Globalisation and its impacts – the present scenario
Globalisation as process has come to imply two distinct processes, the first being technological modernisation, whereby new developments enable movements of goods and services across hitherto less-traversed geographical borders (Gallina, 2002), and the second being a commercialisation of a set of products or services that were previously not available to a given market. The IMF (1997) defines globalisation as:
“the growing interdependencies of countries worldwide through the increasing volume and variety of cross-border transactions in goods and services and of international capital flows and also through the rapid and widespread diffusion of technology.”
While the predominantly capitalist forces who constituted the former forerunners and supporters of globalisation lobbied for globalisation of world economies as a win-win solution for all parties concerned, its negative connotations were uncovered by the incessant financial crises of the 1990s, especially the 1998 South East Asian financial crisis. This effectively led to the clear segregation among the world economies between those that were truly globalised in nature, thereby allowing for minimal interventionist policies on the one hand, and the fundamentally protectionist or partially interventionist economies, which may advocate globalisation, but continue to intervene in the market as and when they perceive the need to do so.
Globalisation however has been accompanied by an increased emphasis on competition and the interest of the investors and maximising their returns, thereby potentially compromising on the interests of the working class. This has tended to place undue emphasis on the investor, as compared to the other stakeholders of an organisation such as employees and customers.
The effect of the above form of globalisation on jobs and employment across the geographical regions where a company operates has been to move jobs from high cost to low cost areas, thereby redistributing income from wages to profits. It has hence led to a general fall in the level of comfort that the average worker could afford by reducing their standard of living to the lowest common denominator internationally (Paul Burkett, quoted in Bina et al. 1996) on a global scale. Effectively, jobs are moved to the lowest cost area where an organisation is present, and workers in other regions then have to either agree to work at the lower wages that the company pays, or find alternative occupation, thereby widening the gap between the haves and the have-nots.
The above gap between the haves and the have-nots culminates in an inequality of economic power wielded by different countries at an international level. While the merits of globalisation cannot be ignored, this apparent inequality between developed and developing nations which results from a global economy needs to be acknowledged and studied, and efforts made to reverse this effect to minimise the ensuing inequality of power (Amartya Sen, Observer 25 June 2000).
The World Development Report (2006) traces the reason for this increasing global inequality to the inherent imperfections within the market, leading to suboptimal usage of resources and other inputs which could otherwise have been put to more productive use. Imperfect markets spawn inefficient resource utilisation, which in turn translates to inequality of power and opportunities. Besides the issue with imperfection of markets, another possible reason for the failure could be irregularities introduced as a result of specific policy related idiosyncrasies within a geographical market. As pointed out by the World Development Report, perfectly functioning global capital markets would mean that there wouldn’t necessarily be any dependency between investment and wealth aggregation or distribution. People could effectively be able to refinance a promising investment by borrowing the money from the debt market, or selling other equity held by them. However, the market imperfections such as rationing of credit limits, spreads in lending and borrowing rates and the non-applicability of perfect models like the Capital Appreciation Pricing Model (CAPM) work against the notion of perfect markets, thereby leading to the inequality of power mentioned above.
The above assessment also does not necessarily account for the underprivileged class of people who are a vast majority in the world, and who increase in numbers as we traverse the continuum from developed countries through the developing countries on to the underdeveloped and third world countries. As a wide majority of these constituents of society do not even have access to the physiological needs of life such as food, clothing and shelter, they would almost never have access to credit so as to make an investment. To start with they would not have access to any meaningful information on what constitutes a good investment, nor would they be provided the credit to borrow and make such an investment.
An estimated 50% of the global population survives on under two dollars per day, and are afflicted on an ongoing basis by sickness, hunger, thirst and other malaises. Most of them do not have a sustained source of income, nor do most of them enjoy access to what would be considered essential utilities in life such as clean water, electricity and sanitation. An estimated half of the world’s population, constituting nearly three billion people resides in rural areas. Most of them are self-reliant for their food needs and also produce surplus quantities in a number of cases for sale to others. Another common phenomenon which characterises developing regions is the coexistence of the export of surplus quantities of food by one part of the region on the one hand, and starvation on the other in a different part of the same region. One such illustration of such a developing economy is the Indian subcontinent.
