The Uneven Fallouts of Globalisation

What is the issue?

• Globalisation thrives on establishment of trade circuits worldwide.
• As different regions are placed at different levels within circuits, the impact of globalisation isn’t uniform throughout the world.  
• Our policy makers need to become sensitive to this obvious structure of globalisation, when they plan infrastructure projects. 

How has globalisation unfolded over the years?

• Initially - In the early 90s, when many economies were opening up their markets worldwide, there was a sense of euphoria about globalisation.
• It was seen as a process that would collectively benefit all due to the “economics of scale, access to diverse products and cost effective markets”.
• It was believed that the communication lines that are opening up would lead to synchronisation of living conditions across the world.
• Reality - The idea of an interconnected harmonious evolution of equally poised global village has withered greatly over time.
• Part of the ploy was lost due to a spike in economic inequalities between countries and between people within a country.  
• Technology has indeed opened communication lines, but that hasn’t necessarily lead to establishment of significant interconnectedness.     
• In reality, globalisation is more about specific circuits that are enabled by technology but are realised for economic and political purposes.

How does globalisation impact different areas differently?

• Globalisation as concept inherently can’t be even worldwide.
• What - Globalisation works through the establishments of trade circuits worldwide, a trend that has intensified with better communication technology.  
• The impact of globalisation on a city depends on which end of the trade circuit it finds itself in – namely commander or supplier.
• The city that commands and controls a circuit faces very different conditions from the city that merely supplies resources on command.
• Examples - Garment industry is a typical example, where command structures are located in developed countries, catering to fashion needs there.
• Garment suppliers are usually based out of emerging market economies that primarily shell out cheap underpaid labour to the west.  
• The Information Technology (IT) industry too is similarly dispersed worldwide to satiate the demands of the western world.
• Fallouts - In such relationships, the former usually thrives with a rich outlook, while the latter merely survives on the margins of the global economy.  
• This is because, the terms of the presently prevalent economic contract is skewed in favour the command centres as against the suppliers.
• Churn - There is always a possibility for firms at the supply end of the circuit to rise to the position of command and control in certain niche areas.
• But this is rare, and might also demand such firms to move to locations where other command structures are located for economic reasons. 
• In either case, supplier cities largely continue to remain suppliers for the international markets, and those residing in them lead a meagre living.
• Inertia - For a city as a whole to become a command centre, there needs to be a comprehensive demographic and politico-economic evolution.
• This is hard to come by in a long time and is almost impossible under the current international economic and political order.  

What is the irrationality that dominates our policy narratives?

• “Indian urban policy” is invested in building infrastructure and replicating the structures of globally acclaimed cities in India.
• In this context, a mad rush to build world class airports, massive expressways and high-speed rail projects has been unleashed.  
• The touted reason for such connectivity projects is to reduce travel time between cities, but it is an end that in itself is futile.
• Additionally, navigating through city traffic in major cities seems more nightmarish than travelling between those cities in India.
• Hence, infrastructure is seemingly being built just for the sake of it, as the government strongly believes that infrastructure will usher in development.
• Importantly, in the midst of this craze, the financial and social costs of the projects are being overlooked beyond prudential levels.

What are the risks of such an irrational approach?

• Cities that are command centres have to be attractive for its inhabitants and hence have to flaunt an aura of attractiveness and richness.
• Contrastingly, supply centre cities usually have a large population that is poor and hence needs to be affordable to accommodate them. 
• Our policy makers fail to make this basic distinction between cities on the differing ends of the global trade circuit.
• Resultantly, they are unleashing projects with little knowledge about its economic potential and little prudence for the costs being incurred. 
• The risk of such high-headed policy making is that, it would lead our cities becoming costly, which would hit the poor masses the most.
• Additionally, as a result of becoming costly, our cities might lose the cost-effectiveness edge, and thereby see a reduced global demand for its supplies.
• In this lies the risk of losing business and thereby jobs, which would add to the nation’s economic pain.

Source: Business Line