Theory of Globalization: Fundamental Basis

Globalization is a theory whose aim includes the interpretation of the current events on the international sphere in terms of development, economic conditions, social scenarios, and political and cultural influences. Globalization, as a set of theoretical claims, underlines especially two main increasing trends: (a) worldwide active communication systems; and (b) fluent economic conditions, especially high mobility of financial resources and trade.

Through the process of globalization, the assumption is that more nations are depending on worldwide conditions in terms of communication, the international financial system, and trade. Therefore the world scenario is more integrated in international economic transactions (Sunkel: 1995; Carlsson: 1995; Scholte 1995). Effects and influences from these "integrational aspects" can be studied from two major perspectives: (a) countries´ external level -or systemic approach-; and (b) domestic or internal conditions within nations -sub-systemic approach. In this last mentioned case, the units of analysis will be those corresponding to national variables of economic growth, or social indicators.

In terms of the globalization process that is taking place under current worldwide economic conditions, two main topics in international political economy are: (a) the structure of the international economic system; and (b) how this structure has changed (2). They can be addressed through the application of the theory of globalization from the development perspective. This globalization approach suggests that the structure of the global system, and the roles that countries play within the international division of trade and labor, is crucial in understanding a wide array of social, political, and economic changes within particular countries. The basic claim is that international connections, roles, and relationships are important variables in any analysis which tries to explain various dimensions of development -economic growth, for example- trade, financial links and communications among countries.(3)

The fundamental premise of globalization is that an increasing degree of integration among societies plays a crucial role in most types of social and economic changes. This premise is widely accepted. However, there is much less consensus on its fundamental organizing principles and laws of motion. Neoclassical economic theories that are based on comparative advantage (Klein, Pauly and Voisin 1985), international relations approaches that stress geopolitics (Keohane 1993, and Thompson 1991), and world-systems perspectives that emphasize "unequal exchange" (Amin 1989; Frank 1979; Wallerstein 1991) offer contrasting models of the international system.

The main areas under dispute concerning the globalization theory are related to four main aspects: (a) The fact that countries can have more than three levels of placement: core, semiperiphery, and periphery countries (Schott 1986); (b) The positional characteristics of several countries in terms of sharing the same patterns of relationships can be related to the "clique" characteristics with other nations at a regional level (Snyder 1989); (c) Even inside the same position within international relations, i.e. the periphery position, the features of countries might have a lot of variation in terms of the size of their economies, internal effective demand, export structure, and level of historical and/or current economic growth (Smith 1992); and (d) There is strong evidence that the patterns of economic concentration among nations especially in the fields of international trade and financial systems, are related to the dependent development patterns claimed by the neostructuralist authors (Cardoso 1992). (4)

The term globalization usually has two principal meanings:

As a phenomenon it implies that a greater interdependence is happening among different regions and countries in world in terms of finances, trade and communications;

b) As a theory of economic development one of its major assumptions is that a greater level of integration is taking place among different regions of the world, and that this integration is having an important impact on economic growth and social indicators.

The theory of globalization emerges from the global mechanisms of greater integration with particular emphasis on the sphere of communications and economic transactions. In this sense, this perspective is similar to the world-systems approach. However, one of the most important characteristics of the globalization position is its focus and emphasis on cultural aspects and their communication worldwide.

In addition to the technological, financial and political ties, globalization scholars argue that modern elements for development interpretation are the cultural and economic links among nations. In this cultural communication, one of the most important factors is the increasing flexibility of technology to connect people around the world (5).

The main aspects of the theory of globalization can be delineated as follows:

a) Global communications systems are gaining an increasing importance every day, and through this process all nations are interacting much more frequently and easily, not only at the governmental level, but also within the citizenry;

b) Even though the main communications systems are operating among the more developed nations, these mechanisms are also spreading in their use to less developed nations. This fact will increase the possibility that marginal groups in poor nations can communicate and interact within a global context using the new technology, and therefore can integrate themselves with the "global village", which represents the current scenario in worldwide communications and transactions (6);

c) In terms of economic activities, the new technological advances in communication are becoming more accessible to local and small businesses. This situation is creating a completely new environment for carrying out economic transactions, utilizing productive resources, equipment, trading products, and taking advantage of "virtual monetary mechanisms." From a cultural perspective, the new communication products are unifying patterns of communications around the world, at least in terms of economic transactions under current conditions;

d) The concept of minorities within particular nations is being affected by these new patterns of communication. Even though these minorities are not completely integrated into the new world system of communications, the powerful business and political elites in each country are a part of this interaction around the world. Ultimately, the business and political elite continue to be the decision makers in developing nations;

e) Social and economic elements under the influence of the current phenomenon of globalization are determinant circumstances which affect the standards of living of every particular nation (7).

Main assumptions of the theory of globalization can be summarized in three principal points. First, cultural and economic factors are the determining aspect in every society. Second, under current global conditions, and when we are studying a particular system -i.e., financial or trade sphere- it is not as important as previously thought to use the nation-state category as a unit of analysis, since global communications and international ties are making this category less useful. Third, with more standardization in technological advances, more and more social sectors will be able to connect themselves with other groups around the world, which implies faster and easier communications and economic transactions. This situation will affect the dominant and non-dominant groups from each nation (8).

In more specific terms it is important to mention that the globalization theory implies a key element concerning integration -integration regarding international trade, the international financial system, technology and communications, and cultural values from the more developed countries (DeMar 1992; Carlsson 1995). Economic integration at the systemic level -among countries- means stronger worldwide relationships. At the subsystemic level -within individual countries- it implies social and economic integration from the different social sectors (Sunkel 1995). At the systemic level there are some nations which are able to achieve more integration into the new world economic conditions than other countries. At the subsystemic level there are some social sectors which integrate themselves into the new economic dynamic derived especially from the economic growth, and sectors which become more marginalized in social terms (Sunkel 1995; Paul 1996; Scholte 1996).

