Globalisation as a contributor to complexity
An Indian perspective on the dangers and opportunities of an increasingly interconnected and interdependent world.
Thursday June 15, 2017,
10 min Read
Management interacts and adapts to the global environment in different forms like culture, technology, social structures, etc. with each passing day, the world around us is continually becoming more and more complex due to the advancements in science, technology, statistics and the development of the human mind and mindset as a whole. Strategy revolves around understanding the game and playing it by the rules, but what if one day, the game is disrupted by globalization and the rules of the game are changed?
India is the 7th largest and 2nd most populated country in the world. It is divided into 28 states and speaks 23 different languages. These are variables, which are highly heterogeneous in each of the states. Each state of the country has specific individual dynamics. India is a country where our traditions still predominate, it is a federal republic and the biggest democracy in the world and economically speaking, it is an emerging country trying to reclaim its position in the global economy. It is the perfect prototype of a complex structure.
Spending 18 years in India and experiencing the interconnectedness and interdependence of globalization, I think following are some of its dangers and opportunities-
1) Globalization has changed the mindset of people. Technological advancement and the mastery of the human mind makes people feel empowered and in control. They end up feeling invincible and believe in the concepts of reason and causality. They forget that reason is incapable of explaining empirical findings in a manner that would be close to reality. This was seen in India in 2016, when Prime Minister Narendra Modi made the use of all Indian currency of Rs 1000 and Rs 500 illegal. This was called as the Indian demonetization. It was a move to eradicate corruption, illegal hoarding of money and fake currency notes. Although, the idea was brilliant, it wasn’t well thought out. They assumed the causality that making the notes illegal will stop corruption, but they didn’t predict co-causality in the form of new notes, public discontent, political opposition, etc. Also, they had a limited time frame of a month and such causal decisions don’t fit into a timeline. The move failed due to wrong planning and the inability to consider the side effects. This is an example of the cognitive fallacies of snapshot thinking.
2) The interconnectedness and interdependence of the world in the form of globalization has lead to a huge leap in the income inequality India. As of Nov 2016, India is the second-most unequal country in the world. The richest 1% of Indians own 58.4% of wealth. The richest 10 % of the Indians own 80.7 % of the wealth. This trend is going in the upward direction every year, which means the rich are getting richer and the poor are getting poorer. (Wikipedia)
The rich already have the money to monopolize all the productive resources towards them. Some people are so good at the game of capitalism, that if you continue the game as it is, they would have owned everything. In the era where all that the poorest have is their physical labor, automation have turned that last refuge worthless. Nothing is less valuable in modern capitalism than physical strength of a menial laborer. Resources are tangible links and should be viewed heterogeneously. They are intermittent and might soon deplete. Income inequality can be brought to an end by viewing an economy as a relatively closed system against oscillations in environment.
3) Another danger of a more globalized world is that national and regional values are being suppressed and common global values are given priority. The decision of the American election in 2016 was given more media coverage than the local Punjab election. Committees in India have been formed to research on nuclear power, climate change and create space missions instead on focusing on local problems like literacy, poverty and corruption. Cheaper products from China are replacing Indian products and local manufacturers are running out of business. Indian textile industry is declining at a rapid speed and so is the agriculture. Corporations and public entities are increasingly exposed to networked risks: physical, virtual or in between. The global supply chain, for example, is vulnerable to shocks and disruptions. Globalization has led to a wider choice and cheaper alternatives. This only helps individuals get excess purchasing power, extra commodities, increase in demand and subsequent exhaustion of natural resources. Everything is integrated and hence, we have reached a situation where no problem is local. To form this integration, every party needs to be an equal and all the problems should be weighed conjointly. Since this is not the case, uneven distribution of power could lead to future wars. To avoid this, we have to explicitly accept the complexity of the world and express the issue through all the shareholders concerned. Although the future is an unknown state, we need to focus on finding the bottom up teleology to facilitate micro interaction of local issues and their identification, sustenance and transformation.
4) Globalization has had a destructive effect on the environment and the climate change is the biggest example of the complexity that has risen due to it. It is a global problem that questions all the rules of strategy – Where should we be? What should we be? How should we proceed? The world does not have answers to these questions. It is ambiguous and has been changing rapidly. It wasn’t forecasted in the past and fails the analogia praecox. There are no methods that have been followed in the past and it has lead to a state on confusion in the global economy.
