Globalization, foreign investment, and Virgin Islands development!
Dickson Igwe - Saturday, August 11th, 2012 at 11:17 AM
Dickson Igwe
A snapshot of the thoughts on globalization of a veteran economist; Alan Greenspan was chairman of the US Federal Reserve for two decades, before his retirement in 2006
Thomas Friedman, Pulitzer Prize winning New York Times Columnist, on August 9, 2012, in an Op Ed piece, ‘’AVERAGE IS OVER,’’ alluded to the fact that today’s world is, ‘’ seamlessly connected.’’ In other words, businesses look for the best places to get work done, and the most cost effective venues wherever they are.
Globalism is a process that determines that products and services are designed and created everywhere, and supplied and sold everywhere. Increasingly, the world is becoming economically homogeneous and commercially interconnected, and this process will continue unrelentingly, far into the future.
Friedman further alluded to a new type of global business citizen with mixed loyalties. These are increasingly multinational personalities and corporate leaders, with 90% of their customers abroad. Today’s entrepreneur ,’’ has cheaper and easier access to above average software, automation, robotics, cheap labour, and cheap genius, than ever before.’’ Another thing: globalization means that as of this August 2012, ‘’ there is no job that does not require more and better education.’’ The right type of education and skills set is the oxygen of globalism: it is everything!
In a related vein, another New Yorker, Alan Greenspan, Chairman of the Federal Reserve Board for nearly 20 years, until his retirement in 2006, was one of the minds behind 21st century globalization. He was also a major mover and shaker in the greater liberalization of the contemporary world economy. In his book written in 2007, at the beginning of the Great Recession, titled, ‘’THE AGE OF TURBULENCE, ADVENTURES IN A NEW WORLD, ‘’Greenspan described how China began its journey towards a capitalist model as early as 1978.
The most powerful banker of his era, Greenspan traced the start of globalization to the Pacific and, ‘’China’s shift in protecting the property rights of foreigners.’’ In other words, the Communist Nation’s gradual move towards adopting a capitalist model by embracing open markets and foreign investment helped create the modern global economy. ‘’ That globalism actually began in the Far East is an interesting assertion!
This change in China’s social and economic culture, ‘’was substantial enough to induce a veritable explosion in foreign direct investment- FDI- into China, from a level of just $57million in 1980. After 1980, Foreign Direct Investment in China drifted upward, reaching $4billion in 1991, and then accelerated at a 21% annual rate reaching $70billion in 2006.’’
The inflow of investment from the USA and Western Europe primarily, ‘’ joined with the abundance of low cost labour, resulted in a potent combination that exerted downward pressure on wages and prices throughout the developed world.’’ In other words, globalization started as a result of capital flows across international borders, and the profitable and productive use of that capital as evidenced by the Chinese model.
But even before China’s slow march towards capitalism, an incremental process that began in the late 70s, the story was the same for the Asian Tiger economies: Taiwan, South Korea, Hong Kong, and Singapore. Beginning in the early 70s, technology and investment from the developed world, and a culture of thrift and enterprise, allowed these countries to become export miracles, catching up with their Pacific neighbor Japan, and outgrowing Western economies. And despite a major downturn in the 90s, these countries continued to outstrip the West in economic growth, and still do to this day.
But add to that cocktail, a global economic model driven by the silicon chip and information technology, and international trade and banking deregulation. Then, dizzying developments in science and technology, and the new economic thinking that encouraged the pulling down of artificial barriers to trade. All of these factors, mixed with a laissez faire modus Vivendi in international banking enabling financial capital to chase the best returns from around the world.
The flow of capital from the rich world went from trickle to waterfall in a matter of two decades. And that in return resulted in strong economic world growth, and greater interdependency, while building a new resilience into the global economy; a global culture that lasted up and until the Great Recession of 2007.
This new global period was further highlighted by Greenspan, when he explained how there had in recent years, ‘’been a shift of a significant share of the world’s GDP to the developing world, a trend with dramatic ripple effects.’’ Plus the fact that not only do, developing countries have much higher savings rates than do industrial nations,’’ but, ‘’ open markets and free trade has elevated hundreds of millions from poverty. Large segments of the developing world’s population have come to experience a measure of affluence, long the monopoly of so called developed countries. ‘’
Now Greenspan’s assertions must be taken in with a pinch of salt. Before he retired in 2006, Greenspan was at the helm of a financial establishment that was deregulated and cowboy, with a casino type dynamic; and this led to the financial catastrophe of 2007: the collapse of the housing market, the bursting of the credit bubble, and a financial implosion that resulted in the severe recession that followed.
