Globalization has been an immense source of prosperity and poverty reduction. It has also probably contribute to peaceful relations as neighboring countries trade and invest with each other instead of trading bombs and bullets as the basis of neighboring relations. But it has also produced massive instability through financial crises.

Globalization – “a global economy, a global society and global governance – is the product of open markets, open borders, and information and communications technologies. We are all now connected more than we have ever been before through trade, investment, finance, and migration and information communication.”

“Globalization is a process leading to greater interdependence and mutual awareness (reflexivity) among economic, political, and social units in the world, and among actors in general.”

Economic Globalization:

Economic globalization is only part of the broader social phenomenon of globalization. By economic globalization we mean the growing international integration of countries through commercial flows, capital flows, flows of direct investment, technology transfers, and the movement of workers. Globalization also has social, human, cultural, and political dimensions beyond the strictly economical ones.


Globalization and Financial Crisis of 2008:

Financial globalization – always globalization’s weakest link – is producing growing instability. And this instability threatens to break the whole globalization project.

Well before the global financial crisis, the potential benefits of financial globalization were questioned by many. Volatile capital flows run hot and cold. And exchange rates move all over the place, without any apparent rhyme or reason. The global financial crisis has only heightened capital volatility.

The collapse of two Bear Stearns Hedge funds in summer of 2007 exposed what came to be known as the subprime mortgage crisis, reintroducing the world to an era of bank failures, a credit crunch, private defaults and massive layoffs. In the new, globalized world of closely interdependent economies, the crisis affected almost every part of the world, receiving extensive coverage in the international media. The crisis of 2008 will go down in history as the first full-blown global crisis.

In the three decades before the 2008 financial crisis, individual national economies became increasingly global: banks, companies and consumers overseas had a direct impact on the economy of other countries

But in recent years, the amount of money flowing across borders drastically decreased. According to reports, this represented a drastic shift away from international commerce, with localized markets more dependent on domestic consumption for growth. It could mark the end of modern globalization.

Plateau of Global growth:

Huge amount of money was removed from the global financial system in the wake of the financial crisis and the worldwide economic slowdown. In 2007, $11.8 trillion in capital in the form of investments and loans moved internationally. This represented 335 percent of global economic production. But in 2012, only $5 trillion crossed international waters, representing 312 percent of global output. And this fall in the international investment is still decreasing brusquely taking economies to antiquarian times. Global growth would be extremely difficult without more money in the system.
“For three decades, capital markets and banking systems rapidly expanded and diversified, but now that process - called financial deepening - has largely grounded it to a halt.

Causes of Financial crisis:

While few predicted the financial catastrophe, almost everyone has an explanation as to why it happened. To economists, it all seems painfully simple.

(1)Too much foreign money was flowing into the US from the Asian countries especially China. The availability of easy credit meant that too many people borrowed to buy properties that they could not afford. The bankers bundled up these loans and sold them to investors that could not understand the complexity of these bundles and the risks inherent in them. Once US borrowers started defaulting on their mortgages, they lost their houses and investors all around the world, including banks and hedge funds, lost their investments.

(ii) The failure of the government to regulate the banking activities.

(iii)The crisis results from the policy of keeping the interest rates low for an extended period of time.

Given the ongoing nature of the crisis, many complicated explanations will surface in the years to come. Yet the root of the economic depression might very well lie in one fundamental human instinct: ‘Greed.’

Impact of globalization on the triggering and propagation of the financial crisis:

Economic globalization cannot be considered the main cause of the current financial crisis, but it is true that greater international economic and financial integration have made the worldwide transmission of the crisis’s effects faster and more intense. What can be seen as the positive side of globalization in one context—international trade flows and investment in emerging countries—could, in a moment of panic, turn into an accelerator of financial crises, giving greater impetus to their international transmission and planetary impact.

Possible scenarios in the given situation: There are two possible ways forward in the situation of economic crisis,

(i) Countries would become isolationist, continuing to retreat from international capital markets and concentrate on domestic growth.

