Globalization and the Caspian Region

by Douglas W. Blum

Douglas Blum is Chairperson of the Political Science Department at Providence College.

Summary

The process of globalization - the revolution in communications and the spread of international culture and values - are slowly penetrating the countries of the Caspian basin. The telecommunications infrastructure in the region is still grossly inadequate and a barrier to the spread of globalization. To date the debate over development in the Caspian region has tended to overlook the potential for speeding globalization. Instead, the approach has usually been framed in the Realist paradigm of international relations, with military alliances and economic development being used to strengthen states in competition with each other and with neighboring powers.

* * *As befits a panel on "Planning for the Future," this paper considers the likely shape of the future itself. Specifically, I focus on globalization in the Caspian region, including its general meaning and the level of its development to date. I argue that globalization is a fundamentally important yet strangely neglected phenomenon in policy discussions of the Caspian region. In conclusion, I suggest some tentative implications for Western policy towards the states of the region.

What is Globalization?

Since the term "globalization" is often used in a bewildering variety of ways, the first order of business is a brief working definition. For the purposes of this paper, globalization has three major components:

1) conditions:openness (political-institutional and infrastructural);
2) process: flows (of capital, people, goods, information, and ideas);
3) outcomes: convergence, in terms of technical harmonization, social organization,
popular culture, and norms (and to some extent, local particularism as well).

In addition to its major components or categories, the character of globalization is also important. The cluster of norms and functional institutions embedded within it include private property, free trade and movement, government enforcement but limited government interference, and basic individual rights. In short, globalization involves the spread of essentially neoliberal institutions and behaviors.

In recent years the subject of globalization has become something of a cause celebre among academics and policy analysts. The process itself, and its resumed cultural and political outcomes, has evoked both lavish praise and blame along with wild exaggeration and equally overstated debunking. The general themes and scope of the process are already well enough known as to make it unnecessary for them to be rehearsed in detail. In a nutshell, however, it is worth reminding ourselves of what we take for granted on the agenda of post-industrial countries. In the developed West, questions of public administration typically concern the efficient regulation of services and productive activities which emerge spontaneously within the market institutional structure, especially given the developed condition of "hard" infrastructure in the transportation and telecommunications sectors. The current analytical debate over the putative eclipse of sovereignty reflects not only the rise of an international regulatory framework, but also precisely the infrastructural conditions and technological ubiquity which make it possible - and even strategically rational - for developed states increasingly to delegate functions to private actors.

Obviously, telephone and fax have long been vital in enabling individuals and firms to conduct international business transactions and communications; this merely underlines the crucial importance of wireless technology today. The number of PC users worldwide continues to increase rapidly, accompanied by burgeoning computer literacy among children in developed countries. As of the end of 1998 roughly 153 million individuals were plugged into the internet, and on-line volume has been estimated to double every one hundred days. While much of this traffic is personal, cultural, or recreational, an increasing percentage of internet volume concerns domestic and international business, and this is certain to expand with the spread of direct e-commerce. Already, the prevalence of such communication connections helps explain the rising share of intra-firm transfers in total "international trade," and allows multinational companies to bring together spatially disparate links in the research, development, marketing, and distribution chain. Likewise, the interconnectedness of information flows makes it possible for nearly two trillion dollars to be exchanged in private financial transfers each day, vastly outweighing the amount of public transfers and trade in industrial goods. And these connections will become even more densely saturated with the advent of new technologies able to integrate all facets of information flow, including internet access, fax, telephony, data manipulation, and video.

Unquestionably this is a remarkable picture, even from the standpoint of a decade ago. What is perhaps most striking about this description, however, is its already hackneyed appearance. The phenomenon of globalization - or at least its broad technical and financial features - is thoroughly familiar to sophisticated audiences in the developed world. But it is often forgotten that commonplace wonders have quietly but steadily altered the mainstream of foreign policy thinking. It goes without saying that acute "shocks" and "contagions" in international finance have caused attention to focus on financial market integration, but various other aspects of globalization - economic, political, social, technical, cultural, as well as their inter-relatedness - are also widely discussed in policy forums today.

