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Competition in a Globalized Economy

The Group of Lisbon is convinced that the ideology of the global market endangers the future of humanity and that the economic war among industrialized countries is a war without gain for anyone.
Competition in a Globalized Economy

By Katrin Gruber

[This essay published in June 2000 is translated from the German on the World Wide Web, www.hausarbeiten.de/archiv/bwl/bwl-lissabon.shtml. Katrin Gruber is a leader in the Group of Lisbon and the Club of Rome which published important studies on "The Limits of Growth" (1972) and "The Limits of Competition" (1997).]

Summary: We live in a globalized economy in which the highest goal is becoming more competitive. Global competition affects society and the state, not only the economy. We all stand more or less under the pressure of competition. Does competition in a globalized economy mean the loss of work in Germany? Is it true that the globalization of competition results in a "triadization"? Does the international political process of globalization lag behind the fast growth of information technology in that politics is slower than progress? This study gives the reader insight in the globalization of competition while answering questions in the style of the Group of Lisbon.

Table of Contents

1. Introduction
2. Globalization and Competition
3. The Group of Lisbon
4. Competition in the Economy
4.1 The Economy and Information Technology
4.2 The Economy and the State
5. Competition in Society
5.1 Society and Information Technology
5.2 Society and the State
6. Chances of Competition
6.1 The Present Situation
7. Conclusion

1. Introduction

That the global world covers our table at breakfast, lunch time and supper, that food from all over the world embellish our table has become self-evident to us. There is Kiwi from New Zealand, cheese from Holland, bananas from Central America or delicious ham from Italy.

We live in a globalized econmy in which the supreme goal is to become ever more competitive. Global competition affects society and the state, not only the economy. We all stand more or less under the pressure of competition.

Does competition in a globalized economy mean the loss of work in Germany?

Is it true that the globalization of competition results in a "triadization"? (cf. Group of Lisbon, 1997)
Does the international political process of globalization lag behind the fast growth of information technology since politics is slower than progress?

This study gives the reader insight in the globalization of competition and answers questions in the style of the Group of Lisbon's explanations.

2. Globalization and Competition

Global means "world-embracing". Competition is understood generally as the rivalry between market players for market shares.

The competition to which the economy and society are presently handed over hardly involves "world-embracing" competition. Rather a selection occurs. Selection through competition is intentional but should run fairly with equal starting chances. After the "victory" of capitalism over socialism, southern countries should be joined to the world market. Globalization would lead to the desired goal. Words like liberalization, privatization and deregulation were proclaimed everywhere..

Fair global competition cannot exist when the share of the goods exchange of the 102 poorest countries of the world fell in 1990 exports from 7.9% to 1.4% and imports declined from 9% to 4.9% and the "triad" increased its imports and exports corresponding more or less to these numbers (cf. Group of Lisbon, 1997). The Group of Lisbon concluded that this kind of competition of countries excludes people and regions which will injure everyone at the end.

3. The Group of Lisbon

The association founded in 1992 in the Portuguese capital consists of 22 alternative economists and entrepeneurs. The book titled "Limits of Competition" immediately calls to mind the report of the Club of Rome "Limits of Growth". Joining these two titles together is helpful since the word "limits" in the case of the Club of Rome implies that existing resources (for example water, air, soil) will soon be used up if there isn't rethinking or changes in ideas. This means an end of growth and an end of carefree life. The word "limits" has basically the same meaning for the Group of Lisbon. This group is convinced that the ideology of the global market endangers the future of humanity and that the economic war among industrialized countries is a war without gain for anyone.

Four contracts should be developed and implemented according to the proposal of the Group of Lisbon to solve the complex problems together:

- the "possessions contract" on basic human needs to remove inequalities,
- a "culture contract" for tolerance and intercultural dialogue,
- a "democracy contract" settling questions of a global control and
- an earth contract based on Agenda 21.

4. Competition in the Economy

At the beginning of global competition, firms restructured and began to manufacture abroad. Then they teamed up in transnational groups to assure competitive advantages and advances in knowledge. Private capital investments of the North rose in the countries of the South. What first sounds like a positive development appears somewhat different on closer examination since a structural imbalance occurs. Certain regions are preferred with these investments and the poorest, above all black Africa, are avoided. The standards set by the world market can obviously not be realized in all locations. As a result investors only concentrate on a few developing countries which appear attractive in their progressive economic development (Thailand, Argentina). A free enterprise, capitalist model cannot be realized all over the world.

