Starbucks: Globalization versus Localization

We often joke about how the Semester at Sea community fights to get into a Starbucks the world over. The Bahamas, Puerto Rico, maybe South Africa? We go to this example of globalization and the Washington Consensus not for the well-marketed latte, but for the free wireless internet, a consequence of having only 250 minutes for the entire 4 months aboard the MV Explorer (most students buy much more). Starbucks is a great example of the new world order. Once called “McDonaldization,” globalization and Starbucks are now showing Ronald how to get it done. After the Cold War, the one superpower, the United States of America, has maintained a greater dominance of the world not known since the Romans or the Hittites or the Chinese. More than simple military might, we Americans have developed and sold a “soft” cultural power and what is referred to as “sticky” power, in contrast to the “sharp” power of tanks and guns. The belief says that open markets and the bottom line will bring democracy and freedom. Nike and GM utilize cheap labor in the beginning stage of industrialization in such countries as India and Brazil; it’s simply one step in the process of becoming “developed” like the West. But the reality is mixed, in practice far from the truth where profit often comes before people. Indeed the world now has an interest and stake in the spiraling U.S. debt—a defaulting debtor would devastate all economies worldwide. Industries pick up and move factories across borders with ease and move to where the labor is cheapest. Some call this globalization an Americanization of the world, with McDonalds and Coke and Pepsi, Xerox and Kentucky Fried Chicken all leading the way. But there are many benefits to this new world order too. We have seen an unprecedented peace and economic boom worldwide in the last 20 years that proves the success of globalization and world trade. But look no further than Starbucks’ headquarters in Seattle, Washington, and ask, why are the people rioting about the IMF and World Bank? Why are people flocking to Hong Kong to protest? If trade and money and freedom and ideas are linked through world trade, why hasn’t everyone benefited? This is globalization in practice, positive and negative, and my reflections about this global 20th and 21st century trend. The deeper you immerse yourself in this debate, the more gray it all becomes.

Global trade in the modern world economy is based on comparative advantage. Consumers are the biggest benefactors of a global economy. Walmart and Target and many US manufacturers produce “low prices always” thanks to cheaper labor and lower costs that they in turn pass over to their customers. Were it not for outsourcing and moving jobs, we could face double or triple prices for anything from sneakers to pillow cases to clothing. But labor is only one part of the comparative advantage of global trade. Countries naturally specialize in one or many industries in order compete with the global market. Steel is a perfect example of changing advantages. For most of the twentieth century, the US dominated steel production with low prices and quality. But in the 1980s and 1990s, other countries have passed the US advantage, leading to US protectionist policies to protect this key “strategic” industry. But this only hinders the ability of comparative advantage in the world trade market and allows weak, inefficient industries to continue. Think K-Mart being propped up by the government because we didn’t like Walmarts on every corner. This is a gross simplification of global trade, but an illustrative one.

Bananas are a recent example of the difficulties of globalization versus localization. The World Trade Organization recently ruled in favor of the United States in the battle over bananas against Europe. Basically, the Europeans buy large amounts of bananas from poor Carribean countries and former colonies. Thousands of farmers are supported solely by the banana industry in the poor economies of these islands. But Chiquita and Dole, major fruit producers in the states with large and successful lobbying efforts and political connections, pressured the US government to enact tariffs against the Europeans for refusing to buy their bananas from these large multinationals. The threat worked, and the World Trade Organization strangely ruled against fair, open trade in favor of its largest stakeholder in the IMF and World Bank, the US. Sometimes world trade doesn’t operate fairly and openly, and bananas are a perfect example of government intervention and protectionist policies. Meanwhile, all over Latin America as the economies fall further down, millions choose the American dream over the Latin American reality, either legally or illegally. In theory, global trade is idealistic and functional, but is the practical, the real anything like the idea and model?

Indeed, the debate about globalization and localization goes beyond economics into the world of politics and culture. The plight of women is another example of world trade not bringing democratization and human rights to the world. Women are held in bondage by families and husbands for labor and families. Nowhere else is this more apparent than in India, where boys are taken to doctors, not girls. Boys play in the streets and learn in schools, while women do the work at home, doing the chores of the family all day long, beaten if they fail the expectations of their mothers. Globalization has failed to address the need to improve their lives through education and hope. Instead, knowing the potential of boys, families are large in hope of boy children getting better jobs and improving the lives of the parents. Girls only eat and sleep, costing large dowries later in life. Sometimes the rules of business do not carry over to the ethics of improving the workforce. But is this one goal of globalization? And should it be? Human rights is another part of the debate, because basic human rights are often described as a Western concept, not applicable around the world.