The Globalization Gap in Caspian Region Analysis

As yet the globalization debate has not entered discussions about the future of the Caspian region. Instead, other issues have overwhelmingly captured our interest, especially oil and gas exploration. The new international security agenda has had almost no bearing on discussion of Caspian issues, which are still frequently analyzed in terms of the "Great Game" between imperial powers a century ago, when the world was a vastly different place. Even the "alternative security" topics which are discussed in the Caspian context, such as transitional politics, ethnic conflicts, and environmental degradation, have generally been explicitly linked to interstate tensions and remain far removed from the process of globalization. This is odd, because although globalization has not supplanted the sovereignty of nation-states, it has loosened their moorings at the epicenter of international affairs. It has also set in motion new international dynamics which increasingly elude the Realist school''s conception of hard, unitary states playing rough contests of winner-take-all. Control of geographical expanse and strategic corridors matters far less now than it did even in the mid-twentieth century. But curiously little has been written on the actual progress of globalization in the Caspian, either descriptively with regard to current developments, or prospectively with regard to the future and the significance of this issue for American policy. It is worth wondering why.

To be sure, there have been some good reasons for preoccupation with Realist themes. Large hydrocarbon reserves are located in the Caspian, and this does have implications for national development prospects and (much more modestly) for international energy diversification. The pathologies of domestic transition, and the spiraling brutality of ethnic cleansing campaigns, have resulted in interstate violence all too often in the past handful of years. Moreover, political elites in the Caspian littoral states themselves continue to think primarily in realpolitik terms, and their competition for natural resources has been both intrinsically and symbolically related to a larger struggle over autonomy and influence. The same is true of social unrest and environmental dislocation: these are often viewed by regional elites through the prism of interstate competition, as being artificial sources of instability, manipulated by rivals or perhaps offering a pretext for overt intervention. For these reasons, the specter of spreading insecurity or military conflagration is not simply a figment of some archaic Cold War imagination - it is real.

Still, the preponderant emphasis on energy competition reveals as much about Western, and especially American, concerns as it does about objective conditions or regional perspectives. Perhaps more than anything else such concerns have tended to reflect a traditional intellectual and analytical focus on geopolitical rivalry, either directly as a function of energy extraction and transportation plans, or indirectly, insofar as political, ethnic, or ecological factors might exacerbate interstate tensions. It seems likely that old intellectual habits are especially engrained in conjunction with Russia and Iran, states around which so much of our analytical thinking has been shaped in the past. And perhaps this helps explain our brimming traditionalism in the Caspian context. At the risk of excessive repetition, however, the point is not that such conventional issues have lost all importance. It is rather that they are no longer enough. In disproportionately emphasizing "hard security" issues at the expense of global or transnational ones, we pay an analytical - and potentially a political - price.

The Advent of Globalization
Nearly unnoticed, currents of global integration are nevertheless already working their way through the Caspian basin. The process is enormously uneven, and to the extent that it is taking place this tends to be concentrated in certain areas within Russia, Kazakhstan, and Azerbaijan. Still, a number of intriguing developments are underway. For example, the joint-venture Caspian American Telecom is installing a cordless telephone network in Baku, and plans to install up to 300,000 lines in Azerbaijan by 2005. Turkmenistan is negotiating a Japanese loan to renovate and expand the country''s telecommunications network, including the introduction of digital technology. Nokia and Vimpelcom have signed an agreement to supply cellular phone equipment to Russia''s southern regions. Siemens and Kazakhtelekom are installing a fiber-optical line to connect Chimkent and Kyzylorda, and ultimately to link up the Russian Rostov-on-Don to Astrakhan line with the Asia-Pacific region. Kazakhtelecom and the Turkish joint-venture K''Cell are also rapidly expanding cellular communications equipment in western Kazakhstan. And the European Union''s TRACECA transport corridor project appears slowly to be gathering steam. More nebulously, it is possible to observe shifts in attitudes and aesthetics consistent with further globalization. The West in general, and America in particular, are generally considered the avatars of modernity in terms of urban development, hard power, standard of living, and sense of style. Therefore Western - or globalized - modes of physical infrastructure and spatial organization are increasingly imitated, such as building styles, parking lots, and advertising techniques.