This scenario would likely provide stability while sacrificing potential international growth. Companies with an overseas presence would retract and concentrate on domestic growth; and risks and rewards that come with foreign investment would be eliminated.

(ii) Financial institutions and policy makers will have to put a regulatory system in place to prevent catastrophes like the 2008 crisis. These regulations would allow money to move across borders more efficiently and with less risk.

The potential for growth in the second scenario is greater. But creating binding global financial regulations, and appointing a global authority to enforce them, would be extremely difficult.

Once governments succeed in restoring consumer and investor confidence; they should focus on designing regulations that encourage responsibility and a long-term outlook. Furthermore, policymakers have to recognize the need for global oversight of the banking industry, either by strengthening existing institutions or by creating new international authorities. Excessive leverage in the non-financial sector (corporate and households) can be further deterred through tax and regulatory policies that do not favor debt financing over equity financing

Role of G20:

One bright spot of the global financial crisis was the emergence of the G20 as the new steering committee of the global economy. At long last, countries like Brazil, China, India, Indonesia, Mexico and South Africa could sit side-by-side on equal terms with the G8 (US, Japan, Germany, France, UK, Italy, Canada and Russia) and chart the way out of the crisis.

G20 moved swiftly to position itself as the core crisis committee over other institutions by establishing Working Groups 3 and 4 to develop collective positions on reform efforts at the IMF, World Bank and other multilateral development banks (MDBs). The incremental reforms of the IFIs advanced at the London and Pittsburgh Summits, to update their management committees and increase voting rights of the emerging economies, not only represent a modernization of their governance structures, but also bolster the G20 as a global steering group

One of the early catalytic functions of the G20 was to create the Financial Stability Board (FSB) replacing the Financial Stability Forum — and to entrust it with key responsibilities in international financial oversight and monitoring national economic policies to promote balanced and sustainable growth.

Possibility of another crisis in future:

The frequency of financial crises and recessions is quite high: on average, there is one crisis every 58 months (using data from the US National Bureau of Economic Research). Reasons that we are on the edge of another crisis includes;

(i) Energy crisis: An energy crisis now would not be caused by the scarcity of energy sources - quite the opposite. The development of new techniques and growing supply of gas in the US have turned shale gas into a potent geopolitical weapon. If the US Congress were to allow energy exports, energy prices in the world would fall significantly. This would be great for companies, but would trigger geopolitical problems in Russia and West Asia. These countries rely on energy demand from Western Europe and China, where energy costs are currently hurting competitiveness and where a cheaper alternative would be welcomed with open arms.

(ii)Corporate failures: The norm for companies is now to be BBB-rated. In the US, there are only three firms that still are AAA-rated: Johnson & Johnson, Exxon Mobil and Microsoft. There were 61 in 1982. Since interest rates are low, companies see the benefits in debt financing. But this means that firms are also more sensitive to changes in interest rates. Typically a BBB rating is associated with a probability of default of about 4 per cent in five years. Therefore, we should expect that in the next five years, about 16 companies in the S&P500 index will go bankrupt.

(iii)Geopolitical crisis: From Nigeria to Ukraine, and from Syria to Venezuela, the world risk map shows too many hot areas where geopolitical events could trigger a world crisis. Why should anyone care about Uk¬raine or Syria? Because fi¬nancial markets tend to overreact to political events, And because, given the financial linkages among countries, negative sentiment in China will trigger a market collapse in the US and vice versa. Let us not forget the lessons of the Great War (we are now commemorating the 100-year anniversary); the butterfly effect can be deadly in politics.
(iv)Poverty crisis: Income inequality is one of the social battles that we need to fight. But the problem with fighting income inequality is that the usual solutions (typically taxes) hinder the competitiveness of nations. This is one of the long-term crises that will require smart leadership to avoid inefficient solutions.