India is a developing economy with a large population and its energy requirement surpasses those of developed nations. To successfully operate the industries, energy emissions would have had to continue. Inspite of this, India pledged under the Copenhagen Accord to reduce its CO2 intensity (emissions per GDP) by 20 to 25 percent by 2020 compared to 2005 levels. On October 1, 2015, India formally submitted its intended nationally determined contribution (INDC) to the climate agreement due in December 2015 in Paris. Although the climate change is not our doing, India faces its impact today in the form of decline of agriculture, natural disasters and changes in weather patterns. This problem can thus be handled only by equal participation and collective action. The steps taken should be synchronized, coordinated, sequenced and should be done by the right people with a shared mental image.
To conclude, I would like to say that, in an ideal world, interconnectedness and interdependence would be the key in tackling global risks. But we do not live in an ideal world and the reality is that countries are in the frontline alone when it comes to cataclysmic events.
And the opportunities are-
1) Contemporary India exists in several centuries at once and hence, bullock carts and postcards continue to vie for economic presence with new information and communication technologies emanating from Silicon Valley. Yet, Indian software professionals have established a major presence not only in the US but also in remote ‘processing’ centers in India. Indeed, the information technology (IT) industry in India grossed annual revenue of US$6.7 billion, and recorded a 53 per cent growth rate in 1999/2000. Because the globalization of information in India in the last two decades has been driven by liberalization, the Indian IT industry is forecast to grow substantially over the coming years. (http://www.g20.utoronto.ca/biblio/globalisationproceedings.pdf)
2) Taking cue from the US e commerce industry, Indian entrepreneurs have built online portals and have taken the e commerce industry by storm. They took the business prototype of Amazon and developed similar portals in India. They enhanced and personalized the deliverables to fit the Indian market. The top 3 Indian startups competing to dominate the online marketplace are flipkart, snapdeal and paytm. Their valuations stand in billions and have been funded by venture capitalists. They follow the red queen model of competitive rivalry where they increase their investment in order to maintain their existing market position. The issue that most of these Indian e-commerce companies face is that they are yet not profitable and are only operational through profits. Although, predictions show that the trends will change by 2020. Yet, it is commendable how these entrepreneurs have taken inspiration from global models and set up a new market in the Indian economy within a span of 5 years. It appeared as a Black Swan in the Indian market that was so well accustomed to the traditional way of commerce. In this example, the traditional sellers ended up like the well-fed turkey, which couldn’t predict the shakedown of their industry with this modern concept. It was a disruptive change, which has boomed the Indian economy and has given a chance for the young entrepreneurs to explore their strengths and showcase the Indian business wit.
3) Globalization has enabled people to be quick thinkers. They are never comfortable being just enough, because they are aware that a new challenge will soon approach them. This has helped the world transform into a learning school, strategies emerge as people experience change. Until 1991, India had remained a closed economy and had shut its border for all types of foreign trade and foreign investment. In 1991, Manmohan Singh and Narsimha Rao observed the current scenario in the outside world and realized that if India does not open up its doors now, we would remain lacking and would never earn the tag of a developing nation. Thus, he introduced new economic reforms and opened Indian borders to foreign investment through liberalization, privatization and globalization. Since 1991, foreign investment in India has gone from $4.2 million $45.69 billion in 2014-15. This shows emergence of India as a learning school and puts light on how we adapted to the environment. They have regularly improvised the policies since then; they saw the bigger picture and introduced these reforms as broad consensus to make a coherent whole. Today, foreign direct investment is a major economic source for the economic development of India in various sectors like infrastructure, automotive, pharmaceuticals, textile, airline, etc.
4) Increase in the interconnectedness has helped other countries realize the high population and hence cheap availability of labor in India. It has given rise to the development of employment across the country. Developed countries like the US and UK realized this opportunity few years ago and executed it with unity, direction and purpose. They surpassed the cultural web and entered into new territory. Since the early days, the strategies of the multi nationals have grown and they have accepted this chance as a growth opportunity with small errors being recognized and modified. They have made the effort to understand and adapt to the rituals, rules, stories, control systems and organizational structures that are prevalent in India. They realized that in India, the power resided with a financial status and hence they lured new talent in by attracting them with financial incentives. They respected the Indian mental programming and found a way to make it profitable. Although, with the youth now focusing more on personal development over financial gains, the institution is changing. The bright side being, these changes are slow processes that don’t have a timeline, and therefore these companies are here to stay.
In the context of the ‘tyranny of the missing alternative’, globalization seems to be an inevitable reality. In India also, there is little objection to globalization as such. However, it remains important to harness the force of globalization to benefit human welfare and try to limit some of its adverse effects.