In addition, there is an increasingly widespread acceptance of the need to follow the general development trajectory prescribed by globalization. This means for one thing that education must be based largely on the acquisition of technical skills. For another, it requires considerable acquiescence to demands for openness, especially to the massive incursion of capital. And this in turn, at least implicitly, involves some recognition of the need for policy changes in keeping with prevailing international standards. It is not surprising that recent IMF and other international organizational reviews have generally praised Azerbaijan, and in some respects Russia and Kazakhstan as well, for their willingness to enact legal and administrative reforms favoring private ownership, transparency, and economic openness. While there has also been foot-dragging aplenty, enormous changes have been introduced over the previous ten years and a broad historical perspective is needed to appreciate the rapidity of change. More surprising, and increasingly less convincing, is the reluctance of Turkmenistan and Iran to embrace the liberal economic agenda to date.

A pivotal question, however, is whether the associated cultural implications of globalization are officially accepted along with its material accompaniments. Although this question cannot yet be answered with any conviction, the early indications are that by and large globalization is neither accepted nor rejected wholesale, but is instead received differently in its various spheres. The technological components of globalization tend to be accepted almost uncritically while its underlying economic institutional features are more partially and conditionally embraced, as shown by the complicated progress of privatization. The political and cultural aspects of globalization are more hotly contested. Even here, however, the emerging pattern is a far cry from either the reactionary exclusion or mimetic embrace which many commentators describe. While it is true that the neoliberal ideology embedded within globalization brings with it new identities, values, and norms that potentially challenge prevailing institutions and sources of power, the tendency to adapt positively to such challenges is at least as pronounced as the tendency to retrench.

Again, one is struck by the different patterns of response across the Caspian basin, from Iran and Turkmenistan on the one hand to the remaining post-Soviet states on the other. Nevertheless, for all the ideological conflict inherent in globalization, for the most part Samuel Huntington''s vision of struggle between monolithic "civilizations" is less in evidence in the Caspian region than the struggle among multiple, competing constructions of the relationship between meaning and material life. To a significant extent this is a simply a novel form of a deeply traditional political struggle over wealth and status, marked by sharply competing normative claims over state-building, state-society relations, and the ongoing quest for legitimacy. As always, this is a struggle which takes place as much within as between nations or "civilizations."

What is distinctly new, though, is the growing inability to sequester domestic politics, or shield them from unwanted external influences. Naturally this does not keep the state from trying to do so. In Iran and to a lesser extent Turkmenistan, such efforts take the form of pervasive, anachronistic, and ultimately self-defeating bids to filter information and starkly restrict access to the outside world. In contrast, in Azerbaijan, Kazakhstan, and Russia the state has essentially bowed to the dictates of globalization. There, government officials increasingly attempt to associate traditional symbols of cultural identity with their own, often highly non-traditional political and development programs. This is a kind of gambit, which envisions selectively embracing key normative assumptions of neoliberalism (such as individual autonomy and initiative) without their threatening state legitimacy and the larger state-building project. Achieving this involves intentionally crafting a culturally blended identity, anchored in traditional themes, which provides a normative foundation for screening out inimical influences while allowing benign ones to penetrate and intermingle. Whether this is possible in practice remains to be seen.

Whatever the ultimate outcome, which may be unforeseeably eclectic and variegated, one must still be struck by the rapidity of essentially peaceful identity change so far in the Caspian region. In addition to the more trivial examples of popular culture, the encroachment of the outside world is increasingly evident in the emergence of basic values and beliefs associated with liberalism. The stirrings of civil society and the proliferation of transnational NGOs - although certainly representing a tiny fraction of the population as a whole - nevertheless belies any notion of passive complacency. This is true even in Iran, where the turbulent youth movement which has ambivalently supported President Khatami has evinced an intimate familiarity with international political and human rights norms. While such normative understandings as well as substantive political and economic knowledge remain unevenly distributed by region and social stratum, there is an unmistakable social and intellectual process in motion.

