GLOBALISATION; What Is On The Agenda

There are few topics today that solicit greater controversy, evoke stronger emotions, and actions than that of “Globalization”. Almost everyone has a strongly held opinion on the topic since almost everyone is touched by it in some form or another. What used to be a “genteel” discussion at academic meetings on “multinational corporations” with its specialized language and little press fanfare has become a village square squabble. The participants in this discussion have expanded to include corporations, political parties, government ministries, labor unions, the media, environmental groups, civil rights activists, NGO’s, international organizations, and a vast array of civic society across the spectrum of countries.∗

Although this is a positive development for a “democratic” debate of the issues involved, the curse of Babel is upon us. In the more or less intelligible discussions that take place, the discussants seldom use the term in the same sense as their counterparts. Some talk of the drivers, some of the process, and some of the consequences in the same discussion, examples and counter examples are drawn from vastly different historical periods, and citations from “authorities” used to support ones arguments are generally taken out of context or truncated to modify the intent of the original author. The broad, critical importance of the phenomenon seems to be getting lost in the obfuscation of the myopic, special interest arguments of the discussants. The discourse has become anything but “genteel”.

The term “globalization” seems to be used in a number of different senses. At one extreme is the limited sense of the movement of goods and services across national borders. This is essentially presented as a benign extension of international trade. A bit wider than this usage is one where the process is seen to be a movement of productive capacity and resources across borders and related to this, the exchange of ownership across borders. These probably would constitute the “hard core” of what most people think about when using the term “globalization” – basically an extension of economic activity, in its various facets, across borders. There seems to be four other senses in which the term is used, all of which imply some sort of intent:

1. The process by which tastes, consumption patterns, and cultures around the globe are “homogenized”.
2. The process by which corporations avoid, or circumvent, various regulations in their home countries and
3. The process by which non-local financial criteria dominate other, local, criteria in decision making.
4. Last, but not least, there seems to be a usage of the term to designate what used to be called “imperialism” with all of its connotations and processes.

The proponents of “globalization” can point to a number of “positive” results of the phenomenon: increased worldwide economic activity and growth, increased flow of productive capacity and capital, increased transfer of technology and know-how, increased efficiency worldwide. They can refer to increased pressures for “democratization” around the world as well as increased pressure for freedom from oppression and the generalization of human rights and their protection. They could point out that there is increased pressure for companies to live by standards of “good conduct” where ever they operate, that there is an increasing push for worker protection, prevention of child labor, and women’s rights. They may refer to increased environmental awareness and protection or to the increased importance and influence of “civil society” and NGO’s in general. It is possible to paint a rosy picture.

The opponents can refer to the same observations and point out their negative impacts: the increasing gap between the rich and the poor, the flow of “low value added” industries to developing countries keeping the “terms of trade” against them, an outflow of creative ideas without commensurate returns, increased disparity in income distributions (both within and among countries), increased delocalisation and resulting unemployment. They can point out that child labor has actually gone up. They may refer to increased exploitation of local resources and the use of local populations to implement “illegal” activities such as trade in drugs, organs, and people, poaching protected plants and animals. They would point out that regulations (environmental or labor related), far from being helpful, either push the problem towards the less regulated developing countries (in the case of the environment) or are actually barely hidden forms of non-tariff barriers to keep out low cost foreign imports. They will point with alarm to increased migration, increased lawlessness and local wars, an accelerated break-down of local cultures and the extended family structures as well as a general weakening of the social bonds that kept societies together. They will point to increasing intra-generational conflicts. They will argue that despite the trimmings of democracy, there is a general breakdown of the democratic processes that, through the legislature, regulates activities that the general populace wants to see regulated.

Both parties make valid points. Both are right – and herein lay the difficulty.

In a way, the whole experience of “globalization” is not particularly new in most of the meanings in which it has recently been used. The age of empires and the whole colonial experience were also periods of “globalization”. What borders did exist were eliminated by incorporating the subjugated lands into the domain of the hegemonic entity. The elimination of borders secured trade and unified the various regimes and laws regulating economic activity and “globalization” under that foreseen by the imperial power. “Homogenization” took the form of local populations emulating the behavior and norms of their counterparts in the imperial power - elite for elite, middle class for middle class. Those carrying out economic activity in the periphery of the imperial powers did not feel compelled to subscribe to the same norms of behavior as applied at the center. And the list of similarities may be extended…..

Yet in a very real and fundamental way the current phenomena of globalization is significantly different from its historical counterparts. In previous experiences, the forces and actors at work were fairly well defined and identifiable. The “crown” no matter how distant, was a recognizable entity. National parliaments, no matter how self-serving, were a sign of sovereignty, in principle accountable to the populace they represented. Occupying armies, no matter how unwanted, were nevertheless, agents, and symbols, of a recognizable entity responsible for their actions.

In a nutshell, revolutionaries knew whom they were fighting.

