Globalization –
drivers and impacts

Poverty, climate change, the breakdown of democracy, an epidemic of depression – the world is facing a convergence of crises. The root cause…? Economic globalization.

But what is globalization exactly and why is it causing such destruction? On this page we will dive deeper into the origins of our global economy, key elements of globalization and the numerous costs for people and planet.

Globalization - drivers and impacts, Local Futures

Today, the process of economic globalization is driven by the deregulation of trade and finance, which gives corporations and banks the freedom to operate globally. This process started 500 years ago, when conquest and colonialism laid the foundation of our modern global economy. European powers spread an extractive economic system – one reliant on slavery, the destruction of local cultures and economies, and the imposition of monocultural ideas and practices – all across the world.

Since the mid-20th century, national governments and international institutions have been nearly unanimous in supporting globalization, often through policies that prop up large transnational corporations to the detriment of small and local businesses. With the help of these policies, a single corporate-dominated world market has emerged.

For a brief overview of how slavery, debt, and corporate control have shaped the global economy:

← Watch this excerpt from our film ‘The Economics of Happiness’.

For a brief overview of how slavery, debt, and corporate control have shaped the global economy:

← Watch this excerpt from our film ‘The Economics of Happiness’.

Corporate-funded think tanks and media outlets would have you believe that this global market is characterized by the free flow of ideas and technology, international collaboration, interdependence, and a worldwide sense of community – in other words, that the global market has created a ‘global village’.

But the reality is far different from this rosy picture.

Our global economic system has become so large and complex – with producers and consumers, CEOs and workers, and cause and effect all far removed from each other – that ethical choices are almost impossible to make, and environmental and human rights disasters have become commonplace.

Five key elements

It can be challenging to understand the workings of a system that is so vast, out-of-control, and deeply ingrained into the fabric of our daily lives. But by breaking the global economy down into five key structural elements, and understanding how it came to exist in the first place, we can begin to comprehend it – and, ultimately, RESIST IT. Use the tabs below to explore these five elements:

Corporate rule

Large corporations now exert unprecedented influence over policymaking and the media, but are unaccountable to voters or elected officials. Many corporations are so big that they wield more economic and political power than national governments; in 2017, 69 out of the largest 100 economic entities in the world were corporations.

Most of this power has been handed over to corporations by national governments. ‘Free trade’ and investment treaties, for example, typically include Investor-State Dispute Settlement (ISDS) clauses, which give corporations the right to sue governments over policies that might reduce their expected profits – such as domestic labor laws that mandate humane working conditions, or rules that limit pollution.

Development

In both the global North and South, government leaders have been convinced that the only path to prosperity is through economic development and growth, with a heavy emphasis on exports and ever-increasing global trade. In order to build up the infrastructure required, governments borrow huge amounts of capital to finance development projects.

This borrowing leaves them vulnerable to the vagaries of the deregulated global financial system: if prices for their exports decline, countries may be unable to repay their loans. They are then pressured to undertake ‘structural adjustment’ programs as the price for further loans. These programs force them to reduce spending on beneficial social programs, open themselves up further to outside investment, sell off their natural resources, and provide still more funding for trade-based infrastructures. It’s a vicious cycle that ensures both environmental destruction and increased hardship for the majority.

The reality is that economic development and growth are about commodification: turning more of the natural world into marketable goods, monetizing the reciprocal exchanges that are part of healthy societies, and enclosing and privatizing commons. All of this gives deregulated global banks and corporations the ability to accrue ever more wealth and power.

Finance

97% of the money in circulation today is backed only by debt: each time a bank issues a loan, money has been ‘created’ out of thin air. Much of this money is then invested in speculation – bets on corporate stocks, the fluctuation of exchange rates, and the price of agricultural commodities, to name a few. The ‘phantom wealth’ thus generated is totally unconnected to the creation of anything of real value or utility.

Financial deregulation – the elimination of obstacles to foreign investment and speculation – has allowed massive amounts of this phantom capital to flow across borders at the click of a button. Bets on exchange rates can cause currencies to crash, instantly changing the prices of imported goods on which people have become dependent. Bets on agricultural commodities are playing dice with food costs for millions of people, and with the incomes that farming families rely on for survival.

This deregulated financial system is highly unstable, and it is therefore not surprising that the frequency and severity of financial crises has increased over the past decade. As economies have become more interconnected, these crises have also become more contagious, spreading quickly from one country to another.

Subsidies

In the hope of improving their economies by attracting and retaining big businesses, governments worldwide routinely hand out hundreds of billions of dollars in direct subsidies to transnational corporations through tax breaks, market access programs, production subsidies, loan guarantees and more.

Governments also provide indirect or hidden subsidies to big businesses, including fossil fuel subsidies that artificially reduce the cost of long-distance transport, and investments in infrastructure such as centralized power plants and shipping terminals that disproportionately benefit large companies. The costs of these businesses’ negative impacts on the climate, human health, and the environment are ‘externalized’ – i.e. paid for by society and the natural world.

Trade

Free trade and investment treaties allow corporations and foreign investors to move in and out of countries in search of ‘investor-friendly environments’ – places where taxes are lowest; labor, environmental, and health standards are weakest; and where the most profit can be extracted for the lowest cost.