This debate goes to the heart of culture versus human rights, and part of this growing globalization is the debate about universal human rights.

Above all else I have learned this voyage is the interconnectedness and interdependence of the world and its people. La mesa de espanol convened each day to practice and learn Spanish, mostly with other faculty and staff interspersed with the occasional student. We discussed all topics, but one recurring theme was neo-colonialism and the modern political state. This is a small attempt at recreating one of my favorite discussions. Look at the world’s problems, one staff member argued, they must be left for the people to solve. We must not intervene, we’ve made so many mistakes over the past 50 years—Vietnam, Cambodia, Afghanistan, Nicaragua, Grenada, Haiti, and now Iraq. Where have we had a success? This isolationist view is becoming a popular one. Indeed, who are we to dictate to the world how to solve their problems. The world criticizes the United States for policing the world, Colin Powell eloquently said over a decade ago, but guess who gets called whenever anyone needs a cop. The issue arises with universal truths like justice and freedom and democracy—do we get involved when there’s genocide? What about hunger and starvation? And politics—that’s a whole other ballgame. The reality is that our actions and decisions have repercussions the world over—from our agricultural subsidies, our trade agreements, the World Bank, the IMF, foreign aid—where does it stop? The simple answer is it doesn’t. Whether we make decisions aligned only with our self-interests or the world’s well-being, our policies and speeches make ripples across the world stage. I am against war of any kind, but does that mean we slip away into the horizon? What do we make out of the mess of Iraq? Burma is constantly a topic of discussion—to go or not to go. The embargo worked very effectively on South Africa to end apartheid, but what about the regime in Burma. As long as the Chinese and Japanese are hungry for resources and the Burmese are happy to oblige, the US and European embargo is nothing more than a weightless piece of paper.

Feast and famine, this is an Earth of paradox. We live in a world where 2,000 people die an hour from hunger and yet the world over produces a huge food surplus. Technology and transportation are shrinking the world, and yet we can’t solve the problem of world hunger. War, strife, hatred and human greed get in the way of solving the world’s problems. Who will step up—governments? The United Nations? NGO’s? Individuals?

Outsourcing is a major bone of contention in the global economy. As consumers want lower prices and businesses want higher profits, labor is obviously an example of comparative advantage. Many countries like India, Vietnam and China are the new lands where service industries are moving for an educated, hard-working and CHEAP labor force. Many countries have moved beyond cheap labor, like Taiwan, Japan, and Singapore, as labor-intensive fields search for the lowest wage per hour. Bangalore, India is a perfect example of a rich labor market with millions of technically-astute, college educated, English-speaking labor forces. Per capita income in India is $480, but many US companies pay $200 a month or $2400 a year! Even more the cost of living in India is 1/5 the cost of America, so the $200 a month here is equivalent to $1000 a month in the US. On the other side, the nighttime hours take a toll on the Indians: digestive problems, high stress, 16 hour days, and a 60% yearly turnover. This “exporting of America” will no doubt remain a hot political issue in America now.

Another great example of the new American mono-culture is in Vietnam. Ho Chi Minh, affectionately called Bac Ho or “Uncle Ho” by supporters, has been a national icon since independence from the French and Americans. The government respectfully refuses everyone from capitalizing on his name. When a Vietnamese-American joint-venture partner proposed “Uncle Ho’s Hamburger’s” joint, it failed, but Kentucky Fried Chicken didn’t. The American business rep offered the striking physically similarities between Colonel Sanders and Ho Chi Minh. “No” the unhappy Vietnamese said, “Ho was a general.” This has not stopped KFC’s success in Vietnam—I saw 5 places in Saigon , a market McDonald’s has not entered. Yet what is the price for business and jobs, to sell out your history, your culture?

Both sides have their supporters, globalization supporters and detractors, businessmen and environmentalists. In reality, the issue is more gray than black and white. Globalization has both positive and negative aspects like any complicated global trend. One student was telling me how she learned so much more during this voyage because she abandoned her steadfast beliefs—she immersed herself in living in the gray she said.

While in Rio de Janeiro, I heard that Starbucks has finally able to break into the Brazilian market. The world’s largest producer of coffee must now fight for its own local market—Starbucks has been clamoring to collect the profits of a large coffee drinking population like Brazil. Or, even worse, many students complained with disgust (while drinking their Mochas and Cappuccinos) that there was actually a Starbucks inside the Forbidden City in old Beijing, a place closed off for 500 years to all commoners. For me, I hoped they have free wireless internet—indeed, maybe we all have a role and self-interest in the new globalization of the world.