What Is Globalization? (Part 2): Global Leadership in an Era of Growing Nationalism, Protectionism, and Antiglobalization

2017 Farok J. Contractor, Rutgers Business School 

In Part 1, What Is Globalization? How to Measure It and Why Many Oppose It, I concluded that globalization is here to stay—and will continue to converge nations, culturally and economically, indefinitely. At the same time, leaders such as Trump, Le Pen, Erdoğan, and Duterte espouse an anti-globalization backlash, emphasizing “my country first” policies.[1]

In Part 2 below, I ask: Is nationalism—a “my country first” approach—compatible with economic growth? What leadership qualities are needed for a 21^st-century civilization? Are leadership styles that emphasize strength of personality, ethnic, or group identification and increased assertiveness—sometimes bordering on bluster and aggression—compatible with human progress and civilization?  In the most general sense, does human evolution suggest a dominant role for competition or cooperation?

To answer these questions, some reflection on how we got to this point may shed some light. Humanity has fragmented from one small African group to many scattered tribes — De Unum, Multis.[2] And today, while organized into variegated cultures and nations, humankind is beginning to come together again into one integrated planet — E Pluribus, Unum.[3]

Human Evolution: From “De Unum, Multis” to “E Pluribus, Unum”

According to archaeology, modern humans emerged from Africa some 130,000 years ago[4]—from a single mother, according to one theory—then spread over thousands of years to occupy all the earth, except Antarctica. See Exhibit 1. But the numbers were always tiny. At the end of the great migration around 12,000 BCE, most estimates put the entire world population at only 1 to 4 million individuals.[5] Most humans lived in small, isolated tribes, with no contact with any others—hence the development of separate languages, ethnicities, and cultures, or almost total fragmentation.

Exhibit 1: How Homo Sapiens Fragmented into Many Tribes:  “Out of One, Many”

It was not until very recently that larger organizational units, such as countries and empires, were formed, first in Sumer (around 3500 BCE) and then Egypt (3150 BCE). Contact began between hitherto isolated tribes, and small-scale “international” trade, began. The process of integrating humans into countries with defined borders was completed only 160 years ago. Italy as we know it today was formed only in 1860, and Germany in 1871.

Passports, visas, and border controls are, for the most part, concepts less than a century old.[6] Before that, people could migrate, at will, anywhere. The process of integrating humanity into countries, or nation-states with demarcated boundaries and border controls, was more or less completed only by the year 2000 (and the resulting border disputes still continue into the 21^st century).

Today, the operating organizational unit is the country, with its own official language, government, and mechanisms of administrative power, such as border guards, army, and police—in brief, “nationalism” as an organizing principle.

However, another integrating force was in operation even before the modern nation-state. International trade over long distances began in a significant way 2,000 years ago with Chinese silk, Indian muslin, and spices exported to Rome in return for Roman silver and gold. In the Roman Senate, Pliny the Elder complained of the huge trade deficit suffered by Rome against China and India. In Natural History, he wrote, “By the lowest reckoning, India, Seres (China) and the Arabian peninsula take from our Empire 100 millions of Sesterces every year… That is how much our luxuries and women cost us.”[7] Roman coins are found all over Asia, from China to Vietnam to India.

The English and Dutch “East India Companies” chartered in 1600 and 1602, respectively, were the catalysts for the modern boom in international trade and the precursors for multinational corporations. By 2015, the exports of all nations (goods and services) totaled US$21,352 billion (compared with a mere US$318 billion in 1970).[8] In 2015, one hundred thousand multinational companies, with around a million affiliates, were operating worldwide.[9] That same year, annual worldwide foreign direct investment (FDI) capital flows totaled US$1,762 billion (compared with a mere US$13 billion in 1970).[10]

International trade and FDI have been huge globally integrating forces, spreading not just products, but also ideas and designs around the world so as to change cultures and lifestyles. Hindu fundamentalists may protest Valentine’s Day as an unwelcome cultural import, but they carry protest signs in English, and wear western shirts and trousers—now standard clothing for more than half of Indian males. Comparing the year 1970 with 2015, we see from the above that international trade has multiplied 68-fold in 45 years, while FDI multiplied 136-fold. Amazon, Alibaba, Walmart, H&M, and Zara not only sell the world’s products, but also propagate globalized images that shift perceptions of self and identity.