In conjunction with the subsidies given to fossil fuels and other extractive industries, these treaties have fueled an explosive growth in international trade, which is almost 40 times greater in volume now than it was in 1950. And redundant trade – where countries import and export nearly identical quantities of identical products – is now commonplace.

The economic theory of ‘comparative advantage’ leads some to claim that trade deregulation creates ‘efficiencies’ that work for the good of all. But this early 19th century theory does not account for the trillions of dollars in direct and indirect subsidies that prop up the system, distort market prices, and mask the true costs – both economic and ecological – of unregulated global trade.

What are the costs?

A fish served in a California restaurant may have been caught illegally on a Thai fishing vessel manned by slaves. A t-shirt bought in Germany may have been sewn in a Bangladeshi sweatshop, where workers labor in unsafe conditions for starvation wages.

The way trade works in the global economy can be insane – it wastes resources, worsens climate change, and undermines the livelihoods of millions of small-scale producers worldwide.

Watch this 3-minute tongue-in-cheek video ‘Insane Trade’ →

In the long term, the globalized economy has no winners. Small farmers, the poor, and the disenfranchised have been the first to suffer its most devastating consequences. But as the economic, social and environmental costs of globalization mount, not even the wealthy will escape its impacts. These include:

Environmental breakdown – Erosion of democracy – Loss of livelihoods – Unhealthy urbanization – Lack of resilience –
Growing wealth gap – Loss of food security – Declining health – Psychological breakdown – Violence and conflict

Environmental breakdown

Globalization intensifies the ecological consequences of industrialization. Corporate agribusinesses poison topsoil and let it wash out to sea. Timber industries clear-cut millions of acres of mature forest each year. Oil and mining industries permanently damage landscapes and local environments. Pollution is destroying ecosystems worldwide and species extinction is accelerating rapidly.

Erosion of democracy

The hypermobility of corporations, the creation of money by deregulated banks, and the cozy relationship between government and big business have resulted in a profoundly undemocratic global order.

Political power is becoming centralized into unelected, unaccountable bodies like the World Trade Organization (WTO), the International Monetary Fund (IMF), and the European Commission, steadily shrinking the influence of elected officials on policy decisions. And when political parties on both the left and the right embrace the wishes of corporate interests, voting can seem all but meaningless.

Loss of livelihoods

All over the world, jobs are lost when big business displaces local businesses. For example, the giant online marketer Amazon employs about 14 people for every $10 million in retail sales, while main-street shops employ 47 people for the same amount of sales.

Unhealthy urbanization

Globalization erodes rural economies, leading to massive population shifts from rural areas to cities. As of 2019, more than 1 billion people worldwide live in urban slums. Many of these people were displaced from rural communities to make way for ‘development’ projects, or lured to the cities by the promise of jobs and a better life.

Lack of resilience

Because globalization encourages countries to specialize their production, most now rely on imported goods to meet basic needs. Supply chain disruptions can prevent producers from getting their products to market, and consumers from obtaining foods and other necessities.

Growing wealth gap

The wealth of the world’s 8 richest people now equals that of the poorest half of the world’s population – more than 3 billion people – and economic inequality is worsening, due to the further spread of corporate rule.

Loss of food security

As globalization spreads, the diverse foods eaten by the world’s people have been steadily displaced by a narrow set of commodities traded globally. The result has been a 75% decrease in the world’s agricultural diversity over the last half-century; this narrowing of the genetic base puts food security at risk worldwide.

Declining health

Industrialized societies are currently experiencing an epidemic of the diseases of civilization: obesity, diabetes, heart disease, and cancer. Processed food, pollution, sedentary jobs, and a sense of isolation – all side effects of globalization – are contributing to a worldwide decline in well-being.

Psychological breakdown

In traditional societies, personal identity is grounded in deep community ties and a connection to place. In the modern economy, increasing mobility, competition, and dependence on a centralized market have eroded these relationships, destabilizing our sense of security and belonging. Vulnerable, isolated individuals become easy targets for advertising messages telling them that just one more consumer purchase will enable them to meet artificially imposed standards of beauty, lifestyle, and material ‘success’.

Every day, people across the world are bombarded with imagery that presents the modern Western consumer lifestyle as an ideal, while implicitly denigrating local traditions and land-based ways of life. The prevailing message is that urban is sophisticated and rural is backward. No matter who you are or where you live, the consumer monoculture imposes expectations that are impossible to fulfill, fueling feelings of insecurity and leading to epidemics of depression, anxiety, and addiction.

Violence and conflict

The rise of ethnic, racial, and religious tensions around the world is in large part a predictable effect of an economic system that promotes a global consumer monoculture while at the same time heightening economic insecurity. Far from being the pathway to international cooperation, globalization has actually had the opposite effect, driving wedges between countries, between ethnic and religious groups, and between individuals.

Moving beyond globalization

If you’re feeling overwhelmed by the enormity of the global economic system, you’re not alone! But the global economy is man-made, and therefore can be changed: the course that has been set for us is neither inevitable nor fixed, and we can choose to shift direction. What might that shift look like? Choose one of the topics below to find out.

Big Picture Activism - rethinking basic assumptions

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Globalization –
drivers and impacts