A Balanced Perspective with a Historical Context: Down the ages from the traders of Meluhha to the BPOs of Gurgaon
By Ramit Arora
Is globalization an absolutely new phenomenon? Can we better understand its interpretation in modern times, as emanating from globalization of production or globalization of markets, while drawing lessons from human history? Have similar phenomena occurred in in earlier times, albeit in different forms? It is said that, ‘History is one of the best teachers.’ Maybe some lessons can be drawn from a study of trade carried out since ancient times and the interplay of effects of this trade on nation states. A study of trade references in historical documents could also make our understanding more holistic on the effects of socio-political and geographical factors on trade and vice versa.
What examples of Globalization existed in the Ancient World? The reach of the Harappan civilization’s commerce in the Bronze Age, from about three to four millennia BC up to about 1000 BC, from its centers in the Northern Plains of India extended upto Central Asia along the Amu Darya and along the Makran coast up to the Persian Gulf [1]. Later on, during the Indo-Aryan era, even after the vanishing of the homogenous Harappans, i.e. by the first century BC, the Indian mercantile network extended from the Mediterranean to the South China Seas. A major portion of this trade comprised goods originating in India, the peninsula was also a major market and an important transit hub for the ancient trade routes [2]. By the first century AD, India ran a large trade surplus with the Graeco-Roman world. This resulted in a constant one-way flow of gold and silver coins.
Roman writer Pliny (23-79 AD) wrote: ‘Not a year passed in which India did not take fifty million sesterces away from Rome.’ In a world where money was based on precious metals, this one-way flow would have been equivalent to severe monetary tightening. At one point, the Roman Emperor Vespasian was forced to discourage the import of Indian luxury goods and ban the export of gold to India [3].
What was the effect of Globalization in recent History? More recently, in the period of the Industrial Revolution, there was a clamor by the newly industrialized nations to ensure a sustained, cheap supply of raw material for their burgeoning factories, as well as natural resources for the development of the freshly affluent nation states. To ensure a steady supply of economic advantage, as also to satiate the lure of more riches, the spheres of influence of colonial reach were strengthened by the use of sovereign might. This led colonial powers to subjugate vast portions of the globe to their political will as annexed territories. Entire economies in once prosperous nations were destroyed through such colonial subjugation.
In the case of India, its GDP share as a proportion of the world total was reduced from a commanding 32% in 1 AD, to still the largest in the world at 25% in 1700 AD, to 3.2% by 1952. Colonialism turned India from being the richest nation in the world into one of the poorest nations in terms of per capita income [4].
What factors shaped modern Globalization trends? The period post the Industrial Revolution also saw the advent of modern nation states, as we know them today. In the twentieth century after two world wars there was an increase in the number of free countries, which also impacted trade, as the equilibrium of trade had to be re-balanced and earlier concessions had to be either re-negotiated or considered withdrawn. It certainly spelt an end to the intra-colonial trade hegemonies. After the end of WW-II, a major concern of the victors was to establish sustainable structures for world peace, aid in the re-construction of devastated nations and bring hope to their own populations. In this midst, new international trade structures like GATT (later WTO) and multilateral organizations like World Bank & IMF also came into being. It was but obvious that the prevailing economic thought would be of the victors i.e. the Allied nations. As it would fortunately bear, the concepts of Westphalian sovereignty, Neo-classical & Keynesian economic theories and liberal democratic principles had a major influence in the formation of the new international institutions.
What are the viewpoints on Globalization? With the promotion of lowering of barriers to cross-border trade & investment, the WTO (like the GATT before it) was instrumental in creating a more open global system having several facets including the globalization of markets and globalization of production. The second most important driver of this trend has been technological change, particularly developments in communication, information processing and transportation technologies. However, the increase in globalization has led to an increasing debate between pro-globalists and anti-globalists. The pro-globalists say that a globalized economy would move the world towards more prosperity, as it brings investment to less developed areas and also results in lowering of prices for goods and services. The anti-globalists have their own views – those in developing or under-developed nations feel that opportunities / gains from globalization are not distributed equally. Pro-globalists mention the trickle down effect, while the anti-globalists want the benefits to reach the poorer sections in an earlier time frame. These voices are not necessarily against the advantages of globalization; they are more likely using the argument as a bargaining tool for higher gains by delaying the lowering of entry barriers.
What are the current challenges to Globalization? However, some of the other concerns carrying more weight in the argument are against cultural imperialism & environmental degradation. These issues do require safeguards, checks and procedures to be put into place. The concerns of protestors in developed nations is for the downward pressure on the wage rates of unskilled workers, depletion of manufacturing jobs in wealthy advanced economies and the outsourcing of services to low cost foreign suppliers e.g. the move of the BPO services to call centers in Gurgaon. The workers groups in developed nations claim that this contributes to higher unemployment and lower living standards in their home nations. Though on the surface this argument could appear falsely substantial, at least to the directly affected people; however the benefits of globalization outweigh the costs. The optimization of production efficiencies could lead to a substantial lowering of costs, which would leave larger surplus national incomes[5]. The dislocation of jobs is a necessity for responsible and fair globalization, as is the opening of markets in populous developing countries, from where substantially increased profit flows have accrued to Corporations & equity owners in developed countries. Hence the final counter-argument on this anti-globalist argument by developed country workers is that one cannot expect only returns without being willing to share the costs of globalization. Immigration is also another touchy issue.
