Globalization and Capitalism

GlobalizationBoth, capitalism and globalization have often been vilified –sometimes even paired up as a supervillain duo. They have been charged with pretty much everything going wrong in our lives. Granted, sometimes, poorly implemented versions of both phenomena are to be blamed (The Cyprus debacle being one of the most recent manifestations). However, a careful and more detailed analysis will reveal that things are not as simple as they are often believed to be. In other words, let’s not shoot the messenger.

In reality globalization and capitalism are like twin siblings, both with their own unique capabilities and flaws, not always walking or running at the same speed, but in the long run, they always end up walking hand in hand.

First things first. By definition, globalization has existed since the very beginning of mankind. It is an inherent component of human nature. For a more in depth explanation, read our article: What is globalization?

Capitalism, as we know it today, was born when the credit system was incorporated into the monetary economy. More on this in Robinson Crusoe and The Monetary Economy. And as monetary systems grew more complex with the growing interconnectivity between countries, it has become clear that capitalism is one of the many manifestations of globalization.

capitalism-crash

Like every human process, globalization and capitalism can spin out of control if not handled adequately. Some thoughts from Gandhi come to mind:

“The world is big enough to satisfy everyone’s needs, but will always be too small to satisfy everyone’s greed”.

Since the dawn of mankind, capitalism has become a driving force of globalization and vice-versa. If we were to visualize global society as an F1 car, capitalism and globalization would be two of its most powerful engine boosters. Like every high-speed booster, they are a double-edged sword that have the power to win the race if adequately used, or crash the car if used improperly.

Contrary to common belief, globalization isn’t the big bad wolf that some people pose it to be; neither is capitalism; turns out that the big bad wolf is ourselves.

Our inability to understand globalization and capitalism, and rise up to the occasion is what is keeping us from riding the wave, rather than wiping out (mainly due to a lack of skills, narrow-mindedness, ignorance, lack of a true competitive attitude –the latter being the most frequent and important).

The many limitations capitalism has proved to have are invariably related to perverse incentives and a typically untempered greedy attitudes. Those same limitations also apply to globalization.

“The Roots of Violence: Wealth without work, Pleasure without conscience, Knowledge without character, Commerce without morality, Science without humanity, Worship without sacrifice, Politics without principles.”

–Mahatma Gandhi

The above statement is a very simple, yet a profound way to visualize that there is nothing inherently wrong and/or perverse about globalization. It all depends on how the actors interact with it.

Constructive, successful, globalization can be summed up in one concept: high competitive spirit/action based in each individual’s unique comparative advantages. This, of course, also fully applies to all levels of society  (organizations, countries, etc.).

Hence, the solution does not reside in throwing away both, globalization and capitalism, but in learning how to  handle them appropriately. In fact, globalization and capitalism seem to be with us forever. They are not expendable. We all must constantly strive to substantially improve these dual pillars of contemporary and future society.

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About Martin Marmolejo

Global Investment Manager | Founder & Managing Director at MMA Global Investment Management | Proud husband and father | Follow me @globalmarmolejo.

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  1. […] but in the long run, they always end up walking hand in hand.” This the heart of our post, Globalization and Capitalism, published on March 27, […]

  2. […] On the other hand, Western civilization works under the well-proven premise that free markets under the democratic system developed in the West over the last 250 years has proven to be the best socio-economic structure the world has known so far (read more in Globalization & Capitalism). […]

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