However Greenspan was, and still is, a believer in globalization, and put it this way in his magnum opus: ‘’ the world of a global capitalist economy is vastly more flexible, resilient, open, self correcting, and fast changing than it was 25 years ago. New technologies not only opened up a whole new vista of low cost communications, but also facilitated major advances in finance that greatly enhanced our ability to direct scarce savings into productive capital investments, a critical enabler of rapidly expanding globalization and prosperity.’’
Yes, Greenspan possessed great faith in a system he helped create. And in his book, he further credited globalization aided by the microchip, for keeping inflation under control and interest rates in single digits. He alluded to the pre World War Two era, when protectionism, ‘’ led to a virtual collapse of world economic activity.’’ However, after the war ended, the embrace of free market capitalism by Truman, Eisenhower and Kennedy, led to a booming USA that spread prosperity to the rest of the Western World.
To be continued
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13 Comments
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Mr. Igwe, what do you think of the model of economic development that E.F. Schumacher promoted in the 1970s? His book “Small is Beautiful” hits the nail on the head with the way things have been going, especially in the “Third World” regions of the world in this global ‘rat race’, so to speak. Is there any hope for smaller economies such as the the Caribean/BVI to escape the economic treadmill of globalization and regain a more healthy way of life? Would like to hear your take on that. Thanks for food for thought, as usual.
NN- the idea is for countries to utilize the benefits of globalization- but at the same time protect unique cultures and eco systems- not an easy task I admit-but certainly doable- thanks for the contribution-
One of these days you people might get a true understanding of what is going on in the real world; Why write a long paper to try and explain one simple thing like: “NWO”?
That is “The New World Order”.
Get real.
Dickson, yet again you have introduced us to a topic, this time globalization, that is of vital interest to the BVI and BVIslanders.
Globalization is emerging and evolving as a dominant social process and ideology whose ideal is to connect the globe economically, socially, politically, culturally and enviromentally into a single community and a single market. It operates on the theory that the global is interconnected and interdependent. But there is still a heated debate as to whether globilization is a “good” or a “bad” thing.
Proponents believe that the forces and virtues of globilization is inevitable and irreversible. They see it as markets triumphing over governments to liberalize and integrate markets, facilitating the free flow of goods, services and capital. On the other hand, some opponents view it as a means by developed countries to continue to exploit poor countries for their benefits. They see it as harming self-determination, destroying national cultures….etc. Others see it as opening the flood gates to waves immigrants that may result in economic and moral decline for receiving countries.
Nonetheless, globilization is here; it is a fait accompli. The proponents have done a superb job selling the claims of globalization: liberalizing and integrating markets, further advancing democracy, benefits to everyone, self-regulating, inevitable and irreversible. Powerful and influential magazines, journals, electronic media, and newspapers have fed their readers a steady, rich diet on the virtues of globilization.
As such, the BVI should accept the reality and acknowledge and embrace globalism and globalization. Whatever occurs in Brazil, Russia, India and China(BRIC) affects life in the BVI. For example, the increasing demand for petroleum products in China and India to support their red hot and expanding economies is a factor in what price Virgin Islanders pay at the pump for gas. Further, the BRIC countries, along with other countries, focus on STEM(science, technology, engineering, mathematics) affects our economy and our quality of life and standard of living.
On the issue of Foreign Direct Investment(FDI), FDI is critical to the continued growth and development of the BVI. The BVI growth and development needs are expanding but financial and tourism, the economic twin towers, are not providing enough hard currency to adequate fund its need. Consequently, it needs FDI to supplement its growth and development needs. Nonetheless, its focus needs to be on FDI that is win-win and in the best long-term interest of the BVI. We have to be selective and deliberate in pursuing FDI.
Mr Igwe, my hat is off to you and your editorial as it non-biased and factual as well as enlightening. Mr. Leonard you too Sir are a breath of fresh air in a complex world of the uneducated.
Mr Friedman has for many years written (Lexus and the Olive Tree and numerous NY Times editorials) of Globilization. I suggest Lexus as a beginning for those that want to know and understand it better. We are products of it’s nature which are not something which we simply stop. We educate and adapt, and Dickson has helped to do so here. When I see you next time, you’ll see me nod my head in recognition well done. Can’t wait for Part 2.
