Globalization and its challenges

Last week, the Philippine Institute for Development Studies (PIDS) sponsored a conference, held at the Sofitel Hotel in Manila, on the “new” globalization and the national programs of action to face its challenges.

New globalization and its challenges. The fast-paced confluence of social and economic changes brought about by shifting technology has influenced greatly the flows of traded goods, resources and incomes in the world economy of recent decades.

This phenomenon in its present form is described as “new” globalization. The past decades of globalization have created wide ranging changes and challenges to national economies, societies, and their respective communities. The world is ever-more connected through the separate and mingled influence of these forces of change.

Leaps and advances in digital computer technology have accelerated the pace of changes and made them more widespread today .

The conference covered a wide range of topics. Many experts from foreign countries and from international institutions supplemented the participants from many sectors of the country’s development and research community.

Mega challenges posed by globalization. A United Nations study that reviewed the challenges posed by new globalization emphasize three mega trends that face the world of nations today.

The first mega trend refers to the impact of production changes on labor markets. Mechanization, artificial intelligence, and the threat of rapid displacements of human labor at production have caused changes in the factory. New ways of contracting labor have emerged.

The second mega trend is with reference to the rapidity of the changes in technology. Computerization has given rise to what is today referred to as the fourth industrial revolution which is the combined effect of the revolution in information and communications and the development of artificial intelligence. This revolution has created massive capacity for dealing with data and blocks of information, altering immensely the way social media interacts. The impact on society and on some specific communities of these developments are immeasurable and have accentuated large income inequalities across nations and within nations.

The third mega trend of globalization is the impact on the environment in which we live: climate change.

These developments are posing new questions for the future in the global ecosystem. They further pose issues facing individual nations.

The policy challenges at the national level. What distinguishes the nature of the challenges we face today is that they are more urgent than the challenges faced in the past. Their intensity is higher. They are happening at a faster clip than in previous periods of rapid change in history.

Luckily, also, the environment in which we work is also one that enables us to move faster. As individuals and as human groups, we can act faster because information flows and communications costs are cheaper.

With open access to the changing technologies, and the possibilities of attracting capital and human expertise through trade and population movements, it is possible for a less developed country that is imaginatively led to leapfrog its development path.

Correspondingly, those countries that are unable to meet the challenges could find themselves easily left behind. As that happens, they fall to the low-income end of a widely unequal world.

National policies that deal with globalization are meant to enhance desired outcomes and to mitigate the effects of unwelcome results. It is often the case that a nation with generally open borders to trade and to all agents of production do much better in terms of outcomes that are desirable, like improved competition and stable economic outcomes.

The two most used adjectives in the development literature these days are “sustainable” and “inclusive.” Sustainable development is desired because, by definition, it should not falter. Inclusive means that more groups of people are incorporated into the benefits from the development process because they are incentivized to participate in it.

In our experience, development policies that had relied on heavy protection and restrictions have often trapped countries into episodes of unsustainable development. The reason is that protection often had very high costs.

In general, open economies have been much more able to create sustainable and inclusive economic development. One of the major engines of this development is the presence of competition.

Hence, a general conclusion is the desirability, within countries, to develop a more open and inclusive economic growth model. Such a model of economic effort has still to rely on a wise combination of spending and taxation policies so that it could help raise resources to energize it and to help equalize economic opportunities.

Economies that are agile and open to the changes tend to be more capable of meeting the challenges and demands of globalization. They become winners and potential leaders in globalization. They ride the tiger of changes.

How then do we craft our policies? How do we direct the research priorities of the development challenges arising from globalization?

On a broad front, there are proactive, or positive, policies that promote the country’s development objectives. More studies should be done on how these pro-active policies can be expanded. They deal with many issues and across many sectors.

In the globalizing world, these policies enable a country to act directly to promote specific or desired outcomes, like strategizing what needs to be done, what specific activities need the highest national attention.

The priority to education or the improvement of the educational system is one of these. The educational program – which also includes training programs for work – has to focus on improvement of quality and relevance of output of the system. It includes the focus on those fields of studies that are specifically needed by changes in the job markets.

Regulation is important, but it has to be well-crafted regulation, that does not close the door toward improved competition, one that assures inclusiveness in participation by useful economic factors.

Our economic policies have been mainly restrictive in the past. Proper regulation allows the participation of more agents of production rather than less, especially when they help enhance competition and when such regulation helps to expand the potentials of development.

My email is: [email protected]. For archives of previous Crossroads essays, go to: https://www.philstar.com/authors/1336383/gerardo-p-sicat. Visit this site for more information, feedback and commentary: http://econ.upd.edu.ph/gpsicat