470 million people are fluent in English, with at least 1.1 billion (or 15 percent of humankind) able to functionally communicate in what is now the common language of the cosmopolitan world. Another integrating force is migration, legal or otherwise. According to the United Nations, 241.3 million persons in 2015 lived in a country other than where they were born.[11] Diasporas transmit money, ideas, technology, and skills around the globe. A hugely disproportionate number of Silicon Valley entrepreneurs are foreign born.

Only 2,000 years ago, most humans lived in scattered tribes and villages, their lives and minds circumscribed within a 10 kilometer radius. Today, with migration, travel, trade, FDI, and the internet (grown from 4.5 terabits per second in 2005 to 400 terabits per second in 2016), we have the makings of a global civilization—indeed, an emerging global collective consciousness.

Psychologists, political scientists, and sociologists are beginning to notice this collective global consciousness— the viral, or virtually simultaneous, transmission of emotion and sentiment around the world.[12] Consider the, for example, the shift to the political right in most countries.[13] The greater incidence of beards among both observant Jews and Muslims over the past 15 years is not the result of any direct contact or theological discourse. There is no evidence of communication or direct links between Hindu fundamentalists and the Jewish orthodox, both discouraging contraception to boost birthrates. Tattoos have spread beyond the US and Europe to Asian men. Terrorist incidents broadcast by social media and the internet frighten billions, although the lifetime odds of an average human being injured in such an attack are well below 1 in 1.5 million.

All of these may be transient sentiments, but they illustrate the power of collective globalized ideas and imagery propagated by the media and internet, which shows the beginnings of a new world culture: E Pluribus Unum, or “out of many, one.” See Exhibit 2.

Exhibit 2: The Great Seal and Official Motto of the United States: “Out of Many, One”

 

A Globalizing World—Benefits and Backlash

 We still live in a world of distinct nation-states and cultures, although the various aspects of globalization, such as trade, FDI, the internet, travel, and migration are stitching us together. Today, nations and societies are grossly unequal in income and knowledge. But this inequality is not based on malevolent forces trying to keep the poor down. On the contrary, globalization has lifted around two billion people out of poverty since 1980 through FDI and trade.

Exhibit 3, derived from World Bank data (using US$1.90 per person/day as their cutoff), shows that grinding poverty has been steadily dropping since the industrial revolution, with the most dramatic decreases coming after 1980. In 1981, 44 percent of humankind lived in absolute poverty. With the big increase in global trade and investment since then, even though the world population almost doubled, by 2015 only 9.6 percent of us were in grinding poverty.

Take Bangladesh as an example. Although it is one of the poorer nations on the planet, today it is the second biggest exporter of garments to retailers around the world (e.g., H&M, Zara, Marks & Spencer, Walmart). Its 2.4 million garment workers, supporting households totaling 8.5 million, enable the workers and their families to enjoy a minimal lower-middle-class life. True, their hourly wage, hovering at US$0.45–0.85 per hour, appears shocking low to westerners. But a US$5 daily wage times two income earners, or US$10 per day, is enough in a low-cost nation to allow a family to live an adequate or tolerable life. (The alternative, in the farm villages from where many came to work in the urban factories, would likely be below the World Bank’s criterion of US$1.90 per person per day.)

Exhibit 3: Reduction in Poverty

Source: World Bank

Citizens of Europe, the US, and Japan also benefit. As consumers, they enjoy low prices, compared with a world where international trade and FDI did not exist and garments would cost thrice as much, for example. They can spend the savings on a wider range of items. As producers, many have jobs are intended for foreign markets, i.e. export. In the US alone, 12 million jobs are directly related to exports, with up to 35 million jobs if ancillary suppliers of components and services are included.[14] (Contrary to the statements of scaremonger politicians, the US remains by far the most productive nation on earth[15] and is also highly competitive in world markets—a very close second to China in total exports, as seen in Exhibit 4 where the EU is grouped into a total of 28 countries.[16]) Worldwide, I conservatively estimate at least 200 million jobs directly dedicated to exports and around 600 million total jobs, including ancillary suppliers.