The net result of the above is that people in developing countries often are afflicted by hunger and thirst because some of the basic necessities such as food and water prove to be too costly for them, and capitalism by its very nature does not differentiate between an essential such as food or a comfort such as a car, both of which need to be bought in exchange for money.
The neo-liberal solution to poverty
One of the standard solutions for the impoverishment of developing countries that has been advocated by the developed capitalist countries across the world and the international bodies such as the IMF is to open up their respective markets, lift all import restrictions on goods and services from abroad, and allow a free market economy to dictate prices and prospects of the domestic industry. This solution however fails to take into account the specific problems of the host nation and is hence not always the optimal answer to the problem.
This neo-liberal theory suggests that lifting of barriers to the flow of goods and capital instils a focus in the country, thereby enabling it to develop its core competencies and leverage the industries where it enjoys an inherent competitive edge. This could be any activity depending on the natural resources available in the region such as farming, mining, fishing or manufacturing, depending on the area’s comparative advantage over others. It can hence import whatever it needs using the money that it earns from exporting the produce borne out of this core competence it enjoys. In addition, the theory goes, these steps overcome one of the main hindrances to development of the countries of the periphery-a lack of investment capital to build infrastructural facilities such as transportation and industries. The proponents of this solution consider this to be a win-win option with the foreign market entrant benefiting from access to a hitherto unexplored market and benefits such as full repatriation of profits made in the region, and the developing economy benefiting from increase in foreign investment and economic growth and prosperity and increase in living standards of society in general.
Another chronic issue associated with the free market approach when adopted by developing countries is the fact the eventuality of the developing economy over-leveraging its financial position by borrowing too much, thereby creating a deficit in its foreign currency position. This issue is further exacerbated by the repatriation of investment profits that these developing countries allow the investing foreign companies to do.
This could contribute to a building foreign exchange deficit in the economies of many such countries, which in turn necessitate the opening up and running of EOUs (Export Oriented Units), so as to garner sufficient foreign exchange to pay off this accumulated debt. This often ends up causing the country to use its comparative advantage to solely produce export products, and not for meeting its domestic needs. At the same time, the country has already opened up its markets to foreign entrants, thereby facing the threat of substandard goods being dumped here, further affecting the consumers in these markets. Finally, the globalisation solution also often encourages local governments to reduce or completely abolish subsidies to help poor farmers and small scale industries, or by privatisation of a number of erstwhile Government-controlled industries. This actually leaves the country worse off as compared to not going down the globalisation route at all in the first place.
What is interesting is that the same capitalist economies actually underwent their own development by traversing pretty much the same path of a protectionist regime and subsidies, which finally culminated in a growth in these economies, creating the need for access to other markets across the globe, and hence the hypocritical push for other economies to open up their own markets and lift trade restrictions. In reality, even today, developed countries continue to protect their own industries domestically while espousing the virtues of free trade to the rest of the world. A case in point is the recent discomfort the United States had to go through when faced with the threat of the service industry jobs such as call centres being invaded by the cheaper Indian counterparts.
The case of the victims
There are numerous examples how neo liberal policies and unethical trade practices have hurt the millions of poor peasants.
Based on the advice of the World Bank and other aid organizations, the Malawi Government reduced agricultural subsidies and effected a reduction in the value of their currency. The effect of this was a huge increase in the cost of fertilizers, which was rendered too costly for the Malawi farmers, and resulted in widespread hunger.
A similar case occurred in Ghana, where the government, “pressured by its Western creditors to keep its fiscal house in order, doesn’t supply fertilizer subsidies, crop-price supports, or any other equivalent of cheap financing…” (Wall Street Journal December 3, 2002). The effect is similar to the Malawi occurrence reported above, with the fertilizers having to be imported at higher prices and hence being out of bounds of the domestic farmers, hence bringing down overall production levels.
Ethiopia also had a similar experience with cuts to fertilizer subsidies, having a knock-on affect. This was further aggravated by excessive supply of grains in the market, as a result of which prices fell considerably. It then contemplated to build storage for the grain so as to hoard it till prices rose back again, but the money for building these storages was also not forthcoming. This led to abysmal grain prices and a decrease in cultivated land the next year round, culminating in catastrophes including hunger and starvation.