Looking back into history, what important issues can be highlighted in the context of global trade and its impact on societies? In the ancient times, the boundaries between states were not as restrictive as in modern times. Efficiencies in either production techniques or harnessing the bounties of nature brought riches to certain societies. It can be seen that traders depended upon a variety of global production centers excelling in specific goods, the techniques of whose production were generally guarded by tightly knit guilds. This was akin to the globalization of production. Trade always flourished based on the principle of maximization of profits, need for resources, the lure of luxury goods and on the shoulders of the entrepreneurial spirit of merchants. The economic successes of the Indian civilization had developed a huge trade advantage in its favour, which had caused a trade deficit and payments crisis in the Roman empire. The Indian traders had expanded their market to encompass the Roman empire, for goods produced in India. Another common thread noted throughout the millennia has been that the hunger for power, riches and survival instincts continuously propelled new emergent tribes to obliterate older states to form new states and sometimes new nations. The magnet for all invaders and conquistadors were always thriving, successful cities and nations, which had been developed by bringing resources and riches through either successful trade or establishment of production bases. The basis for change in regimes was based either on superior fighting prowess or innovative violence. The advent and use of disruptive technologies always aided societies which were its early adaptors to rise to power.
Lessons from History. To round up the argument on globalization and seeing it from a historical prism we can draw out a couple of definitive lessons – I will list out five important ones.
A. The first and most important lesson is that no global issue is uniquely an economic consideration alone. History has repeatedly shown us that societal economies are sustainable in the long run only through the political backing of the nation state. This sovereign guarantee is also valid only till it can be ensured through sustained military might of the nation state, and furthermore only till its challengers can be vanquished.
B. The second learning from a study of history is that for any economic system to succeed, it necessarily has to have broad based social and individual acceptance also. One of the reasons for the fall of imperialism and the failure of communism is the lack of their acceptance in the long run by individual and societal groups; as individual will cannot be repressed indefinitely. This leads us to one moot conclusion, that for globalization to succeed, it has to encompass all three spheres of political, societal and economic considerations. This can also be seen from the example of the European Union, where a free market grouping needed to be strengthened through a monetary union, which further gained strength only through a societal union allowing free movement of its citizens. The final amalgamation guaranteeing longevity can only be a political union.
C. The third lesson which history teaches us is that trade protectionism has been a natural response to threats posed by trade imbalances. This could also be used by political forces wanting to thrive on societal fears. To overcome such threats in today’s age, the leadership at the helm of affairs needs to display statesmanship and liberal values.
D. The fourth lesson being that the clash of civilizations and nations brings out base competitive and survival characteristics, which can turn out to be highly detrimental to the long term interests of competing nations. As an effective safeguard against the rise of hegemonic policies or actions, every nation needs to work out its priorities and safeguard its own interests, while ensuring responsible and fair globalization. Like they say – there are no permanent friends or foes in diplomacy, only permanent interests.
E. The fifth and final lesson which I want to emphasize is that for a globalized economy to be sustainable in the long run it has to have a stable natural environment. History is replete with examples of how affluent societies and civilizations lost their influence and wealth, as well as their civilizational continuity, once their immediate geographic region suffered major environmental changes. The best example being the drying up of the ancient Sarasvati River, which was an important factor in the dissipation of the Harappan civilization. It is imperative to ensure that the balance of nature is maintained. The Earth is one combined home for entire mankind – depredation of its natural resources for purely profit maximization would be catastrophic for the entire human race. Hence, we need to steadily move towards sustainable values, goals and accountability. A very apt understanding of globalization is, ‘Think global, act local’.
Drawing lessons from human and civilizational history, an imperative which should necessarily be studied by economists also is that those that do not learn from history are condemned to make the same mistakes, over and over again.
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[1] Mesopotamian tablets mention a land called Meluhha that exported bead jewellery, copper, wood, peacocks, monkeys & ivory – Michel Danino in The Lost River: On the Trail of the Saraswati. Penguin, 2010.
[2] Greek manual Periplus Maris Erythraei – quoted in Land of the Seven Rivers by Sanjeev Sanyal. Penguin, 2013.
[3] pp 114, Land of the Seven Rivers by Sanjeev Sanyal. Penguin, 2013.
[4] Timeline of the economy of the Indian subcontinent – https://en.wikipedia.org/wiki/Timeline_of_the_economy_of_the_Indian_subcontinent ;
The World Economy: Historical Statistics by Angus Madison. OECD, Paris, 2003.
[5] Excerpts from a textbook on International Business – Competing in the Global Marketplace by Charles W.L. Hill, Rohit Mehtani et al. McGraw Hill Education, Eleventh Edition, 2019.
