Globalization and Peace: The Cold War
“Global trade promotes peace” is a provable statement when recalling fairly recent history. While the Cold War was a terrifying experience for most involved, the Cold War posed a particular obstacle to globalization and the promotion of global trade. The two largest powers on the planet forced the globe into a two sided, “us vs. them”, mentality, literally dividing the planet into two hemispheres of limited interaction, trade, and communication. The armaments stockpiled by both sides to secure their respective existence by force if necessary amounted to enough destructive force to destroy the entire planet three times over. The Cold War ceased to be part of our reality and turned into history; in part, we must thank globalization for this turn of events.
Globalization can be defined in several ways depending on the overall context and the viewpoint of the observer. In the broadest sense, globalization refers to continuously increasing interconnections between the nations around our globe and the processes that lead to the integration of independent nations into a global network. Globalization can also be defined rather narrowly; from a people-oriented perspective, for instance, globalization describes our extended mobility with respect to world travel, our ability communicate over great distances, and the blending of diverse cultures. The economic perspective, which is commonly applied in business and political settings, defines globalization as the unstoppable rise of international trade and the spread of free market principles, as well as democracy around the globe.
Forms of international trade have existed for hundreds of years. The book “The Travels of Marco Polo”, for example, documents Marco Polo’s experience as the son of a merchant traveler in the 13th century. Marco Polo’s father and uncle, originally from Venice, began trade with the Middle East and proceeded to explore trade opportunities in Asia. Europe’s exploration and colonization of Africa, Asia, and the Americas in the beginning of the 15th century, entailed forms of international trade as well. However, global commerce did not reach its full force and dimension until the 20th century, particularly the latter half of the 20th century.
Several factors contributed to the acceleration of globalization in the 20th century. Industrialization reached an impressive level, allowing companies to mass-produce and grow to respectable sizes; large business were generally better equipped to produce adequately and conduct major transactions across national borders. Increasingly sophisticated motorization, such as airfreight and speed rails, defined a new era of transportation and eased the hurdles associated with global product distribution. Technological communication innovations, such as the telephone and later the Internet, permitted better and faster communications in real time across long distances. Last but not least, social and political developments, such as the Marshall Plan following World War II or the fall of communism in Eastern Europe and Russia, paved the way for a global economy.
World War I defined the global economy in the first half of the 20th century. The leading economic nations, such as the United States and the United Kingdom, engaged in protectionism that favored respective local businesses rather than enabling free trade across borders. The imposition of tariffs and quotas on imports established effective barriers to global trade and lead to a significant reduction of global trade and foreign investments throughout the 1930s (Griffin, R. & Pustay, M. 2010). The European devastation following World War II, however, reversed the trend towards protectionism; the Marshall Plan, also known as the European Recovery Program, provided the war torn European nations with the necessary funds to rebuild their economies in exchange for trade agreements with the United States and the erection of political and economic structures that favor free markets. In addition, the major trading powers negotiated tariff and quota reductions through the General Agreement on Tariffs and Trade (GATT) with the goal to ease international trade among participating nations.
The effects of globalization are diverse and receive strong critique and praise likewise. Critics of globalization argue that globalization promotes job insecurity, creates environmental and human rights concerns, accounts for a lack of national sovereignty, and contributes to the erosion of cultural diversity. Job insecurity results from the business trend to outsource labor to the cheapest available nations; in turn, the job market in the home country experiences decreasing stability. Similarly, environmental and human rights concerns are born out of the business trend to locate productions in nations that have a weak regulatory framework. Lacking regulation invites unethical conduct due to cost savings; the absence of labor laws, for instance, allows businesses to employ workers in exchange for inadequate wages. In contrast, concerns about lacking national sovereignty relate to the increasing development of internationally applicable regulations, which aim to hold entities from each nation that is participating in the global economy accountable for their conduct. Out of fear to loose national sovereignty, the United States hesitated for more than a decade before President Obama finally decided to ratify the Kyoto Protocol, an international agreement to cut greenhouse emissions. The increasing interconnectedness resulting from globalization, critics argue, erodes national and regional cultures as well as linguistics that create an appealing global cultural diversity. Furthermore, critics see the spread of free market principles and capitalism as form of despotism that allows the leading economic nations to rule the globe and exploit the less powerful nations (Lawrence, A. & Weber, J., 2011).
Proponents of globalization, however, view the effects of globalization in a different light. Outsourcing jobs to low income nations is seen as form of production efficiency that ultimately leads to increased economic productivity and price reductions for consumers, thus increasing access to goods and services to a broader range of people nationally as well as globally. The lacking nationally sovereignty, proponents purport, is offset through foreign investments that support economic development; economic developments, in turn, will increase the nations power and standing in the global market. The erosion of cultural diversity is hard to counter because increasing interconnectedness blends cultures and results in the loss of regionally distinct cultural traits. However, supporters of globalization see the interconnectedness of nations as an integral part to the spread of technology and knowledge that will benefit the human existence regardless of location or culture; wastewater treatment technology, for instance, allowed India to curb water shortages and the spread of diseases.
Although critics insist that globalization leads to despotism through the spread of capitalism and free market principles, proponents counter that globalizations spreads democratic principles and reduces military conflict, thus promoting diplomacy and world peace. Democratic principles foster an environment of tolerance with respect to conflicting views and replace hostile attitudes with diplomacy. In addition, democratic principles support free trade and trade derived international interdependencies increase the opportunity cost associated with military conflict; war disrupts trade, the higher the level of trade, the greater is the cost of losing trade related benefits (Weede, E., 2004).