Exhibit 4: The US and EU (28 Nations) Together – Far Bigger Exporters Than China and Japan

Source: World Bank / UNCTADStat

FDI is an alternative channel to exports in reaching a foreign buyer. An American purchasing a Honda CR-V may not know whether his or her particular car was assembled in Honda’s US subsidiary, exported to the US from Honda’s Mexico subsidiary, or shipped to the US out of Japanese production. (All three sources are used.) Honda’s USA subsidiary employs 30,000 Americans directly[17] (and an estimated 60,000 more indirectly). The worldwide total stock of FDI in 2015 was US$24,983 billion, and the total jobs (at multinational headquarters and subsidiaries globally) are likely to approach the hundreds of millions, the numbers attributable to exports.

Some economists estimate that the world GDP is at least 10 percent higher—or an additional US$8.5 trillion—because of globalization.[18] Globalization has produced enormous net benefits for the world: gains for consumers, hundreds of millions of additional jobs, and alleviation of mass poverty in developing nations.

So why the anti-globalization backlash?

In an earlier article,[19] I indicated that the benefits of globalization are offset by the pain endured by millions of workers laid off in Europe and the US (although automation and Information Technology, and not trade or FDI, have caused most job losses in developed nations). Traditionalists also lament the erosion of local cultures and the blurring of identity caused by globalization. Industrialization has also generated a looming climate problem. Economic growth has allowed spending on weapons to increase in almost all nations. Finally, global cooperation inevitably means the loss of national economic sovereignty, at least to a minor extent.

Reciprocity in an Interdependent World

The discussion above suggests we are in a far more complex, interdependent world where negotiated cooperation, based on common rules, is the only way to make our planetary civilization function. Your exports are my country’s imports. My new drug discovery needs patent protection in your nation. International banking and finance cannot function without common norms and protocols for transactions. African dust pollution wafts over to the eastern US. Air travel is impossible without close coordination among controllers in many nations. Millions outside the US use GPS devices receiving signals from American satellites. Passengers and cargo require assurances of safe passage through waters claimed by individual countries. The internet must operate on commonly accepted technical standards. Mutually negotiated technical standards apply to almost all industries.

Because we live in a world of nation-states, negotiations on a multitude of issues must take place. A “my country first” approach may be desirable, but only as an early starting point. Great mutual gains are to be had in every nation by participating in planetary standards, common rules, technical and economic cooperation, and policies that promote trade and FDI—while tackling at home the inevitable adjustments and pain suffered by segments of each country’s workers who are laid off. Globalization is not pain-free. But the overall gains vastly outweigh the pain felt by affected segments of each nation’s population. And the debate continues to rage on. See Exhibit 5.

Exhibit 5: UK Edwardian-Era Campaign Poster, Early 1900s

What Leadership Qualities Are Needed in an Interdependent and Globalizing World? 

In politics, if global cooperation inevitably means a minor loss of economic sovereignty, what are desirable leadership qualities in an interdependent world? Exhibit 6 summarizes two opposing leadership styles.

Exhibit 6: Leadership Qualities for a Global Civilization

Our recent tribal past still powerfully influences human behavior and politics. From a leadership qualities point of view, the opposite of globalization is not nationalism, it is tribalism. Tribes were, and are, led by “big chiefs,” “strong men,” potentates, and kings—in short, autocrats. Tribal leadership is characterized by centralization of power, concentrated in an individual (the chief) and his immediate circle. Ego, impulse, and passion are frequently displayed. Outward impressions are emphasized, and flaunting of wealth, power, hangers-on, and retinue are the result. Value is placed on fast decision-making and the appearance, or image, of decisiveness and machismo.

The globalist leader, on the other hand, recognizes her apex role differently, knowing that a global economy and civilization require cooperation and assent from other countries, as well as from her own organization and citizens. She sees herself as a facilitator of interactive and interdependent processes, a catalyzer of cooperation across organization levels in her own government, as well as interorganizational cooperation at the international level. Passion (strong likes and dislikes) and rapid decision-making are recognized as impulses to be suppressed in favor of deliberation, consultation, and advice from a wider circle of opinion. 