Gradually cooperation between businesses gains importance. More large corporations develop worldwide trade. For example, thirteen businesses in 1980 shared 80% of worldwide sales in the soap industry. In 1990 only six businesses split up 85% of worldwide sales. Industrialists and experts assume that only three or four firms will divide these sales by 2005. Monopoly markets and cartels are expected. (cf. Group of Lisbon, 1997)

The number three emerges elsewhere in the economy. Businesses are not alone in making themselves "more competitive". Three economic areas also compete in a kind of "pact" against the other countries of this world. The "triad" is composed of the EU (European Union), the US and Japan. "The countries of the triad interact more and more. Their integration process advances." (Limits of Competition, 1997)

The Group of Lisbon speaks of an "uncoupling" since the triad has a share of 73.6% in world trade. The number could be 95% in the year 2020 if the excluding competitive struggle advances as fast as in the past. "This is uncoupling, the new division between the increasingly integrated global world and the parts of the earth excluded more strongly." (Limits of Competition, 1997) No global competition occurs any more in the economy. The question is whether competition exists at all.

4.1 The Economy and Information Technology

The dominance of the "triad" is also incredible in information technology. Everything involving the media (hardware, software, film, TV etc) is adorned by an American, German or Japanese name.

For example 80% of broadcasts in the world come from the three great data banks operating worldwide. Therefore speaking of a competition for everyone is misleading.

Outside of the "triad", very few persons have a possibility of maintaining this kind of media. Although an access of all people in the world to media would represent a reduction in inequality, this access is not attempted.

Media have important enlightening and education functions. For the Third World, the possibility of access to these resources could be a chance for integration and assertion on the world market.

Contrary to the idea of the "global village", people seem content with an "international village". As a result, the possibility of developing a global knowledge is only really given to a few persons.

What does `information society' mean when there are as many telephones in Tokyo as in all Africa and half of the world population has never used a telephone? Something about input and fair competition was apparently forgotten.

4.2 The Economy and the State

National competition policy can only control national conditions, not the world market in which some preconditions seem better fulfilled by larger firms. Internationally there is little regulation. Increasing market concentration and higher market entry barriers make it difficult for smaller firms in the actual competition. The question arises whether the economic nations will wage a competition war, no longer whether firms participate in a global competition.

State intervention is indispensable to assure a fair competition that includes goals like equality and freedom. A world cartel authority could prevent injustices in international competition.

"To globalize efficiently, businesses are forced to secure the greatest possible support of their state." The states fulfill certain demands of businesses for example payment for essential infrastructures (education) or creation of tax incentives for industrial research and development. Businesses promise to become increasingly "competitive" , create more jobs for people and secure a technological independence for the state. These promises do not seem to be kept with present unemployment statistics. Rather the state is losing its real position. The question is posed: "Against whom should the OECD countries be more competitive? Against developing countries? Against the moon?" (cf. OECD General secretary Emile van Lennep, 1988).

The support of the state should not concentrate on a few large corporations but rather on the global competition which otherwise will not take place. Thinking globally and acting locally is not eno0ugh. We must also act globally.

5. Competition in Society

More and more jobs in Germany were lost in the last ten years through structural change. Globalization frightens people in our society.

"Simple" work has become too expensive for Germany in the positional competition. The same work is performed for less money in other countries. For example, a seamstress in Slovenia costs less than a seamstress in Germany.

As a result, the German seamstress must now rethink globally since there is not only work in this area. With retraining through the labor office, she could be trained into a computer expert and then immediately find a new job. Whether this is possible in her state or in Germany generally is not debated.

The change from industrial state to information society must be lived by everyone in a global way. While this may sound very interesting in theory. Everyone may not have the lifelong flexibility (educational level, family, one's children) or capacity to be retrained after a lot of effort.

To be "competitive" as an employee, wage or collective agreements should be accepted which are unintended in the sense of the legislature. The jobs situation becomes increasingly precarious and often based on atypical agreements. Being optimistic as an unemployed person is difficult since reentry in the old occupation is hardly still possible and keeping up with the global competition is onerous.

5.1 Society and Information Technology

The nascent "information society" is easily informed. There is information 24 hours a day whether over the Internet, radio or television. This obviously has its advantages and disadvantages.

The advantages are that scholarly works can be made available through the Internet, politics appears more transparent and society can be better informed and enlightened.

The disadvantages are that national socialist propaganda can be diseminated and people are easily susceptible for this kind of politics in a time when they suffer under a loss of identity. The parliamentary elections in Brandenberg of September 5, 1999 confirmed this. Despite enlightenment and global knowledge, parties with anti-foreigner slogans are elected and come into the state parliament before ecology parties.