A similar case was encountered by the Philippines Government with it being coerced to import corn and rice to the disappointment of its local farmers.
The case of the rich nations
The case of the capitalist countries is different. As they provide subsidies to their farmers, it results in excessive production by these farmers, thereby deflating the prices of their products in the global market. This makes these products at these lower prices attractive to other countries, thus presenting roadblocks in these developing countries selling their own produce in competition with the subsidised low cost alternatives from the developed countries. It is estimated that the average U.S. farmer receives an annual subsidy of over $20,000 while the average Mexican farmer receives about $700 (Business Week, November 18, 2002). Effectively these forces act to the disadvantage of the periphery countries in two ways – firstly, it denies them the opportunity to compete in the global markets when it tries to sell its own variant of the crop subsidized in the centre, and second, it hinders the sale of the periphery’s products in their own market as well, due to the opening up of trade barriers for these developed countries and their cheaper crops.
Oxfam in the scenario
In this scenario the activities of Oxfam for fair trade to ensure that ‘producer in the poor countries get a fair deal which means a fair price that covers the cost of production and guarantees a living income; long term contracts that provide real security, support for gaining knowledge and skills that they need to develop their businesses and increase sales. This can be achieved only by changing the unethical rules of world trade. Oxfam founded in 1942 and the greatest charity in UK had been in the forefront of the ‘Make Trade Fair’ campaigns and it has succeeded in spreading the message across nations world wide in both the rich and poor alike. The Oxfam reaches the policy makers, intelligentsia, workers, farmers and people at power through a large number of publications, websites and through their campaigns. Their objectives can be beautifully expressed in organisation’s own words: ‘Oxfam believes that in a world rich in resources, poverty isn’t a fact of life but an injustice which must be overcome. We believe that everyone is entitled to a life of dignity and opportunity; and we work with poor communities, local partner organisations, volunteers, and supporters to make this a reality.’ Oxfam today campaigns on a number of issues other than make trade fair campaign, that affect the human lives in various capacities like providing necessary funding, training, and support to get people started, giving proper medical care for people in poor countries, help communities to set up their own schools, funds and school buildings, equipments and provide teacher training programmes, providing shelter and sanitation, help people to speak out together and enabling women to improve their status in community.
Research for Situation Analysis
The situation analysis has been prepared after an intensive research that included collection of data from primary and secondary sources. The primary sources included the experiences of Oxfam activists, the mission statements and agenda of Oxfam and the experiences of the victims.
The secondary data includes references to UN documents, World Bank Data, reports in newspapers and periodicals and books in related topics.
To take the message of fair trade practice to common people, intelligentsia, people at power, industrial conglomerates and policy makers to make a significant improvement in the lives of billions of people around the world.
Marketing objectives and strategy
In this present global scenario of increasing unfair trade practices, the message of Oxfam and particularly the services Oxfam offer have to get more reach. The objectives include
- To involve at least 25 per cent of the policy making executives in the corporate giants in the pro- fair trade campaigns of Oxfam within a year
- To involve at least 20 per cent of the policy making bureaucrats in the governments in Oxfam activities
- To widen the Oxfam support base among the public.
The strategies include:
- Canvassing executives of big companies through their primary groups.
- Canvassing bureaucrats through their primary groups.
- Awareness campaigns to spread the message of fair trade
Advertising objectives and strategy
Oxfam need to advertise aggressively to make a good campaign. The objectives include
- To increase the support base of Oxfam among general public by 25 %
- To increase the support base of Oxfam among decision making people by 20 %
To remind target audience about the problems faced by the victims of the unfair trade practices by rich countries.
There is a multiplicity of advertising media in Britain. Make Trade Fair campaign requires a media that can best reach the target audience completely as possible. But the target audience of the campaign uses different media and hence a media mix that includes the newspapers, television, outdoor and internet is recommended.
The advertisement in the newspapers can include inserts with photographs or simply the messages. The television can carry spots that convey the message and campaign through the internet includes developing a website.