In the current round, the situation is different. Although there are still “non-local” forces at work in determining local phenomena, the forces and actors at work are very diffuse, impersonal, and hardly identifiable. “The market” or “the financial markets” are hardly well defined actors; decisions seem to “happen” based on some abstract measure of “efficiency” which is supposed to be good for an unknown group of people called “shareholders”. Things seem to happen and fortunes seem to change without any apparent “local” reason or any identifiable “culprit”. There seems to be no accountability to recognized political processes. Even elected governments give the impression of being impotent in the face of these unseen forces adding to the feeling of being at the mercy of shadows.

Revolutionaries no longer unambiguously know whom to fight.

Corporations are obviously high on the list of both groups; either as heroic propagators of a new and more desirable civil order or as the despicable villains exploiting people and natural resources for barely disguised base motives of one sort or another. Contrary to the general belief that “the left is dead” and therefore arguments seen to be “leftist” irrelevant and no longer an issue, the above cleavage is not one of the traditional “left” or “right” but rather a much more complex and nuanced one. We’ll pick up on this in a coming communication.

Whatever ones view is, though, one conclusion is inescapable; corporations can no longer extract and insulate themselves from the social discourse taking place with the argument that “the business of business is business”. For better or worse, they have become a very significant contributor to the discussions on the problems and their solutions – even if some see corporations as part of the problem and some as part of the solution.

What is true for corporations is equally, if not more, true for VCs. In the interaction between creative ideas and funds, the intermediary can, by the way they act and transact business, be seen as the channel through which local heroes are created worldwide thus assure wider access to interesting ideas or they can be seen as the agent of exploitation who will then end up being marginalized and wasting their time in the global market. We no longer have the luxury of operating in the shadows far from public opinion with a set of rules seemingly insulated from the momentous changes happening in economic structures, and social perceptions and norms. We will touch upon the relative position of funds/liquidity and ideas in a coming communication but suffice it to say here that capital in general, and western origin capital in particular, is no longer king and that makes all the difference in a global world. The fund models of the 1980’s or even the 90’s will no longer suffice and need to be largely modified.

In a real sense, the popular clichés of the world having become “smaller” or that it “is flat” are not only wrong but also very misleading. A century ago competition was the guy next door, entrepreneurs did not have to think or worry about much beyond that. Fifty years ago it was your national competitor; you had to think of the other end of the country but not much beyond. Today even the corner video rental store has to worry about what is happening in India or China. The world we have to keep track of, understand, develop counter-strategies for has become much bigger. And it is not “flat” either in the sense of the uniformity of the competitive space or of its dimensionality. What seems to be very “far” in a flat space can actually be very “near” on a sphere and the shortest distance between where you are and where you want to go may not be a straight line.

This generates the need for a cadre of executives and VC’s who understand the issues from a perspective other than just that of the local corporation or shareholder in the narrow sense; executives who can decrypt the language of the other participants in this discourse and aid in bringing a modicum of clarity to an already complex set of issues. There is a need for corporations and funds to begin reading “weak signals” in the socio-economic environment to be able to recognize emerging patterns and manage perceptions. This is not a matter of “PR” but of a changing economic order in which corporations and fund managers need to organize their “internal” discourse to be able to make a meaningful contribution in the “social” discourse as well as the economic one.

This is also critical from the perspective of the local entrepreneur, the creator of the new IP or business idea. If they happen to fall upon a VC or fund that does not understand “ideas” and how to deal with them except as manifested in a set of Excel projections, if they do not understand the local context in its relation to the global context, if their ability to read the global context is merely a slight extrapolation of the way they read their own local context, then many good ideas will go to waste.

In this emerging world the entrepreneur should not be fooled by “size” or number of affiliates in any potential fund but take a close look at the dominant culture and pay close attention to whether it is organized around liquidity or ideas... that is the acid test….

More coming on this, stay tuned in……

∗ For the time being VC’s seem to be excluded from such debate, but that is only an illusion, as we shall see…

Ahmet Aykaç

Comments

[Anthony Kuhn]

Ahmet:

I'm excited to see Golden Horn Ventures blogging their thoughts on a variety of subjects and especially that of globalization. I lived in Izmir for a number of years and can definitely say that Turkey is changing and growing in ways that would never have been possible a decade ago. I linked to your post in my blog at the Innovators Network with hopes that some of the my readers would find your post useful to their business pursuits. Best wishes for every success with your growing fund!

Mutlu yillar ile kolay gelsiniz!

Anthony Kuhn

[Ahmet Aykaç]

Anthony; thanks for the message. We're also pretty excited about what is going on in Turkey - which we have not touched upon yet... But it is bubbling with ideas, and good ones at that. Yet one does ned to understand the local context and culture quite well as well as the international context to make something of it.

What did you think of the pieces we posted on our blog?

Ben de sana iyi yillar dilerim.. :-)

a