Globalisation is a new phenomenon. The very term “globalisation” appeared in the languages of the world around 1993. Fig. 1 shows the occurrence in the German language.
Fig. 1: The career of the word “globalisation” in the German newspaper FAZ.
The strongest reason for the sudden appearance of the term globalisation has been the end of the Cold War. We all, I am sure, were glad about many things that happened in this context.
- We were freed from the spectre of a Third World War;
- Democracy, free speech and free press spread throughout the world;
- Well-positioned enjoyed exciting new opportunities, notably the US (owning the largest amounts of capital which could be placed at the places of highest profitability world-wide) and China (with its immense labour force, emerging high technologies and high discipline).
- Stock markets soared, letting market capitalisation of the world’s total stocks triple within ten years.
- Inflation was sent down in most countries to the lowest levels since the 1950s.
- The Internet became an immensely powerful tool of world-wide communication.
However, for all the good news, there is also a downside to globalisation. During the Cold War, international capital had always to seek consensus with national governments and parliaments in the North and South. In the South, governments used to play on the East-West tensions to induce the inflow of official development aid or private capital.
In the North, the Cold War forced governments to establish an attractive social security net to prove to the masses that capitalism took better care even for the poor than communism. Progressive income taxes and hefty corporate taxation were the rule. For private sector capital this may have been annoying but is was anyway better than any move towards communism.
With the end of the Cold War, the need for consensus disappeared. Now the name of the game was global competition not only among companies but also among states. Tightened cost competition was just too much for many companies. Business bankruptcies soared in many countries.
Fig. 2: The rising tide of business bancruptcies after 1990 in Germany.
In other countries, e.g. in Latin America, in Eastern Europe and in Africa, the situation was worse. The number of people living in poverty is on the rise. Least developed countries went through a demoralising period of de-industrialisation.
The strengthened bargaining position of the private sector was able to force the states to systematically reduce corporate taxation.
Fig. 3: Corporate tax rates have been systematically reduced during the 1990s.
These few pictures and passages are just the beginning of the story of globalisation.
The German parliament, the Bundestag, has established a select committee on economic globalisation in December 1999. I was appointed chairman of the committee. In June 2002, we published a report of 600 pages and 200 recommendations. The full text is available online. English, German, French and Spanish summaries are also available.
The International Labour Organisation (ILO) has created the World Commission on the Social Dimensions of Globalisation. I was appointed member and am happy recommending their website where you will find the final report of the Commission which was released 24 February, 2004.
On my website you will also find a few papers I wrote on globalisation.