The upshot is that globalization is beginning in the Caspian region, albeit slowly. At this point its advance is impeded more by financial and infrastructural factors than by ideological constraints, although obviously Iran remains an outlier in this respect. A second tentative conclusion is that the spread of globalization is likely to continue to be highly contested but is not likely to have profoundly destabilizing political effects, at least not on the interstate level.

A Little Sobriety

Having asserted that globalization is underway, a number of caveats must be immediately mentioned as well. In fact, the Caspian region is only weakly globalized with regard to the openness, flows, and outcomes referred to at the outset. This is true regardless of which indices one chooses to examine.

While mobile phones, fax machines, and computers are becoming more widespread, the process is starting from an appallingly low level. Internet hosts were calculated at less than 9 per 10,000 people for Russia in mid-1998, as compared to 95 in Belgium and 145 in Ireland. And of course Russia is the bright spot in terms of PC and internet users (and this mainly in a few major cities); the other Caspian states lag far behind in most key indicators. Even in Russia long-distance telephone networking remains poor, especially outside of the Moscow-St. Petersburg corridor. In most areas of the Caspian basin, internet and e-mail access speeds are slow and connection fees high. The system of satellite, land lines, microwave radio relay, and submarine cables is inadequate to handle increased international volume, and domestic fiber-optic cable installation is still limited. Given the ongoing economic difficulties, everything from net investment in telecommunications to private sales of computers is expected to slump in the short-term future.

Financial globalization is also just beginning, although considerable policy openness has been achieved in recent years in Russia and Kazakhstan, and to a lesser extent in Azerbaijan. Still, total foreign capital flows have plummeted in Russia during 1998 and 1999, and have slowed markedly in Azerbaijan and Kazakhstan as well. Direct foreign investment as a percentage of GDP remains modest by Western standards, with the partial exception of Azerbaijan. Finally, a great deal remains to be accomplished with regard to the legal underpinnings for full market relations and international investment. The lack of democratic consolidation is another hindrance to outside investment, and changes in this area often seem glacially slow. Likewise, certain economic institutional changes - especially private land ownership, which is so consequential for the distribution of wealth, status, and power - continue to be strongly resisted. While this is not strictly speaking part of globalization, such institutional underdevelopment has far-reaching and retarding effects. In sum, globalization in the Caspian Sea is still in its earliest stages, and the prospects for its rapid acceleration are rather remote.

Why Globalization Matters

The slow penetration of globalization into the Caspian region is unfortunate, since the process brings with it potentially beneficial results. Admittedly, because of globalization''s close fit with the ideological and institutional structure of highly developed countries, they tend to benefit asymmetrically from its advance. Yet while this is true in relative terms, in absolute terms globalization offers numerous benefits to the Caspian countries as well. These include economic and social development, attraction of foreign capital (and retention of domestic capital), enhancement of governmental legitimacy, consolidation of pragmatic and cooperative foreign policies, and a lessened danger of domestic political instability. In keeping with international trend of dividing up the production and distribution chain, domestic market size matters less for foreign investment. Smaller countries with developed infrastructure and human capital have far greater chances than previously to become advantageously integrated into the international economy. Moreover, most comparative studies suggest that sustained growth in per capita income contributes to the emergence and consolidation of democratic institutions, and globalization can potentially help promote median per capita income in the Caspian countries. In any case, standing outside the process simply dooms them to economic and social underdevelopment, with all its attendant political risks.

The above points are also germane to the development path chosen so far by the Caspian states, featuring enormous emphasis on raw energy extraction. Indeed, the oil and gas sector has accounted for the lion''s share of direct foreign investment in all the post-Soviet Caspian states. As numerous analysts have noted, continuing such an unbalanced reliance on energy resources as the engine driving national economies is likely to have seriously distorting effects. The dangers go far beyond the risk of "Dutch disease," which merely threatens to limit the export competitiveness of other natural products and manufactured goods. More far-reaching problems are those associated with:

1) skewed infrastructural development;
2) short-sighted dependence on a volatile, low-to-no value-added commodity; and
3) extreme income inequality and the rising social strains this creates.

