An expert explains the history and evolution of globalisation, how it shaped contemporary populism around the world, and what it means for India, in a talk organised by the Finbiz Club at the Management School.
A team of volunteers of Finbiz - The Finance And Business Club, comprising interested students from all the various schools of Ahmedabad University on the basis of the student feedback wanted to have a talk which would explain to the student population, the impact of contemporary populist policies like Brexit and Trump-o-nomics' on the world of business.
Since in recent years, we see a trend of such events occurring in western nations such as USA, UK & the trend seems to be emerging in many European nations, where referendums are being planned/being held for staying in EU or not.
It was felt that a lot of students have incomplete information leading to wrong notions; hence the Finbiz team, felt that it would be appropriate, if a dialogue can be set up wherein students can get the correct perspective about such events from experienced faculty members which may be followed by an interactive session, where they can raise their queries and get answers.
The idea was discussed with the club mentor, and it was felt that this format is a good idea as it would promote interaction among students and faculty in an informal environment outside the classroom.
With this objective in mind the volunteer team approached Dr C Rangrajan, who very graciously gave his consent for the event since he appreciated the idea of connecting with the students beyond the classroom in an interactive session.
Topic: Changing Contours of Globalization
Speaker: Dr C Rangarajan
Event Type: Interactive Talk; Talk: 30 min talk, 30 min interaction
Date: March 22, 2017
Time: 2:30 pm
Dr C Rangarajan started the talk by explaining the evolution of Globalization. The talk which was divided into three broad parts after starting with the evolution and history of globalization where it explained how trade and commerce were globalized in the 18th and 19th centuries, went on to touch the recent developments which have led to people starting to ask about the costs and benefits of globalization.
Dr Rangarajan explained that, while there was a tremendous benefit of globalization in terms of improved products at competitive prices, the fear of globalization was due to the displacement of employment it created in countries/industries that could not remain competitive. Hence while on the whole people benefited; it lead to certain groups of people becoming unemployed in certain industries especially labour intensive ones, which leads to politicians wanting to win elections where numbers matter, to speak against globalization and try and create policies which create local employment by creating trade and tariff barriers.
Due to the phenomenon of globalization, since industries moved to the most competitive locations, it led to people employed in those industries to be unemployed and if those people could not retrain, it led them to being unemployed, the illustration given were the labor intensive industries of the past and many industries which could maintain cost competitiveness like the steel industry in the advanced economies.
The Brexit vote seems to be influenced more by the influx of large number of people from other European countries into Britain, making it more difficult for the local population to get jobs, by increasing the competition for available jobs, rather than a vote against the concept of globalization, since the rise of Britain a relatively small island nation, in the world economy, was largely on it being to be able to take advantage of globalization, whereby it had trading outposts all over the world leading to wealth in the home nation.
Dr Rangarajan explained that the phenomenon of globalization had both benefits and costs. The benefits being better quality and cost-efficient products, the costs may be in terms of local unemployment. The other cost of globalization is the ‘contagion effect’, whereby problems in one economy can spread to another as in the case of the Financial Crisis of 2008, which started in the mortgage market of USA, but had effects reverberating across the world, since the world was connected through the banking and finance industry.
Dr Rangarajan explained that the much talked about the concept of ‘Make-in-India’ is a good one, which has actually been around since quite some time, just that, in the past, it was referred to as ‘Import Substitution’. In response to a query, he explained that while it was a good idea, in order to make it a reality, we need to focus on not just manufacturing, but on developing cost competitive quality products, which can be consumed by the large captive market and also exported to the rest of the world, due to the comparative advantage they may enjoy our similar goods manufactured elsewhere. In order to make this a reality, apart from just manufacturing per se, we need to also address issues on costs, quality, innovation and value addition.
Dr Rangarajan stated that to make the ideas of ‘Make-in-India’ the countries need to develop market transport and trade infrastructure, which would help the goods reach speedily to the consumers in a cost-effective manner. He stated that for that matter President Donald Trump’s ‘Make in America for America’ can be successful only if the country is able to develop the supporting infrastructure in the form of ancillary industries for manufacturing of the high-tech products.
To a query on the impact of globalization on the software industry of India, Dr Rangarajan stated that India needs to upgrade its product offering by moving beyond ‘body shopping’ to high value added products and services.
Speaking about the impact of globalization on India, Dr Rangarajan concluded that India has on the whole benefitted by opening our economy. The high growth phase was supported by growth in world output and trade. The capital flows, both portfolio and direct investment has been beneficial. We, however, need to be watchful of occasional strong outflows as happened in 2013. The protectionist tendencies of a few countries may be fought against at the WTO with the help of other countries.
While globalization, on the whole, is good and it has it’s upside in the form of better quality affordable goods and services; it is also a mixed blessing, since it can help crisis spread from one region to another due to the integration of the economies, like the credit crisis of 2008 which started in the housing mortgage sector of America, but then had reverberating effects in many economies across the world.