they preferred to balance the budget and manage inflation than taking a bullish approach to fiscal spending.

Political Challenges

• Political backlash toward the economic consequences of the GFC led to a resurgence of nationalism which rode on chauvinistic sentiments. This can be seen in
  • Rise of Marie Le Pen in France
  • The victory of Jair Bolsonaro in Brazil, and Donald Trump in the US.
• In Industrialised countries - Politicians exploited fears about
  • Immigrants stealing jobs.
  • Dilution of their culture.
• In developing countries, Politicians exploited economic inequalities, social divides and ethnic or religious identities to challenge or oust incumbent governments.
• Apart from this, Globalisation has required someone to set the rules to facilitate free trade.
  • Until 2010, it was performed by the US, but since then China has used globalisation and trade to its advantage to grow, first economically and then geopolitically.
  • The position of the rule-setter of globalisation has been challenged which can negatively affect the current rules causing further conflicts, as seen in the trade wars between US and China.

The spread of COVID and the rise of protectionism

• Globalisation and the inter-connected economy resulted in the quick spread of the COVID pandemic.
• As countries closed their borders, Protectionism and Import substitution became the mantra.
• A serious disruption in integrated global production networks was observed.
• Companies have started discussing shifting the production systems back to their home countries as uncertainties and disruptions of supply linkages have become a new reality.

Russia-Ukraine War and threat to Globalisation

• The war has led to volatility in Fuel and Food Prices. This has caused dependent economies to think about the burden of Globalisation.
• Russia and Ukraine are important sources of supply for wheat, maize and edible oils in the world market, while Russia is a primary source of oil and natural gas.
• The war might be localized, but the continuing conflict has created global ripples.

India’s experience with globalisation

Positive impacts

• Liberalization has increased choices available to consumers, thereby increasing ease of living apart from a steady growth rate.
  • In the pre-1990s India grew at 5.3%
  • During 1991-2005-06, it grew at 6.1%
  • Post 2005-06, it has grown at 8.5%
• Innovation in the economy has increased
  • India has the 3rd largest start-up ecosystem.
• Revolution in the IT and Telecom Sector
  • This has made India a service exporting economy.
• Increase access to health technology
  • Access to modern machines and technology of transfer has caused important medical devices to be available at an affordable rate.
  • It has also led to the development of medical tourism.
• It has liberalized our attitudes and caused changes in our prejudices and biases.

Negative Impacts

• Vulnerability to global economic shocks has increased
  • Eg East Asian Crisis(1997), GFC (2008)
• Failure of domestic companies to face stiff competition from technologically superior companies
  • Eg Ambassador cars, BSNL
• Loss in revenues due to decrease in custom tariffs.
• Failure to get similar treatment for its goods due to non-tariff barriers
  • E.g Turkey refused the consignment of Indian wheat this year.
• Increased consumerism in Indians has been observed.

Conclusion

• Globalisation is here to stay may be in its current form or in some transformed form. India’s aim to become Atma-nirbhar is a sign of acceptance of the new form of globalisation, in which India utilises the benefits of globalisation and addresses its concerns to its advantage.

Source: Live-Mint

Mains Question:

Q. What is Globalisation? What have been different challenges faced by globalisation in modern times?