The bigger picture
By Digby Lidstone, November 4, 2007
Last week there was unrest in the labour camps of Dubai. Workers - most of them poor migrants from the Indian Subcontinent - protested against the hardships caused by yet another shift in exchange rates.
The rupee is rising; the dinar, dirham and dollar falling. If you are earning money in the Gulf and sending it home to India, the past year has not been kind.
"This is the fault of globalisation," was the remark of one local blogger. But is this true? Isn't globalisation precisely the reason those workers are in the Gulf in the first place?
'Globalisation' is a relatively new term, but it is an ancient phenomenon.
Many a society has pottered along in happy isolation for centuries before being rudely awakened by the arrival of a shipload of merchants or missionaries from across the horizon. One by one, isolated cultures have been gradually absorbed into a world-wide web of trade links.
It is not always a one-way process. Civilisations collapse, after all, taking with them their networks of trade ties. But these links are usually reforged. For several thousand years now there has been a general movement towards a single, global market.
The trading communities of the Gulf once played a major role in this process. You only have to look at the archaeological record to see how far their influence stretched. Gold coins from Abbasid Iraq have been found as far north as Norway. A few years ago, the wreck of an Arab-built dhow was discovered off the coast of Indonesia, its hold full of porcelain from medieval China.
Those early seafaring merchants enjoyed some of the biggest perks of globalisation.
For a start, not many other people were prepared to undertake the risky, months-long voyages across the globe. This alone added a premium to the prices of the Indian spices or clothes they sold on to traders from southern Europe.
The other power they wielded was the knowledge of the true price of things in their respective markets. Because end-buyers were completely ignorant of conditions in the producer market, merchants could exploit those differences massively.
Pineapples might be ten-a-penny in the Caribbean, for example, but in early Victorian England they were so expensive that rich households would rent them for the afternoon to impress their teatime guests.
Eventually, however, the first trickle of new goods becomes a flood. Bananas were an unheard-of luxury in Britain in the 1950s, for example. But today more are consumed per capita in the UK than any other fruit.
The same process is happening in Bahrain. From sausages to rambutans, most things that were unavailable to homesick expats a few decades ago can now be found in the local supermarket. And the more there are, the cheaper they get.
But lower prices are not an inevitable result of globalisation. Globalisation is also about the free flow of people as well as goods. And as the barriers between one market and another come down, price changes filter more rapidly from one to the other.
It is for this reason that labour costs will rise in in Bahrain over the next few years. So long as the Indian economy booms, migrant labourers will become scarcer and the salaries they command will grow higher as a result. The wage honeymoon enjoyed by the kingdom's economy will come to an end.
But this is no bad thing, either for those remaining expat workers or for Bahrain itself. A country that depends too heavily on imported labour pays a high price in terms of low-skilled and unemployed nationals and a lack of innovation in business. The sooner it can address those shortcomings, the better for its economic health.
Globalisation can be a painful process, but it can only be held back with tariffs and quotas for so long. The quicker Bahrain integrates into the world economy, the quicker it can compete with the best.