The tribal leader, or autocrat, typically draws from a smaller circle of advice—from family, sycophants that have pledged personal loyalty, and external patrons that stand to be politically rewarded. Sharing information and disclosure are seen as forms of weakness, giving needless advantage to others. Secrecy is a desirable norm. His language is characterized by short phrases, often repeated, and his speech projects an impression of “great” power. Life and work to him are an endless series of “mano a mano” negotiations in which one party wins and the other loses. Maneuver, covertness, and psychological tactics are seen as important ways to get ahead in this worldview that emphasizes a “me first” or “my country first and the rest be damned” mentality.

The globalist leader has a more realistic and humble perception of her own capabilities. Her instincts are democratic. She knows, in today’s complex, interdependent, and multicultural world, that no single person is knowledgeable or wise enough to make highly centralized decisions. Advisors are chosen based on merit, rather than nepotism. Her language style is moderate, nuanced, contingent, complex, and persuasive. Openness and disclosure make for better collective decisions. Openness, communication, and cooperation also enable reciprocity and consensus to be reached with other countries on common rules, standards, protocols, and norms without which something as simple as the internet or cross-border phone calls and air travel—let alone the “architecture” of thousands of worldwide technical standards or the political dialogue needed to build and sustain a global civilization—would not be possible.

In summary, the tribal leader’s worldview is that of a planet populated by distinct and often conflicting tribes, each one looking after its own. If not racist, tribalists look upon other tribes as inferior in capability and skills. The globalist’s weltanschauung,[20] in contrast, is of a planet populated by a uniform and undifferentiated humanity with a collective global consciousness. If in the 21st century some of humanity remains  inferior in wealth or education, that is not an indictment or judgment against them. Rather, it represents an opportunity—nay, an obligation—to raise their education and living standards higher. As Exhibit 3 illustrates, the happy transformation of billions being lifted out of abject poverty is something that globalization is already accomplishing. 

Conclusions

 It took humankind 100,000 years to reverse its scattering into tiny, isolated tribes occupying remote corners of the planet and begin contact with other tribes, and it took another 12,000 years to move from being hunter-gatherers to becoming entrepreneurs launching the industrial revolution in the 18th century. Another 250 years later, we live today in a globalizing economy that has benefited most of humanity, especially in the developing world, although it may have adversely affected jobs, expectations, and self-worth in some segments of society in Europe and the US.

However, the gains of globalization, as illustrated in Exhibit 3, vastly exceed the pain felt by some in advanced nations—although it is no consolation to the laid-off worker in Lille, Detroit, or Birmingham[21] to be told that millions in Buenos Aires, Bombay, and Beijing enjoy an elevated way of life. It is small comfort to the television viewer in Kent or Manchester, traumatized by images of terrorism (however minuscule the probability of being personally attacked may be), to be told that millions in Kinshasha, Kolkata, and Kunming don western dress, speak English, listen to Beyoncé, and follow Facebook, so that their culture and life, superficially at least, approximates that of the person in Kent.

“Competition is the law of the jungle, but cooperation is the law of civilization.”

– Peter Kropotkin, author of Mutual Aid: A Factor of Evolution (1902)

Darwin was not all wrong. But today we know he was less than half right. Cooperation, even more than competition (or “survival of the fittest“), forms the basis, or architecture, of biological life at the cellular level, as well as behavior within and between species.[22]

The same applies to the mind. In the 21st century, when we speak of “institutions“ (be they national or international), we are talking about mental architecture. Treaties, technical standards, air traffic control, shipping lanes, GPS units, international postage, the internet, and all such commonly accepted standards may have a paper or soft copy repository. But once negotiated and implemented, they really are collective pathways of the mind that most of humanity follows to its advantage.