(v)Cash crisis: There is too much money out there. It is the result of quantitative easing policies that central banks have followed. The excess liquidity in the system is concentrated among financial and non-financial firms. Citigroup has more than $487 billion in cash; Apple about $150 billion. It is paradoxical that, in some cases, banks and firms are so rich that they could buy entire countries (if one takes into account the total GDP minus government debt). If the corporate sector were to unload such massive financial resources (as is their moral obligation) on to society, they would create hyperinflation and hence financial crisis.

Conclusion:

Once the crisis occurred, financial globalization provided a buffer against the crisis for some countries, whereas it amplified the crisis for others. The global economy is at a crossroads. One path leads to regulatory integration on a global scale, creating national economies with extremely close ties. The second path leads to a world where national economies are more isolated and rely on domestic consumption for growth. It remains to be seen which way we’re headed.
The lessons of history are clear. Civilizations come and go. They usually self-destruct through political incompetence or complacency.

We may not be there yet. But the social and political injustices of the financial crises are deep. Working men or women lose their job. They pick up the bill of the financial crisis as the costs are socialized through the government budget. They also saw the golden boys and fat cats of Wall Street and the City pocket the benefits of the upward ride of the roller coaster.

Global finance is sowing the seeds of globalization’s self destruction. If economic growth remains weak, and unemployment stays high, people will get angrier – especially if we see a lost generation of youth on the streets. Look at what has been happening in Tunisia and Egypt.

Pressure will grow to shut down global markets through protectionism. When we see another financial crisis – it is bound to happen – the social mood will get worse. Already unstable and fractured societies will splinter and fray even more.

We cannot be sure of the consequences. Societal breakdown can take many forms. Of course, societal breakdown may not happen. We have to make sure that it does not happen. But at the moment, we seem to be sleep walking towards globalization's self destruction.

If the appropriate international and national institutions are put in place, financial globalization retains its potential to positively contribute to risk diversification, consumption smoothing and efficient capital allocation. Indeed, under an improved institutional framework, a lower volume of cross-border financial trade might deliver more genuine benefits from financial globalization, if smart international asset trade is enhanced at the expense of distorting international asset trade.

The Clash of Civilizations and the Remaking of the World Order

Author: Samuel Huntington

Introduction

‘La revanche de dieu,’1 a term that Huntington himself also uses, is apt in explaining the trends and world view that the Clash of Civilizations and the Remaking of the World Order projects. The mainstream contemporary political theory, especially post-cold war has tended to regard primordial identities of religion, race and ethnicity as part of the old world and that these constructs have an insignificant role in shaping the world order in modern times. Genocides in former Yugoslav followed by an upsurge in separatist movements and religious militantism in the late twentieth century, however, seem to suggest that identity politics have an important role to play in shaping conflicts and wars in modern times. Primordial identities based on religion and cultural and ethnic commonalities seem to be reasserting themselves with a vengeance. There has been as Kepel originally stated, ‘La revanche de dieu’ (the revenge of God).

Huntington, in the Clash of Civilizations and the Remaking of the World Order, analyses and asserts the resurgence of post-cold war cultural identities to explain the prevailing and future world order. Discarding arguments and world views which assert the existence and proliferation of a universal culture, Huntington argues that the ‘great divisions among humankind and the dominating source of conflicts will be cultural.’2 He then goes on to offer a theoretical approach on how countries from common civilizations will align themselves and what sort of inter-civilization alliances will be formed. In order to assess how plausible such a framework is and the strengths and weaknesses of his arguments, this book review looks at how Huntington has built his argument through a chapter-wise summary of the book and then offers a critique on the content.