Indeed, globalization has a dynamic of its own. A study conducted by leading economist that considered 290,040 country-pair observations from 1950 to 2000, concluded that increased bilateral trade reduces military conflict between the paired nations, especially if the paired nations are contiguous (Lee, J. & Pyun, J., 2009); contiguousness is said to be a factor that increases the probability of conflict in the absence of bilateral trade. Thomas Friedman, renowned New York Times columnist, author, and commentator, asserted in his book “The Lexus and the Olive Tree”,
“Globalization is not simply a trend or a fad but is, rather, an international system. It is a system that has now replaced the old Cold War system, and, like that Cold War system, globalization has its own rules and logic that today directly or indirectly influence the politics, environment, geopolitics, and economics of virtually every country in the world.”
The plan to rebuild Western Europe after World War II did not center solely on the creation of a prosperous European free marketplace that would render a source of lasting product and service demand for the United States through trade agreements, such as the Marshall Plan. A prosperous and strong Western Europe was to serve as a buffer between the western capitalistic ideology and the eastern implementation of communism. The two opposing ideologies engaged in what is known as the Cold War, an ideological war that was primarily waged through propaganda and threats of possible military involvement rather than actual military involvement. The Cold War created a sharp division between the eastern and western hemisphere of the globe. Western capitalism supported free markets and democracy whereas eastern communism favored a totalitarian regime and strict governmental market regulation. Communism as Marx intended it was supposed to free the people from inequality and the unfair rule of the bourgeoisie; governmental regulation of the market was meant to serve as a tool that would provide living essentials, such as housing and food, to everybody. As time passed, however, communist ideals fell victim to power hungry individuals who turned governmental regulation into a dictatorship to reap personal gains.
In the late 1980’s, communism deteriorated in Eastern Europe and Russia. In an effort to keep up with the power of capitalist nations, communist nations had overextended their resources and drove their economies into stagnation. Capitalist nations generally have the capability to borrow money to boost stagnating economies through the issuance of securities but communist nations cannot borrow anything if the government already owns all the national resources. The people of the communist nations, such as the people of the Soviet Union and Poland, grew tired of the stagnating economies and the totalitarian regimes that appeared to treat them like prisoners; the people in the communist nations demanded liberation from the repressive regimes and called for the democracy and capitalism that had led the West to individual freedom and prosperity (Carnes, M. & Garraty, J., 2008). Michael Gorbachev’s liberal approach to socialism had exposed the communist population of the Soviet Union to media from the capitalist West that depicted the joys and prosperities of economic freedom (Young, M, 2010).
The Revolutions of 1989 marked the beginning of the end of communism in Europe and Russia; with few exceptions, the revolutions accomplished political and economic change in a peaceful manner. The tension-ridden global political climate that stemmed from the Cold War changed almost over night. The West offered moral and financial support for the new democratic governments and free market economies. The International Monetary Fund was the primary vehicle for western nations to fund the new economies and create strategies that would later lead to binding trade agreements (Stone, R., 2002). In addition, the major opposing nations of the Cold War, Russia and the United States, signed agreements to reduce their armaments as a sign of lasting peace and cooperation. Today, the former archenemies are engaged in trade and foster cooperation with respect to global political developments, such as the war in Afghanistan.
The quick change from communist regulated markets to varying forms of free democratic markets, however, came at a cost. Rebuilding economies and political structures from scratch did not deliver the prosperous payoff associated with democracy and capitalism as quickly as anticipated. The smaller post-communist nations were particularly vulnerable to the weak political structures and economies that accounted for a significant decrease in living standards and the emergence of recessions. Romania, for instance, was unable to stabilize the new economy and continues to fight quickly reoccurring recessions to this day (Vassilev, R., 2011). Nevertheless, the opportunities associated with free markets help the struggling nations to attract financial help in the form of foreign direct investments; it may take time and the recent global recession posed an additional setback but the benefits of global market integration will likely bloom eventually.
Communist China, in contrast, had discovered the benefits of free global trade prior to the fall of communism west of China and opted to gradually adapt to the opportunities of the free market through economic rather than political reforms (“China’s Reaction to …”). In 1975, for example, China signed the Asia Pacific Trade Agreement (APTA), an initiative of the United Nations that provided preferential trade treatment of the developing nations in Asia. China still remains as a communist nation today but their economic reforms continue to further integrate China into the global marketplace and allow China to become a recognizable force in the global economy. Despite ideological conflicts with democratic nations, China fosters peace and diplomacy to maintain the benefits the nation derives from global trade. China ranks among the top three exporters worldwide; engaging in military conflict would likely threaten China’s export position and decrease China’s GDP which rest largely on the nation’s exports.
The forces of globalization and the incentives entailed in free market principles create an ever-changing global economic environment; more and more nations opt to adopt free market principles in an effort to benefit from the capital gains. Marketers, in turn, benefit from an in-depth political and economic understanding of the nations around the globe. Constant political and economic changes create both a wealth of opportunities, and potential threats to global trade. Economic reforms, such as the emerging legal framework for business conduct in China, provide a plethora of market opportunities but may also pose threats to some existing areas of the market. On the one hand, the legal framework will regulate business conduct, thus accounting for a more reliable and safer environment to engage in contractual obligations. On the other hand, increasing regulation has potential to diminish cost-saving opportunities, such as outsourcing low-skilled labor; the rise of labor standards in China will eventually lead to rising labor costs.
The road to world peace, justice, and harmony will be a bumpy and uneven trek, but the yield will remain as the ultimate prize. The more interconnections, trade, communications, and blending of cultures we can bring each other, the more equal and balanced the world as a whole will be; globalization will bring forth an era of global prosperity. Full globalization is yet in front of us and it will create a world beyond our wildest dreams.