This in no way implies that the Caspian states should forego oil and gas development projects; at present there is simply no alternative for generating the capital needed for development. The question is rather how the dividends from such investments might be channeled in more balanced directions, and how the international community might play a constructive role in the bargain.

Policy Prescriptions

Globalization depends on a number of factors which determine domestic receptivity. First among them is policy openness in the form of engagement with international regulatory agencies and legislative accommodation of financial and informational flows. Also falling under this rubric are other forms of "soft" infrastructure: legal enforcement, a substantial degree of civic trust, effective domestic institutions, and sound macroeconomic policies. While these are undoubtedly important, however, they are outside the purview of international aid. There is little that developed states and international organizations can do beyond providing advice and a variety of potentially helpful examples. The same is true of the other key category of domestic reform, education. Globalization - and therefore the new basis of national and sub-national competitiveness - involves fundamentally different factors of production than those characteristic of previous periods. As Peter Drucker and others have stressed, first and foremost among them is knowledge. This dovetails with the World Bank''s observation in its recent review of globalization, that a critical factor enabling a country''s development is its educational system as measured by investment as a share of GDP. But again, crucial though educational reform and knowledge acquisition is, it can only be facilitated from outside in the most general terms.

What remains, at least with relevance to globalization assistance? One answer is concessionary provision of "hard" infrastructure, especially in non-proprietary telecommunications. At present this turns on a hypothetical causal argument, since whether investment in telecommunications can actually stimulate economic and social development remains an unstudied empirical problem. The ostensible linkage, however, is clear enough: non-proprietary IT infrastructure provides an essential element of the conditions for broad economic growth, lowers market entry barriers for small entrepreneurs in the service sector, and does so in a way which is not easily hijacked by rent-seeking elites inside or outside of government. For the latter reason it also facilitates the growth of civil society, which should have largely beneficial (democratic) effects, although admittedly it will also have its detrimental aspects (terrorists and criminals can use telecommunications too). Yet the potential for galvanizing broad-based economic activity and the flow of ideas is apparent, and is far more dynamic than the traditional forms of infrastructural investment still generally emphasized by the EBRD and World Bank, such as transportation, water supply, electricity grids, and heavy industry.

The political aspect of the problem is particularly compelling. Ultimately, the more globalized the Caspian region is the more neoliberal it will be, because the two are mutually reinforcing. This point highlights the costs associated with the current, highly competitive assumptions and practices of the Caspian states, as exemplified by their energy strategies and abetted by the US and other outside actors. Cumulatively these policies preclude the emergence of various regional development initiatives, through which information, people, and goods might circulate, and into which foreign capital might flow. In the absence of such conditions the Caspian countries remain more technologically and infrastructurally undeveloped, and more domestically repressive, than they might otherwise be. This is obversely related to globalization because the more connected these societies are to each other and the outside world, and the more neoliberal the basis of those connections become, the less political coercion and military instability we are likely to witness. The conclusion reached here is that some creative thinking about foreign policy and foreign aid is needed in the Caspian region. While fiber optics and other leading edge technologies are no panacea, telecom transfers might have palpable benefits in promoting the exchange of ideas and information, and in spurring the development of both private and regionally cooperative economic activity.

In the long run technological convergence may well be inevitable, along with some accompanying macroeconomic and regulatory harmonization. But the order of the day should not be fatalistic complacency. The best hope for regional stability lies in the promotion of dynamic development, rooted in technology of the post-industrial era. Moreover, identity convergence is not inevitable, and neither is the eruption of cultural clashes throughout the Caucasus and Central Asia. Fears about such outcomes should not be allowed to hinder the process; nor should outdated conceptions of what is really at stake in the Caspian region. While it is not within the West''s power to orchestrate and ensure convivial domestic politics in these countries, it is within the West''s power to help foster the macroeconomic and infrastructural framework within which such developments may occur on their own. And today this is possible only by keeping globalization squarely in mind.