The coming together of humankind in a global, integrated economy will likely continue—although history is replete with scenarios of human progress followed by retreat or even “dark ages.“ To build a global civilization, we need leaders that espouse democracy, openness, morality, benevolence, meritocracy, egalitarianism, and a recognition that the edifice of a modern economy is built on a foundation of international cooperation, mutually negotiated rules, and commonly accepted procedures. 

Endnotes

[1] Contractor, F.J. (2017). What is globalization? How to measure it and why many oppose it (part 1). GlobalBusiness.blog, May 8.

[2] “Out of One, Many.”

[3] “Out of Many, One.” E Pluribus Unum is the official motto of the United States and part of its great seal.

[4] Among scholars, the dates for the outmigration from Africa range widely from 125,000 BCE to 60,000 BCE. For example, see Osborne, A.H., Vance, D., Rohling, E.J., Barton, N., Rogerson, M., and Fello, N. (2008). A humid corridor across the Sahara for the migration of early modern humans out of Africa 120,000 years ago. Proceedings of the National Academy of Sciences, 105(43), pp. 16444–16447.

[5] World population estimates. Wikipedia.

[6] From a resolution in the League of Nations, 1920. Benedictus, L. (2006). A brief history of the passport. The Guardian, 17 November.

[7] Contractor, F.J. (2012) The story of globalization: from the Neolithic Era to the tea-opium countertrade of the 19th century. AIB Insights, June, pp. 3–7.

[8] Figures sources from UNCTADStat.

[9] As legal entities, these numbers are correct; but because many of these firms are shell, or dummy, companies, created for tax-avoidance reasons, the actual number in terms of economic impact may be a quarter or a third less—but still very numerous. See: Contractor, F.J. (2016). Tax avoidance by multinational companies: methods, policies, and ethics. Rutgers Business Review, Vol. 1, No. 1, pp. 27–43 (2016). Also see my blog version, May 5, 2016.

[10] See endnote No. 5, ibid.

[11] International migrant stock 2015. United Nations Department of Economic and Social Affairs, Population Division.

[12] For example, see: Coviello, L., Sohn, Y., Kramer, A.D., Marlow, C., Franceschetti, M., Christakis, N.A., and Fowler, J.H. (2014). Detecting emotional contagion in massive social networks. PLoS ONE 9(3): e90315. Also see: Ross, A. (2014). Global sensitivity: theorizing communication networks in the digital age. APSA 2014 Annual Meeting paper. And see: James, P. and Steger, M. (2016). Globalization and global consciousness: levels of connectivity, in Robertson, R. and Buhari-Gulmez, D. (eds.), Global Culture: Consciousness and Connectivity, Ashgate Publishing, pp. 21–39.

[13] Foa, R.S. and Mounk, Y. (2017). The signs of deconsolidation. Journal of Democracy, Vol. 28(1), pp. 5–16.

[14] Johnson, S. (2016). Trump’s tariff proposal would gut US export jobs. Boston Globe, June 27.

[15] See figures in Contractor, F.J. (2012). 7 reasons to expect US manufacturing resurgence. Yale Global, August.

[16] The 28 EU nations combined appear to be highly export-oriented because they trade with one another, compared with giant unified economies such as China and the US. This is to say that if, in 1787, the constitutional convention in Philadelphia had failed, and we had a “DSA” (Disunited States of America) instead of the USA, each individual state in the DSA, like today’s EU, would be very export-oriented, with New Jersey selling to Pennsylvania and so on.

[17] See: Honda in America employment: Honda employs more than 30,000 associates in the U.S.

[18] Tyson, L., and Lund, S. (2017). Adapting to the new globalization. Project Syndicate, February 8.

[19] See endnote No. 1, ibid.

[20] The German word weltanschauung literally means “world perspective“ and is denotatively the same as the English word “worldview.“ But to a German, weltanschauung has a larger and broader connotation as “philosophy of life.“

[21] In January 2017, the city of Birmingham in the UK had the worst unemployment in that country. See Walker, J. (2017). Birmingham has the worst unemployment in the country. Birmingham Mail, 18 January (updated 30 January).

[22] See for example: Rand, D.G. and Nowak, M.A. (2013). Human cooperation. Trends in Cognitive Sciences, 17(8), 413–425.