globalization vs. localization
we were discussing globalization. one friend opined that the whole process will not be fruitful unless globalization is combined with localization. he did not explain what he meant by localization and how it will gel with globalization. another friend thought that the two terms were incompatible.
are they? i am examining this aspect in the current write-up.
this is the era of globalization. no one will disagree with the statement. it is not merely the multinational coming to india to invest and to make profit but also the indian companies which are fanning out to capture markets and to establish themselves in other countries.
one of the criticism of globalization is that it cuts jobs. the foreign companies bring with them latest technology involving much of automation which means less persons are needed to do the same job. the corollary of the development has been the economy of scale. the bigger industries have got bigger and are now manufacturers of larger percentage of goods than ever before. the automation also means concentration.
the labour surplus is constant problem with india and it is felt that it will become more acute with bigger industries capturing the market and cornering the manufacture of goods. in the good old days when cost benefit analysis – cash flow system was taught, it was said that weightage has to be given to labour when calculating the returns. roughly if rs 100 was to be spent on labour, in calculations we could give it a weight (say 60 %) and put its value at rs 60. this was true of government projects but private sector did not play by such a rule. the multi nationals are obviously not going to do it. maximization of profit is the simple motive of their investment. the increase in rate of return is their constant endeavour.
the automation and concentration of industries has dual disadvantages – one the automation cuts down the employment; and secondly the concentration in particular area produce environmental hazards viz. sanitation, transport bottle necks etc. as the cities and the industrial centres grow, the social requirements – education, health, entertainment also tend to get concentrated adding to the problems. it also leads to concentration of wealth, and, consequentially, facilities leaving other areas poor and poorly provided. india versus bharat is often cited as a problem.
what is the solution? the evident answer is dispersal. does dispersal mean, or should it mean, industries spread over a wider area? new cities will be created. will this not mean just the spread of the problems also? instead of intra city transport bottlenecks ,we will have inter city transport bottlenecks.
in my view, the problem can be solved by introducing the growing role of aggregators. they get orders for goods from industrialists and from abroad, pass on the specifications to manufacturers, get deliveries and arrange delivery of goods. one of the head aches of small manufacturers is marketing which can be taken care of by the aggregators.
the idea is not revolutionary. we can think of khadi and village industries commission and the khadi boards in india as aggregators. they deal in khadi cloth and clothes but the actual spinning or the tailoring is done by hundreds of people in their homes. delivery is taken and supplied to shops. marketing is with the commission/ boards. there are other examples. bata shoe company and many other shoe companies have long indulged in this practice. the shoes are actually made in agra, kanpur and elsewhere. the company provides the specifications. the sine qua non is that maintenance of quality has to be ensured for this type of venture to be successful. the inspectors regularly interact with the manufacturers to maintain the standards prescribed by the company. there is no limit on expansion of such aggregators as the number of manufacturers can be multiplied easily. in the first example above, clothes remain a major item of export to world market and such enterprises can take globalization in its stride without surrendering localisation. we can even consider ola and uber company as aggregators.
it is not only the simple items like clothes which can be manufactured by small industries or householders. take the example of china. it has a large number of same scale manufacturers of sophisticated machines. for example, it has a small brick making machine costing around $ 3990 to $5880 (about rs 2,60,000 to rs 3,90,000). it can manufacture quality bricks. concrete house block making machines, road asphalt laying machines are available as cheaply as $1000 to $3000. these companies have, typically just 5 to 10 employees. such small companies can be set up anywhere and if the transport facilities are good, it can compete with any factory producing similar products. similar is the procedure of manufacturing consumer goods. the indian market for dewali decoration lights provides such a scope where the small enterprises provide with typically indian designs of ganesh and durga murtys.
the number of SMEs in china has exceeded 10 million, accounting for 99% of the total enterprises. Of that number, those with fewer than 300 employees account for nearly 96%. The SMEs contribute 60% of China's GDP, 50% of tax revenue and 80% of urban employment. (figures are for year 2000)
this is, in essence, localization of industries without giving up the benefits of globalization.