Chapter Summaries

Huntington begins his argument by looking at the weaknesses present in the four paradigms existing in the political world after the cold war. He goes on to show how the rise of ethnic conflicts and genocide has extinguished most hopes of a one world model. In most cases, the one world model has been replaced by the ‘us against them’ (West against the rest) model which Huntington regards weak, as it fails to look at the differences in the non-western civilizations. He goes on to explain that the realist model of international relation suffers from limitations as it calls the sheer chaos model highlighting failed states as close to reality but simplistic as it fails to see any order in the world at all. He goes on to state that there may be a degree of truth in each of the models but that ‘the four paradigms are also incompatible with each other’3 making it difficult to accept different pieces from each model. He then goes on to assert that the civilization model that he proposes eliminates this problem as elements from each model can be incorporated into this model. He then discusses the rise in ethnic conflicts to elucidate the need for a civilization model to understand and predict political happenings.

The second chapter moves on to define and explain the characteristics of a civilization. Huntington terms civilizations as ‘broadest cultural entity… the biggest ‘we’ within which we feel culturally at home as distinguished from all the other ‘thems’ out there.’4 According to Huntington, the main civilizations that exist in the world today are Sinic, Japanese, Hindu, Islamic, Western, Latin American and possibly an African civilization. In later chapters Huntington also discusses the Russian Orthodox civilization separately from the Western civilization. After elucidating the civilizations that exist in contemporary times, Huntington discusses that the rise of the west in the 16th century led to world politics and other civilization being dominated by a ‘unidirectional impact of the Western civilization.’5 The 20th century, however has seen the rise of other civilizations leading to intense sustained and multidirectional interactions among all civilizations.’6

The next chapter discusses the notion of a universal civilization which occurred as a direct result of dominance of the western civilization. Huntington discards the notion of a universal civilization by looking at the rise of indigenous languages and religion especially Islam. Thirdly, where it is mostly assumed that modernization of societies shows their westernization and thus move towards a universal civilization, Huntington differentiates between westernization and modernization. He argues that ‘the west was the west long before it was modern’7 and goes on to look at the characteristics of the civilization which made it western.8 He then moves on to look at the different responses societies have had to the west and modernization such as Rejectionsim, Kemalism and Reformism and argues that societies are becoming more modern and less western.

Following from this, the next chapter looks at the decline of the west and the rise of other societies. It should be clarified at this point that when Huntington talks of the decline of the western civilization, he talks of a gradual and slow decline. He argues that the west is likely to remain a dominant power for a long time to continue but there is a ‘slow, gradual and inexorable’9 fall marked, for instance, by the decline in its population, economic products and military capabilities in comparison to other societies especially East Asia. Furthermore, he analyses a rise in non-western cultures seen by the indigenizing stance taken by post-colonial leaders. In East Asia’s case, he shows how East Asia attributes its economic success and growth to adherence to their own culture rather than following the western model. The next chapter expounds on this idea further. Huntington also explains a resurgence of religion which has occurred ‘as result of long standing sources of identity and systems of authority being disrupted’10 through processes of modernity. People, hence, turn to religion for a sense of belonging.

Building on the previous chapter, chapter 5 moves on to explain the roots behind the challenge East Asia and Islam are presenting to the West and how these challenges are different from each other. The economic success of East Asia which it attributes to its culture has led to a renewed self confidence in the East Asian culture. This in turn has led to a promotion of Asian values as universal values and also made East Asian countries assert themselves when dealing with the west. The Asians are, thus, using their economic success to assert themselves, where as in the Muslim world, Muslims are increasingly turning towards Islam as a source of identity. Huntington goes on to argue that population growth in the Islamic world leading to a population consisting largely of youth, the failure of the state to deliver economically and the dictatorial nature of the state which suppresses political activity, has led to a rise in fundamentalism and Islamic Resurgence in the world.

