Economic globalization and development aid

Globalisation has been defined in many different ways. According to Kotilainen & Kaitila, 2004, 5) globalisation, usually;

is regarded as a phenomenon that has developed when modern nation states no longer provided a sufficient environment for the desired level of economic, social, political, cultural and other activity… being fundamentally an economic phenomenon, but having implications for almost all fields of human life.

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Giddens (1991; 1998) has written much of the pitfalls of globalization, of the ‘risk society’ and of experiences of personal meaningless. As Giddens (1998, 29-31) writes, globalization is usually understood as economic and as involving connections that span the world. Globalization, however, is not only, or even primarily about economic interdependence, but about the transformations of time and space in our lives. Distant events, whether economic or not, affect us more directly and immediately than ever before. Conversely, decisions we take as individuals are often global in their implications. (Ibid...)

A central tenet of different theories of globalization is the assumption of rapid social change, and as Väyrynen (1998, 64)⁴ writes: “There is no simple definition for globalization. The predominate interpretation of globalization in social science is anchored to theory on modernization. According to this theory, globalization is merely a part of a broader social movement, which moves from modern to a postmodern society”. Väyrynen propagates the view that globalization is marked by a move toward a postmodern, globalizing, more fluid society, where transnational agents are able to exercise more autonomy in relation to states, creating more transnational, liquid spaces. The markets, he writes, are central to globalization, as the markets transmit goods, information and values that are valued in different ways by supply and demand mechanisms. According to this view on globalization, it is taken to mean the dual movement of compression and of intensification, to an increasingly rapid pace at which changes have taken pace in recent years and the far-reaching nature of recent changes. (Ibid., 67 – 68.)

Over the past decades, economic globalisation has been given – and has taken – many of the roles that development aid in general, and the private sector more precisely, has traditionally played, and in this process, both the IMF and World Bank have both played an important part in the increasing role of economic globalisation. Economic globalisation takes many forms in developing countries.

Kotilainen & Kaitila (2002), for example, have identified the following forms: 1) foreign trade of goods and services; 2) foreign direct investments; 3) other forms of co-operation between firms; 4) international migration; 5) foreign borrowing and lending; and 7) integration of macroeconomic policies.,

For the perspective of development partners, as they are called today, including the UN and others such as the EC, USAID, DFID, idealisms of globalization are often inbuilt into the starting points

4 Globalisaatiolle ei ole mitään yksiselitteistä määritelmää. Yhteiskuntatieteissä vallitseva tulkinta globalisaatiosta on ankkuroitu modernisaatioteoriaan Sen mukaan globalisaatio on vain osa laajempaa yhteiskunnalista liikettä, joka lopulta vie modernista jälkimoderniin yhteiskuntaan.

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and assumptions of their approach to development and to development aid, although globalization rarely explicitly appears in official discourse on aid – in fact, it is probably more common to question the characteristics and manifestations of globalization, which is approached as cultural homogenization. For developing countries, the focus is often on the promises of economic globalization, for as Kotilainen and Kaitila (2004,2) note:

Most development countries want to globalise. They want to increase their foreign trade, be members of the World Trade Organisation (WTO) and receive more foreign direct investment. These developments are related to the processes of democratisation, liberisation and privatisation of national economics that started after the late 1980s and which continued at a rapid pace during 1990s. The collapse of Soviet Union and socialism in many parts of the world accelerated this process.

Economic globalisation is often presented as dividing countries into two parties: the appropriated and the appropriators. Yet national policy makers in developing countries have not been mere submissive undertakers of reform, but have had their own agenda, as witnessed by the current scandals of domestic politics in Thailand, for example. Globalisation has not occurred without some kind of acceptance of national policy makers.