Even though the term globalization in recent years has been utilized, especially following the technological revolution in comunications (9) and the creation of cyberspace, one of the first major argument on "Globalization of the Markets", under its present way, can be found in a 1983 article by Theodore Levitt in the Harvard Business Review (10).

The functionalist aspect of the globalization concept is what distinguishes it from the mere notion of internationalization, wich refers to a quantitative process but not necessarily to an epochal shift of a more qualitative kind. According to Peter Kickens, globalization processes are qualitatively different from internationalization processes. They involve not merely the geographical extension of economic activity across national boundaries, that is internationalization, but also and more importantly, the functional integration of such internationally dispersed activities. The current proces of globalization produces a new global-functional unity (11).

Globalization and other Theories of Development

In addition to globalization, the other main theories of development are: (i) modernization; (ii) world systems; and (iii) dependency. From a more comparative point of view, the theory of globalization coincides with some elements of the theory of modernization. One aspect is that both theories state that the main direction of development should be that which was undertaken by the United States and Europe. These schools hold that the main patterns of communication and the tools to achieve better standards of living originated in those more developed areas.

The modernization perspective differs from the globalization approach in that the former follows a more normative position -stating how the development issue should be solved. The latter reinforces its character as a "positive" perspective rather than a normative claim (12).

Globalization theories emphasize cultural and economic factors as the main determinants which affect the social and political conditions of nations, which is similar to the "comprehensive social school" of Max Weber’s theories (13). From this perspective, the systems of values, beliefs, and the pattern of identity of dominant and the subordinate groups within a society are important elements to explain national characteristics in economic and social terms (14). For the globalization position, this statement from the Weberian theory from the 1920s must apply to current world conditions especially in terms of the diffusion and transference of cultural values through communication systems that are increasingly affecting many social groups in all nations.

Based on the aforementioned elements, it is clear that the globalization and world-systems theories take a global perspective as the unit of analysis, rather than focusing strictly on the nation-state as was the case in the modernization and dependency schools. The contrasting point between world-systems theory and globalization is that the first contains certain neo-Marxist elements, while the second bases its theoretical foundations on the structural and functionalist sociological movement. Therefore, the globalization approach tends more toward a gradual transition rather than a violent or revolutionary transformation. For the globalist authors, the gradual changes in societies become a reality when different social groups adapt themselves to current innovations, particularly in the areas of cultural communication and the economic sphere (15).

The globalization and world-systems theories, and to some extend the dependency approach, take into account the most recent economic changes in world structure and relations that have occurred in the last two decades; for example: a) In March 1973, the governments of the more developed nations, began to operate more flexible mechanisms in terms of exchange rate control. This situation allowed for a faster movement of capital among the world’s financial centers, international banks, and stock markets; b) Especially since 1976 trade transactions base their speculations on the future value of the products, which is reinforced through the more flexible use of modern technology in information, computers, and in communication systems; c) The computer revolution of the eighties made it possible to carry out faster calculations and transactions regarding exchange rates values and investments, which was reinforced by the general use of the fax machine; d) During the nineties the main feature is the Internet system which allows the achievement of more rapid and expansive communication. The Internet is increasingly creating conditions to reinvigorate the character of the "virtual economy" in several specific markets.

Under current conditions, the main aspects under study from the globalization perspective are: a) new concepts, definitions and empirical evidence for hypotheses concerning cultural variables and their change at the national, regional and global level; b) specific ways to adapt the principles of "comprehensive sociology" to the current "global village" atmosphere; c) interaction among the different levels of power from nation to nation and from particular social systems which are operating around the world; d) how new patterns of communication are affecting minorities within each society; e) the concept of autonomy of state in the face of increasingly flexible communication tools and international economic ties, which render obsolete the previous unilateral effectiveness of national economic decisions; and f) how regionalism and multilateral agreements are affecting global economic and social integration.-

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4.  In terms of concentration among nations: Latin America participate with 8 percent of the total international trade in 1960, for 1990, that participation is 4 percent, Reyes, G. Globalization and Latin American Economies (University of Pittsburgh, 2000). Even developed nations show patterns of wealth concentration within their economic conditions: In the United States the wealth gap is particularly stark for blacks and Latinos. In 1997 the median black household had a net worth of just US$7,400 (compared to US$61,000 for whites); median net worth excluding home equity was only US$200 for blacks (compared to US$18,000 for whites). Nearly one in three black households had zero or negative wealth. Latino households are even worse off: their median net worth was US$5,000 including home equity and zero otherwise. Half of the Latino population in the United States have more debts than assets. See Norris, Ch. The Wealth Gap Widens in Dollars and Sense, Sept./Oct. 1999. (New York: Dollar and Sense, 1999).

8.  Related to this issue is the significant power of multinational or transnational corporations. Data from 1997 shows that Mitsubishi Trading Co., Mitsui Co. and General Motors had sales equivalent to the economic size, in gross national product, of Indonesia, which is the 24^th economy of the world. These conditions lead to the evidence that certain parts of the world are underging processes of economic integration and desintegration. For more on these aspects see, Mundell, R. International Economics. (New York: Mcmillan, 1998), especially the chapter concerning the theory of optimum currency areas, pp. 177-186; and Kenneth Galbraith, J. Challenges of the New Millennium talks with Asimina Caminis, in Finance and Development, Dec. 1999, Vol. 36, No. 4 (Washington, D.C.: International Monetary Fund, 1999); and U.S. Network for Global Economic Justice (http://www.50years.org/).

Pittsburgh, March 2001

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