Chapter 6 describes the current trends in the world today of cultural alignment. Whereas in the cold era, a country could define itself as being non aligned or aligned on the basis of its security interests, there has been a crisis of identity post cold war.11 Countries thus have shifted to relying on ties of blood, language, religion and values to reaffirm their identities. This has not only led to the formation of organizations such as NATO and EU which have realigned countries of roughly the same civilization together but Huntington also goes on to argue that only those international organizations can be effective whose members are from a similar civilization. Huntington moves on to discuss the structure of civilizations based on core countries, lone countries, member states, cleft countries and torn countries.12

The next chapter builds on the structure of civilization by showing that ‘civilizational grouping are emerging involving core states, member states, culturally similar minority populations in adjoining states. States in these civilizational blocs often tend to be distributed in concentric circles around the core state or states, reflecting their degree of integration with the bloc.’13 It goes on to discuss the changes occurring in the Western, Sinic and Orthodox civilizations due to this grouping. Huntington goes on to discuss in considerable detail the lack of a definite core state in the Islamic civilization and its reason. He goes on to discuss that in the Islamic world, identities and loyalties are shaped as an inverse U; where loyalty is extended to the family, tribe or clan at a micro level and the whole culture or religion at the broader level with very little significance given to the nation state. This in itself is problematic as a string core state is needed to bring the civilization or Ummah together yet the Ummah holds the concept of a nation state illegitimate. Huntington goes on to argue that it’s the absence of the nation state that has led to so many external and internal conflicts in the Islamic world. He also looks at possible core states that could have emerged and the reasons they have not emerged so far.

The following chapter discusses the different clashes that can occur between civilizations at a micro and macro level. Huntington argues that at the micro level, most clashes are and will continue to be between Islam and its Orthodox, Hindu, African and Western Christian neighbours, and the macro clashes will be between the west on one hand and the Islamic and Sinic civilizations on the other. The rest of the civilizations are what he calls ‘swing civilizations’ meaning they will shift allegiance one way or the other depending on different interests. In this regard, he shows how a Confucius-Islamic connection has emerged over the recent years. He then goes on to look at the declining ability of the west to promote a single culture and dominate global politics due to the difficulties it is facing in maintaining its military superiority and counter proliferation, promoting western values and institutions by forcing other societies to respect human rights and adopt democracy and protecting its ethnic and social integrity by restricting the number of migrants and refugees from non-western societies entering western societies.14

Chapter 9 moves on to discuss inter civilizational politics at the micro and macro levels. Huntington predicts that micro level conflicts will occur between neighbouring states from different civilizations and groups from different civilizations within a state. Macro level conflicts will emerge between core states of different civilizations. Huntington focuses his argument on the possible shift of power from Unites States to China as a source for inter civilizational conflict and the dynamism of Islam as a source of relatively small ongoing fault line wars.15 He moves on to discuss the historical antagonism between the western and Islamic world and moves on to look at the five modern sources of conflict: population growth in the Muslim world generating a large number of disaffected unemployed youth who can be recruited by fundamentalist organizations, the rise of Islamic Resurgence, West’s simultaneous efforts to universalize its values and institutions, maintain its military superiority and intervene in conflicts in the Muslim world, the collapse of communism which was the common enemy of both civilizations and an increased contact between both civilizations which has stimulated a new sense of identity.16

Huntington looks at the rise of China as an economic and military power and the shift that may occur in the power balance due to it. In regard to this, he discusses the increased antagonism between Asian societies and the west leading to a band-wagoning of states around China. He goes on to discuss a possible deepening of relations between Islamic and Sinic world and the alignments that are likely to occur between the swing and other civilizations.

Chapter 10 elucidates how the Soviet-Afghan and Gulf war were ‘transition wars to an era dominated by ethnic conflict and fault line wars between countries from different civilizations’17. Huntington shows how both wars were straight forward wars where one country attacked the other but came to be seen as civilizational wars. He moves on to discuss the incidence of communal and fault line wars in the Islamic world. He explains why ‘Islam has bloody borders’18 by looking at empirical data which shows that the maximum incidence of wars in the recent decades has been between Muslims and Muslims or between Muslims and non-Muslims. The most common reasons given for this situation are the demographic pressures of the Muslim world, the fact that Islam has traditionally been a religion of the sword, the way the religion spread from Arabia to Asia via North Africa has brought Muslims into direct contact with other cultures and the indigestibility of Islam as a religion. However, Huntington argues that perhaps the most significant reason for this is the absence of a core state in the Islamic world, an issue discussed in detail in the next chapter.