Foreign direct investment (FDI) has become an important form of global business practice today. It has grown four times faster than foreign trade (Kotilainen and Kaitila ,2004). The current upswing in foreign direct investment is a response to the liberalisation of capital restrictions. However, it has also its limitations which place developing countries with fragile economies at particular risks. For instance the global financial crisis has heavily affected many developing countries, especially countries such as Bangladesh and Cambodia that are heavily dependent on foreign investments and, in many cases, are narrowly focused on one sector, such as the garment industry in Cambodia.

Therefore even if FDI is an effective way to mobilise domestic resources more efficiently and more quickly than what would be possible through domestic resources where domestic savings are small, it has clear limitations as a mechanism through which to engage the private sector in more long-term investment in developing countries, such as those made through calls for Corporate Social Responsibility, as it is volatile to market fluctuation.

Through globalisation, the number of multinational companies has grown rapidly in developing countries (Goldin & Reinert 2007, 33), and as witnessed by China and India, for example, an

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increasing number of multinational companies today originate from developing countries.

Multinational companies, by definition, operate within a global framework and have an international ownership structure, which can be assumed to limit the amount of purely national decision making, but also on the other hand, international ownership can be assumed to introduce new, global policies and guidelines to national contexts. Multinational companies often carry a lot of weight in the countries where they operate, particularly in smaller developing countries. Their sales far surpass the domestic GDP in many developing countries, and thus they are often able to possess a lot of influence in developing countries in which they choose to locate their production.

(Goldin & Reinert 2007.) As Giddens (1998, 31) observes: “Globalization ‘pulls away’ from the nation-state in the sense that some powers nations used to possess have been weakened. However, globalization also ‘pushes down’ – it creates new demands and also new possibilities for regenerating local identities.”

As part of the transnational development, regional and global perspectives have achieved a more visible role, and have been conveyed through bodies such as the Global Business Forum and the Asia-Pacific Business Association to HIV/AIDS, for example, which have played an active role in many of the areas that have traditionally belonged to the public sector and third- sector stakeholders, issuing various global and regional guidelines on matters of public concern, such as HIV/AIDS (Ashbourne 2004; Inderjit 2008; Turnbull, Parry, Gravestock, Julford, Clayton, Bery, Gorra, Lee, Mistry, & Tanguy 2006).

The macroeconomic policies of individual countries have become more integrated as a result of economic globalisation (Golding & Reinert 2007; Kotilainen & Kaitila 2004). This integration itself has been a form of globalisation and has strengthened the globalisation process. As Kotilainen &

Kaitila, 2004, 14 write: “Sometimes macroeconomic integration itself reinforces the integration and the globalisation process.” The role of non-governmental organisations (NGOs) has also gained in strength versus the role of public institutions as a part of the globalisation process (Hjertholm &

White 2004). This, as Vartola, (2000, 3) argues, follows a practice originating in Western (donor) countries which has downsized national public administration since the end of the 1980s. Whilst there is some dispute in views as to whether the role of the nation state is, in fact, declining or merely transforming, as Giddens (1998) claims, a general move can be observed from government to governance, demonstrating the effects of globalization on the role of the nation state:

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[Governance] becomes a more relevant concept to refer to some forms of administrative or regulatory capacities. Agencies which either are not part of any government – such us non-governmental organizations (NGO’s) – or are transnational in character contribute to governance. (33.)

Walter (2004, 2005), similarly, places emphasis on governmentality as a central tenet of the globalizing world (see Tietäväinen, Pyykkönen & Kaisto (2008, 63). He draws attention to different forms and rationalities of international governance, refusing to take international institutions and forms of power as given, but carefully follow the development the development of different genealogical processes. Governmentality, he underlines, is not exercised in the same ways across different contexts, but occurs differently in different contexts. (Ibids.)

Development aid takes part in globalization in its own ways, and is interconnected to economic and cultural globalization (cf. Law 2000; Owen et al. 2005). Multicultural communities, of which the UN is a good example, thus take part in a playing field that is, in part, determined through global business relations on the one hand, and through the will to carry forward particular values and goals that take on seemingly universal appearance on the other.