The world is being shaped by the pulls and pushes of two forces often in opposition—globalization and localization. The benefits of globalization have been celebrated in recent years by many economists and business people—the “Davos crowd”, as the media often calls them. Now they are concerned that the world may be “deglobalizing”, with governments struggling to manage the effects of the global economic crisis on voters in their countries. Global trade has reduced in the past few months, as have cross-border capital flows. The votaries of globalization are urging leaders of governments to stay committed to the cause and to resist demands for protectionism. Globalization produces many benefits, no doubt, by stimulating growth of economies and businesses.
Illustration: Jayachandran / Mint
However, localization is not only inevitable, but it can also provide solutions to several enormous problems that need to be addressed globally—such as inclusion in economic growth, care for the environment, food security, and empowerment of women.
Four drivers of change coming together make localization inevitable: human rights, democracy, entrepreneurship and innovation. The ideas of human rights and democracy have spread across the world in the latter part of the last century. They induce political localization. At the same time, the drives for entrepreneurship and innovation—two of the hottest topics in business in recent times—are fostering localization of businesses.
Political localization is manifest in the great Indian election bazaar. Parties representing regional interests and particular castes are on the rise. While one national party, the Congress, has increased the number of seats it won in the recent general election, overall the two national parties got fewer votes than they did five years ago. Because communities that feel their cause is not well represented are organizing themselves to be counted and heard. In Andhra Pradesh, first came the Kammas; now, the Kapus. In Bihar, after the Yadavs, it is the turn of the Kurmis. If the Shiv Sena is losing its fangs, the Maharashtra Navnirman Sena (MNS) will take up the cause of the local manoos. The communal flare-up within the Sikh community in Punjab is another reminder that economic growth is not enough to overcome old divisions and oppressions. People will rise to be respected and fight for their rights.
Globally, too, the trend is for countries to break up into smaller components along regional, religious and linguistic lines rather than to combine into larger countries. In the 20th century, colonial empires broke up, Pakistan separated from India, then Bangladesh from Pakistan, and Indo-China, Yugoslavia, and the Soviet Union were broken apart. And in the 21st, Scottish nationalism is chafing within Britain while (less seriously) Texans are threatening to break away from the US.
The necessity for business localization is known to all business leaders. “Think global, act local” is a common slogan in multinational corporations. A study of European multinationals in India—to understand why some companies made high profits while others, performing poorly, complained about the difficulties of doing business in India—showed that those who localized products and management grew both their revenues and profits. They delivered to local customers’ requirements, took advantage of local capabilities, and enabled innovations to emerge in many places, whereas their competitors with more centralized and standardized approaches were slow to hit the mark.
Local action is an effective approach to solve social and environmental problems too. Last year, the World Economic Forum (WEF) brought together experts from around the world in its global agenda council for food security. They concluded that new approaches are needed. “While a global model is needed, solutions are ultimately local and should engage the community as the central driver of the solution,” they said, adding: “Agricultural production interventions must necessarily address the needs of small farmers and invest in women producers who grow and process the majority of food supply in many regions.” These experts are not Gandhian village lovers. They are renowned agricultural scientists and executives of large Western corporations engaged in the production and distribution of food.
The theme of smaller, local solutions ran through the insights of other WEF global agenda councils concerning water conservation, renewable energy and economic inclusion. The global agenda councils’ summit concluded in November with the warning that “we cannot reboot the old economy” to get out of the global crisis. The old software—the old ways of thinking and organizing—cannot provide the solutions required. Indeed, they have caused many problems. Therefore, new software is required.
There are many inspiring examples of local solutions—from South Asia, Africa and South America—to interrelated problems of income generation, education, empowerment, health and environmental care. The challenge is to “scale up” to rapidly multiply such successes across the world. In the old way of thinking and organizing, “scaling up” would require a large organization under a central authority. Invariably, large bureaucracies creep in with this way of organizing—in governments, multilateral organizations and large corporations. This is the way of “buffalos wallowing” and smothering local initiatives.
Instead, localization gives power to more people. It also brings out more ideas. But those who already have power do not like sharing it. The Group of Eight, or G-8, resists enlarging to the Group of Twenty, or G-20. The UN Security Council does not want to include others. The global superpower does not want to subscribe to universal rules.
Following the sunshine of many years of growth, the world is going through a tunnel of darkness. New ideas are necessary to come out of the dark. The 21st century challenge for leaders of governments, political parties, NGOs and business enterprises is to create an effective “local-global” governance architecture which distributes power and generates more local leaders and initiatives. Because more such “fireflies arising” will turn gloom to light, and improve the world for everyone.
Arun Maira is former chairman, Boston Consulting Group India, and author of Remaking India: One Country, One Destiny (2005). Comment at email@example.com