The Big Bang: Globalization plus Social Entrepreneurism

I recently read a paper that strongly criticised the WTO, and it prompted me to write this article. The biggest argument seems to be that most of the poor in the world depend on natural resources for their livelihood, and free trade as promoted by WTO, either destroys these natural resources, or it opens them up for exploitation by the richer nations. The same old story - the richer become richer, and the poor become poorer. This goes into things like fisheries where rich countries can subsidize their production and cheaply dump it into poor countries, driving the local fishermen out of business. Or, opening up the local waters to big fishing boats depletes the resources available to the local people. The same holds true for forest products and agriculture as well. Another fear is that opening up the markets to foreign industrial players will reduce the amount of regulation that local governments can exercise towards environmental concerns like freshwater water depletion, greenhouse emissions, soil desertification, energy generation, and garbage disposal. Many developing country governments have also been unsuccessful in protecting their intellectual property for things like herbal medicines and originally developed seeds that are being patented by multinational companies. Recognizing the foreign IPR for such products makes it illegal for local farmers and traditional healers to practice their age-old professions, leading to what is known as biopiracy. Even though this kind of free trade can be useful for some other sectors because it opens up foreign markets for developing countries as well, but anti-WTO activists argue that the poor countries are not being offered enough, and that these are just methods used by developed countries to delay the flattening of the world so that they are not overtaken by India and China.

All of that is true, but then again, there are huge benefits to globalization as well. Look at how IT outsourcing and BPO improved the middle class incomes. All of this triggered off a cycle for bigger and better economic growth, because additional disposable income supports other industries like cars, tourism, eateries, clothing, consumer electronics, entertainment, and much more. This is not only good for the local industries, but also the countries that have been outsourcing their jobs to India and China and cribbing about them, actually now get to benefit from more exports to India and China. The foundations of globalization are based on the theory of comparative advantage where countries or corporations or individuals should focus on doing what they are best at, and then trade the goods and services accordingly among themselves. A bigger and freer market also allows competition among these corporations from different countries because with free trade everybody can compete with everybody else for the global market, which in turn provides a continous incentive for the corporations to keep improving their services.

But then what is the answer to reconcile both these two opposing factors? The answers are simple.

Instead of opening up the ocean waters, why not first make the global corporations invest in efficient and state-of-the-art processing plants for fish products? Verghese Kurien brought prosperity to the milkmen around Anand in Gujarat by starting the white revolution. The same revolution can be started for fish products as well. It is easy to rant about the fact that fishermen around the coastal areas are very poor, but the real thing is to do something to bring prosperity to them. Set up cold storage chambers. Open up canning plants. Improve access to the global market. Bring about coordination and standardization among the different fishermen in what they catch and how they catch. Economic growth is like a spiral. Once the income levels begin to improve, the same fishermen will buy bigger boats, catch more fish, earn more money, and buy another bigger boat. The first step is the hardest to help create the spiral in the first place, and this is where social entrepreneurism and globalization come into the picture.

The same spiral is necessary for argicultural and forest products as well. Processing plants and granaries need to be brought closer to the farmers, and this does not mean physically opening up new plants closer to the villages, but a closer proximity can also be achieved by improving the transport and communication infrastructure. Rather than have the farmers pile up sacks after sacks on bullock carts and spend days together to take these and sell their produce in the cities, the setting up of local collection hubs similar to the ITC model can greatly benefit the farmers. Not only that, micro-credit can help farmers buy mechanization tools to reduce their drudgery in harvesting and post-harvest processing. Setting up the same thing on a cooperative basis with collective ownership can further ammortize the costs. And access to world markets can bring in more income. This is where social entrepreneurism and globalization are really needed.

And why let foreign multinational corporations do any biopiracy in the first place, when we already have the know how with us, as well as all the talent to produce and propagate our innovations and heritage to the rest of the world. We missed out on baasmati rice big time, but we should not allow that to happen again. Associations like Srishti are trying to do this by promoting local innovations and encouraging profitable organizations to be created out of these innovations. But social entrepreneurism and globalization can take it to the next level by making it easier for smaller organizations to scale up their production and give them faster and seamless access to more markets across the world. A global supply chain network that can work for a multitude of different kinds of goods is what is needed today.

Apart from all this, rural manufacturing needs to grow. The reasons are threefold. Firstly, as the living standards of the people improve, they move up to the next strata of society and their demands increase, which requires a corresponding increase in production and infrastructure. Secondly, automation reduces the number of people required to do any given job, and the surplus labour needs to find other alternative employment opportunities. Thirdly, to take advantage of the globalization and access to markets already in place today, IT services and BPO are not the only options, but many more niche manufacturing markets that are being catered by China presently, have lots more room and demand to expand. Apart from the infrastructure necessary to be put into place to encourage rural manufacturing, education is essential to fulfil the demand for skilled and semi-skilled labour. This will be the subject of my next article on how social entrepreneurism can promote manufacturing industries and other sectors to help in solving the problems of rural India.

Thomas Friedman also states the same thing in his book, "The World is Flat". He talks about the unflat world largely comprised of the poor and rural population who have remained untouched by globalization. Globalization and free trade have benefitted the middle and upper classes no doubt, but so far it has harmed the poor only because the poor were never brought into the loop. And this is where the reach of the spiral of growth needs to expanded. Once good technology, standardization, and access to world markets are brought to the rural people, and they are integrated into the mainstream of globalization, who is afraid about competition from free trade then? But the prerequisites need to be fulfilled first of bringing the rural population up to the mark. Otherwise fears of the tyranny of free trade will surely come true.

And last but not the least, what is the role of the government in all this? The government has its tasks lined out well and nicely. Firsly, to set up systems to ensure that public spending is uniformly available to develop the infrastructure necessary for growth of both rural as well urban India. As Amartya Sen says, we cannot afford to have an India which is half California and half Sub-Saharan Africa. This is what the role of a socialist democratic government is supposed to be. Secondly, to ensure that positive social change goes unopposed, and short-sighted and selfish sections of the society like terrorists, religious fundamentalists, and gender inequalists are not allowed to voice and exercise their stupid opinions. And thirdly, to empower to the people to make sure that the government does its job.

In short, globalization is good because it encourages competition and provides access to a larger market, but certain pre-requisites and safeguards are required so as not to initiate the opposite affect that can stiffle local production. Social entrepreneuism is not just the answer to bridge the gaps and create safeguards by making the society capable of coping with the hazards of globalization, but also to actually make use of the benefits brought forth by globalization. This big bang will only be the beginning of the vast universe of possibilities that can open up for the developing world then.