Paradoxes of Globalization

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Eric Milliot, Nadine Tournois (ed.),
Paradoxes of globalisation,
Palgrave Macmillan, London and New York, 2010.

Chapter 1
The paradoxical dynamics of the globalisation of
markets
Eric Milliot

The phenomenon of the globalisation of markets is not a new one. For several hundred years, regular, cross-border exchanges of goods and knowledge have been organised between human groups (tribes, cities, communities).1 To illustrate this we can look at the famous Silk Road, already being used by trade caravans in the 2nd Century BC. In contributing to the weaving of political and cultural links between remote groups, this route went beyond the mere scope of trade and the simple distribution of products. It is also noteworthy that, prior to 1914, the exchange of merchandise was facilitated by the freedom of people. Travel in Europe was generally not controlled (no passports, no work permits, no immigration policies). The First World War put an end to this movement of opening-up and encouraged the adoption of protectionist measures. The results of this policy were so disastrous that after the Second World War, the allies decided to introduce an 1

The concept of nation is a relatively recent one. It appeared at the end of the 16 th Century in the West, but did not adopt an essential dimension until the beginning of the French Revolution (Zarka, 2007).

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international plan of monetary stability (The Bretton-Woods Agreements, 1944) and one of free trade (General Agreement on Tariffs and Trade, 1947). 2 These efforts allowed the progressive resurgence of a cross-border economy. The resulting movement of decompartmentalisation of markets would lead one to suppose today that companies have never been so free to operate on a worldwide scale. In fact, since the middle of the 20th Century, the rhythm of cross-border freight traffic has been accelerating,3 the number of industries affected by international trade has been increasing, and the importance of foreign operations carried out by companies has been constantly rising.

In combination with the emergence of the information society, it would seem that the actors’ geographical, strategic and operational freedom is particularly strong. A more precise analysis of the operating conditions of businesses suggests that this should be put into perspective. The decompartmentalisation of markets undoubtedly broadens the field of industrial and/or commercial opportunities, but, at the same time, imposes numerous constraints on companies, limiting their autonomy and their independence.

In order to understand this paradox, this chapter will first of all study the dynamics which fuel the phenomenon of globalisation. Secondly, the ambivalent nature of its driving forces will be analysed. Thirdly, the industrial and geographical characteristics which redefine the field of action and the freedom of the actors will be looked at. Finally, the necessary compromises developed by companies to cope with the forces they are confronted with will be presented.

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Some authors talk of two globalisations (O’Rourke and Williamson, 1999; Schularick, 2006). The first runs from 1870 to 1913; the second from 1950 to the present time. 3

In 2004, 28% of the gross world product (GWP) was affected by international trade, as opposed to 8% in 1950 (Adda, 2006).

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Section 1 A twofold political-economic sphere of influence
As stated in the introduction, globalisation consists of a dual dynamic: the decompartmentalisation of markets and the interdependence of actors. These two symbiotic rationales generate a complex system of dualities which must be understood in order to appreciate the real degree of freedom which companies have. 1.1

The decompartmentalisation of markets

National markets are seeing their borders becoming more and more permeable to foreign economic activities because of globalisation.

Concretely, tariff barriers

(customs duties, compensatory taxes, anti-dumping...
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