Chapter 11 explains how fault line wars tend to exaggerate differences between civilizations and causes the war to further intensify. ‘In the course of a war, multiple identities fade, and the identity most meaningful in relation to the conflict comes to dominate. That identity almost always is defined by religion.’19 A fault line was between two countries or groups starts to involve the rest of the countries directly or indirectly in the war. Huntington goes on to look at the important role core states have to play in resolving the war. He builds this claim by highlighting the need for a disinterested third party to resolve conflicts and that in the case of fault line wars, core states have the capability to negotiate agreements from their counter parts and to induce their kin to accept these agreements.20 In this light, the Islamic world lacking a core state has been unable to come up with a mediating force that has the ability to make its counterparts negotiate terms and then press the concerned country to accept these terms.

The last chapter titled the ‘future of civilizations’ looks at the future of the western civilization in particular. He looks at the tendency of every dominant civilization to think of itself as universal and immortal yet every civilization that thought so has fallen. He admits that the western civilization is unique as it brought modernization in the world but that it must use this uniqueness to renew itself and overcome its decline. He also goes on to discuss the need for core states not to intervene in the other’s sphere of influence in order to maintain peace.

Analysis and Critique
The question that now needs to be looked at is that how plausible is the framework that Huntington provides. One distinctive factor of Huntington’s work is that he tries to bring culture back into the study of international relations and state behavior. As Shulman states, ‘Huntington redresses one of the main glaring weaknesses of liberalism and realism alike: neglect of cultural sources of cooperation and conflict.’21 However, at the same time, most scholars are also quick to point out flaws in Huntington’s methodology and framework. Rosecrance and Jervis22, for instance, highlight the downplay of inter-civilizational conflicts in Huntington’s analysis of global conflicts including conflicts between religious sects. Rosecrance further argues that ‘if civilization is the one true independent variable, why did it give away to power relations during the Cold War’23 and goes on to show that the inter-civilization alignments in the cold war and the ones Huntington addresses (between Japan and China and India, Russia and the West) show the interests of powerful states and not overarching cultures. This argument highlights a related weakness in Huntington’s analysis of excluding the influence of the world economy in political decision making.

Evans goes on to argue this issue further in his review of the book and points out that Huntington’s analysis of the ‘tensions between the United States and China are remarkable to the extent that they unfold without reliance on explanations involving Confucianism or Chinese culture.’24 He goes on to point out that the cause of tensions seems to be overwhelmingly based on economic interests, an issue that Huntington fails to look at. Evans concludes that bringing civilizations into the framework for analyzing geo-political trends confuses the real issue of economic gains and the conflicting interests of the elite and the middle class within a culture. Shulman also points out weaknesses in Huntington’s predictions of the future world order stating that the he never gives a time frame for the emerging world order and never explains ‘what proportion of alliances and successful integration schemes must be there within civilizations and what proportion of conflicts must be there between civilizations to support the civilizational perspective.’25

Where does this critique leave Huntington’s thesis? Though his inclusion of culture as an influencing factor in global conflicts seems to be valid, he seems to fall into the same trap of determinism he wanted to take political theory out of. Instead of taking economics as a dogma, he takes culture. His reliance solely on culture may have been more valid if he looked at the behaviour and sentiments of people within a state (differentiating it from state behaviour) and the direction of transnational links between them; he, in other words, fails to completely prove how state behaviour may be completely based on cultural affiliations. Culture and civilization may play a part in influencing state decisions, but it cannot be thought to be the dominating factor.

what other topics should be prepared under the topic Globalization except economy ?? please share outline of globalization ...
have you completed preparing IR ??
what topics should we expect from examiner to ask in Globalization ??

I personally think that economic aspect is the most important ,, remaining being very general and easy ,, means causes, future impact, advantages and disadvantages of globalization.