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How Globalization Divides Developing Countries

What danger does the global marketplace pose for societies in developing countries?

November 7, 2001

What danger does the global marketplace pose for societies in developing countries?

The globalized world faces two contradictory trends. While a globalized market opens the prospects of unimagined wealth, it also creates new vulnerabilities to political turmoil and the danger of a new gap.

The impact of these new trends on the developing world is profound. In economies driven by a near imperative for the big to acquire the small, companies of developing countries are increasingly being absorbed by American and European multinationals.

While this solves the problem of access to capital, it brings about growing vulnerabilities to domestic political tensions, especially in times of crisis. And within the developing countries, it creates political temptations for attacks on the entire system of globalization.

In the process, the typical developing country’s economy bifurcates: one set of enterprises is integrated into the global economy, mostly owned by international corporations. The rest, cut off from globalization, employs much of the labor force at the lowest wages and with the bleakest social prospects.

Manipulating the political process

The “national” sector is substantially dependent on its ability to manipulate the political process of the developing country. Both kinds of companies pose a political challenge: the multinationals, because they seem to withdraw key decisions affecting the public welfare away from domestic political control — and the local companies, because they generate political pressures on behalf of protectionism and in opposition to further globalization.

The social world of developing countries also reflects this two-tiered system: globalized elites — often living in fortified suburbs — are linked by shared values and technologies.

Meanwhile, the populations at large in the cities are tempted by nationalism, ethnicity and a variety of movements to free themselves from what they perceive to be the hegemony of globalization, frequently identified with American domination.

The global Internet elite is completely at ease with the operation of a technologically-based economy. In contrast, a majority — especially outside the United States, Western Europe and Japan — neither shares this experience nor may be prepared to accept its consequences, particularly during periods of economic hardship.

In such an environment, attacks on globalization could evolve into a new ideological radicalism. This is particularly true in countries where the governing elite is small and the gap between rich and poor is vast and growing.

A permanent worldwide underclass is in danger of emerging, especially in developing countries, making it increasingly difficult to build the political consensus on which domestic stability, international peace and globalization itself depend.

Challenges in hiding

Overt political challenges to this entire process may not become apparent for some time. But the large industrial countries and their multinationals are now too widely perceived to be the principal beneficiaries of globalization.

As the current period of global economic expansion comes to an end, the tensions between economic realities and what is politically sustainable could shake both the economic and the political systems around the world.

Some of these dangers can be averted by accelerating free trade. But even if multilateral free trade progresses at a fast pace, the leaders of the industrial world must not lose sight of the political challenge.

They must keep in mind the many decades it took for the American model to evolve into its present form. What has worked in the United States cannot be exactly replicated, and certainly not any more rapidly, throughout the developing world — in any event, not rapidly enough to forestall a political backlash against globalization.

The great changes in history, almost without exception, were driven by mankind’s need for some kind of political vision and pursuit of a standard of justice.

While the self-righteousness, nihilism and violence associated with the demonstrations against globalization that are now spreading around the world is abhorrent, these outbreaks represent a warning that the international economic system may come to face a crisis of legitimacy.

The industrial democracies must preserve — and extend — the extraordinary accomplishments that fostered globalization. But they can do so in the long run only if they endow the economic aspects of globalization with a political construction of comparable sweep and vision.

Copyright © 2001 by Henry A. Kissinger. Adapted from “Does America Need a Foreign Policy?” Reprinted with the permission of Simon & Schuster.