Mr. Leonard u are correct in that it is a fait accompli and that we should adapt to this new reality.
We must not, however disregard the fact that this system has been imposed by the usual suspects, (ie europe and north america) on the unsuspecting, or impotent resource rich brown world. See what Peter Doyle, a senior IMF economist, has to say about european domination of policy in africa and asia.
Greenspan is a disciple of Rands objectivism and so greed is good and Mammon ascendant.
Read Atrios’ view on Friedman. Unlike the author of this article, those who are in anyway familiar with the accepted and prevalent view of the NY times columnist do not deign to take him seriously.
You are an ignoramus- if you do not understand that Jews and Zionists have done more for blacks than any other race- IDIOT
Look at the racist attacks on Africans in Israel. Look at how the Falasha (abyssinian jews) are treated. Look at how Christians are spat upon there. Please get educated. Obvious racism exists. Open ur eyes. Don’t swallow piecemeal what ur told. Think for urself
First, Mr. Igwe, welcome back. Happy to see that have not been discouraged from writing your regular columns after your previous one was overwhelmingly panned by many, included me. Please know that my disagreement with your previous column was not personal and rather an intellectual one. As someone who writes quite a bit in my own life as part of my living, I do appreciate other writers and recognize their efforts. It’s never easy writing with such frequency. It’s easier for others to critique. So, keep writing.
Now, before I address this new column, I just wanted to go back to the previous one for a moment. I am sure you are aware like the rest of us of Mitt Romney’s VP pick this morning. If you and others are not familiar with Paul Ryan’s politics, you should quickly get up to speed. Certainly, with this VP pick, a President Romney will be no where closer to being better for neither the Virgin Islands nor the West Indies.
Moving on, I was so looking forward to a discussion on “Globalization, foreign investment, and Virgin Islands development, but thus far, the first part of your article has not discussed this. So, I gather I will have to await the second part of your column to learn what you are thinking. Nevertheless, the background discussion on globalization is good.
As for the topic at hand, as you have articulated in differing words, the worlds’ economies are very much interconnected at this point in time, a trend that I do not see unending anytime soon. And the main underlying driving force for this is cheap labor that can be obtain in developing countries to produce or manufacture most of the worlds needs. Places like China (1.5 billion people), India (over a billion humans), other Asian countries, Mexico, and Brazil, all are producing goods and services at very competitive rates because they simply have the man power and lack labor and union costs, costly employee medical expenditures, etc. which some would argue drives up the cost to manufacture such goods in developed countries making it diffucult to create a competitive product/service. I added services, because even services are being out-sourced today. Case in point, Customer Service operation for Fortune 500 countries being outsourced to educated and English speaking countries such as India.
With the Virgin Islands population being so small, standard of living higher, labor restrictions here and there, it is unlikely we would be able to take advantage of this globalization outside of some collective Caribbean Free trade zone agreements with developed nations whereby goods and services can be produced at a decent price and exported without or with limited tariffs. We will need quite a visionary to get all on board for such an effort because as it stands in the Caribbean, every man is for himself.
As for foreign investments, there is a lot of resistance to such here in the Virgin Islands as you know. The typical outcry in some quarters is that the politicians are “selling out the country.” Investors like to go where they are welcomed, and their investments are safe. So given the current political climate and vocal anti-investment fever here in the Virgin Islands, I personally do not expect to see much in the form of foreign investments in these neck of the woods any time soon.
Currently there is no apparent consensus on acceptable foreign investments in these lands, and until we do, the country will continue to grow at a much smaller pace than it could for better or for worse since we do not have the money to build on our own short of borrowing from the banks or the Social Security fund to do simply things such as fixing our roads. Witness the ungoing debate with the Cruise Ship Pier development.
At any rate, I look forward to your take.
Two Correction:
Second sentence should read:
“Happy to see that you have not been discouraged from writing your regular columns after your previous one was overwhelmingly panned by many, included me.”
And,that should be Fortune 500 Companies, and not “counties”.
Thanks Ray
You quote Greenspan and Friedman. Two discredited zionist shills who help propagate a system that exploits brown people all around the world. Are you really that ignorant sir?
“Greenspan and Friedman. Two discredited zionist shills…?” You have some issues you need to work through my friend. Jewish does not mean Zionist, and ease up with the hating – those are two highly accomplished men, and Dickson’s quoting of them was entirely in context.
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