People in our society... "are convinced that the `others' (foreigners, immigrants and those insulted as "social parasites") are the main cause of problems." (cf. Group of Lisbon, 1997) To this conviction, we owe... "The passivity of the world community in view of the genocide in Ruanda and the many dead in Sri Lanka... who had the sad privilege of standing in the center of mass media attention. Does hostility to foreigners and racism increase in a global world because responsibility for unemployment is found with the seamstress in Slovenia? What a pity if this is the success of an information society!

5.2 The State and Society

To make Germany's position more interesting, wages and social security contributions are lowered by the state. The earlier welfare state seems in danger. On first view, global competition seems to bring no advantages but to take something. Nevertheless funds are invested in apprenticeships or traineeships to fill newly created jobs in the information society.

The question is raised whether global competition can be reconciled with the principles of "freedom" and "equality" and the right of individuals to work. A right to work may exist in Germany but the chance to choose work is taken from the worker. Even with training, he or she will not be able to work in that vocation (for example as seamstress) since the output in other countries is cheaper. The state does not seem to observe several essential functions. The state has handed over part of its power to the economy and moves in a "globalization whirlwind" which must be stopped since it does not benefit anyone except mammoth corporations.

6. Chances of Competition

Supplementing the theses of the Group of Lisbon, participation in the global market seems denied to. The "triad" increasingly strikes with its own weapons. Information- and communication technology which we consider unsuitable serve the "weak" as a springboard to our world.

The possibility exists that so-called Third World countries could leap over the industrial age and wrestle with us for the markets of the information age. On the ground of their positive attitude, these countries will deal very differently with available technical resources.

As an example, an Indian student attends a German university and studies information science. With a computer unfit in our eyes, he draws up programs after the completion of his study which he offers and states sells on the Internet. From the realized profits, he invests a part in the local and regional infrastructure. More people in his environment gain the possibility of enrolling in correspondence courses...

Nevertheless contracts alone are not enough. A genuine interpersonal will is necessary on our side to promote this assistance. Only by creating "selfless" chances in the global economic area outside the triad can we open ourselves and developing countries to the markets there.

6.2 The Present Situation

Through the nascent "global" competition, essential steps to globalization are undertaken in transportation, telecommunications and information technology which ultimately lead to a balance in the welfare society. Thus globalization offers mutual chances and opens up possibilities of growth and prosperity.

Eastern Europe's backlog demand for technical instruments is a kind of globalization as we understand it today. New jobs already arise through these "little" efforts. We create the chances for reducing the gulf between poor and rich and integrating eastern Europe in the triad. At the same time we do not only create new jobs in the "new colonies". Through the transfer of technology and know-how, profits are amassed which can serve for investments in countries on the periphery of the triad. Globalization begins at our front door and not at the most remote corners of the earth. Thus an equal standard can spread in a gradual and controlled way.

Is it really necessary to "slave away" in heavy industry if only a little process of rethinking could wrest from the new millenium what it promises us so that livelihoods could be paid for on the home telephone. Ultimately the new information society offers a great number of jobs in the areas of service, environmental protection and telecommunications. If we were not so inflexible, a redistribution and widening of the base of jobs would appear.

In the last 20 years - amidst the acceleration and intensification of the globalization process - the inequalities between the richest 20% of the world's population and the poorest 20% gradually declined between 1960 and 1975 but increased again in the 80s. Aid to developing countries can not only occur in the so-called developing countries. Rearranging resources in the most obvious goals can be an option for a better aid program.

7. Conclusion

In less than twenty-five years in the year 2020, the world population will include 8 billion persons (5.8 billion in the year 1995), even if epidemics, famines and wars counteract this development.

The shortsightedness or myopia of politics particularly in relation to aid to developing countries hinders a real globalization that does not only refer to the economy or society. According to the opinion of the Group of Lisbon, the proposed contracts could bring about an improvement of the situation. The cooperation principle instead of the competition principle seems urgently necessary.

Such contracts cannot yet refer back to existing agreements. There are already many good initiatives that are worth realizing. Contracts like Agenda 21 and the "earth contract" represent ecological demands to the status quo of our time. Despite the suggested contracts, the ecological condition of our world visibly deteriorates.

The power of capital must be limited and returned to democratically elected politics, to people. These people bear responsibility, not corporations or conglomerates. This restriction of the economy will take away the pressure forced on society. Our seamstress may be what she wishes to be. The constant imbalances arising through the distorted competition can only lead to economic conflicts without a real globalization. "In most cases, war is the last means when the conflicts pent up in the struggle for survival intensify extremely and fall out of control." (cf. Group of Lisbon, 1997)

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