Modern globalization - Essay Example

?Business Introduction to modern globalization The concept of globalization refers to the phenomenon in which the entire globe appears to be coming under the canopy of a single order. This is the general and most broadly defined idea of globalization. This phenomenon involves integration of global economy through transfer of knowledge, transmission of technological knowhow and cultural and social values, change and modification of various government as well as private sector policies, regulations related to the geographical borders and change in relations of production. One most important effect of globalization is power discourse. Globalization refers to the process that takes place around the globe and that creates remarkably significant effect on the position of power among the nations (Cavusgil, Knight and Riesenberger, 2013). This shows that the term globalization does not relate to any single concept that might be encapsulated within a definite frame at a defined point of time. It is a process with a long history. Although globalization is regarded as a recent phenomenon, several environmentalists, economists and scientists univocally claim that this process has its beginning in the distant past and it cannot be clearly predicted whether it has any definitive end. While most of the activities of the modern world are shaped under the effect of globalization, several activities are recognized as the ‘bad effects’ of this process (Sassen, 2000). After a prolonged period of time, scientists have seen signs of this process of globalization to weaken in the current international economic and business scenario. These effects also cannot be determined as absolutely good or bad. It rather depends upon the way in which the term has been defined in a particular context and the level of impact that this phenomenon has cast on the performance of the sector or firm. Thus, in popular discourse, the term holds varied meanings. Hence, it is imperative to distinguish between the two types of concepts of globalization; one that is viewed as contemporary ideology of modern politics and the other that is related to as structural globalization. The current wave of globalization is the outcome of large scale interaction within dense networks of individuals and institutions around the world. International trade has increasingly become a function of global production of goods and services and their distribution (Chase-Dunn, Kawano and Brewer, 2008). Various arguments made by different economists, policy makers and environmentalists can be presented in this context. Some of these arguments support the positive impacts of globalization while others support the negative impacts of globalization. Arguments for and against globalization At present, the economic development of the global economy is highly dependent on the waves of globalization. With the beginning of the 21st century the world has moved on to a higher level of networking and interconnectivity. This is applied to all the aspects of society and economy. There has been structural reformation in the fields of technology and knowledge transfer has become more advanced (Hipsher, 2006). The fragmented dimensions of the economy in different parts of the globe of the globe get interconnected with smooth flow of technology and better networking. The different parts of the world are becoming more interconnected with one another and socially as well as economically. This structural reformation lays emphasis on the integration of diversities imbibed in the culture and practices of the different nations. On the other side of the coin, the process of globalization takes into account the diversities or differences in culture. Hence, it implies that this process leads to unification of the different ideas, cultures and practices among the nations. Under this process the world is considered as a single unit or economy that runs by following a uniform system. This leads to the formation of one single society. However, there are also certain drawbacks of the global integration. One of the major problems is related to the governance system (Yuzon, 2005). Since the globalized village is an integration of different cultures and tradition, a single government system is not sufficient for governing the entire world. There is a huge debate that exists regarding the activities in the world economy under the effect of globalization. Three different divisions can be identified among the scholars that take part in this debate. The debate sheds light on various beneficial and detrimental effects of globalization on the world economy. These arguments have been described below. The first and most important argument occurs between the ‘hyperglobalizers’ and the sceptics. These arguments are supplemented by arguments made by the Neoliberals and the neo-Marxists. Additionally, there are also arguments among the concepts of homogenization, heterogeneity and hybridization. Hyperglobalizers mainly conceptualize globalization in terms of economic benefits and loses. According to them, under the process of globalization, people act as economic agents and they are increasingly subjected to the global market place. They are subjected to the policies of one unified economy. Countries lose their geographical borders and get denationalized. Hyperglobalizers argue that economic developments include enhancement of the production process, improvements in the financial structure and establishment of complicated transnational networks that helps to create trade. According to the concept of hyperglobalizers, the process of contemporary globalization is irreversible and reconfigures the channel of human thinking that guides human action. However, it has to be acknowledged that hyperglobalizers disagree amongst themselves while evaluating the opportunities and risks arising out of the globalization process and how these impact the market behaviour for individuals to nations. Sceptics severely criticize the arguments of hyperglobalizers on the ground that they do not distinguish between the different countries in the world in accordance to their individual political power and the actual state of economic development. This is vivid in the contrasting positions of the countries taking part in the single market of the European Union (EU) on one hand and the United states on the other. On joining the single market, sovereign power of the European countries has been reduced (Martinelli, 2002). Presently, the issue of welfare of these countries are jointly addressed as a common issue of the welfare of the entire Euro zone, while, the issues pertaining to the individual countries are overlooked. At the other end, the United States of America has become a hegemonic power and the country plays a major role in the international market exerting its unprecedented economic and political strength. The sceptics claim very frankly that the theory of globalization based on the notion of a well integrated world economy is unreal. Due to the inherent differences within the nation states, a single world economy cannot take place. The waves of globalization do not bring any novel outcome, but offers a new world outcome in which few influential predominant economies take part in the decision making process of the global economy more actively (Young, 2001). Since this a gap between the actual concept of globalization and the phenomenon that is taking place presently, the net result is that several unionized blocs are developing in the world; one in Europe, one in North America and the other in Asia pacific (Joshi, 2009). These blocs are being made on the basis of trade facilities and the characteristics of trade in which these economies take part. Sceptics extend their argument to include other aspects of globalization. They argue that globalization is not all about trade and commerce. There are several other aspects to this phenomenon, which include the culture, traditions, environment and social values of the nations that integrate with one another. The multinational organizations are the face of the globalised world economy. It has been claimed that these organizations conduct their operations in different countries, but, have a solid regional base in their home country. Therefore, the view of the sceptics cannot be totally ignored. According to them, the multinational organizations are the power powerful decision maker in the international market and they have discreet power to shape the trend and path of movement of the world economy (Gilpin, 2000). There is significant asymmetry in position of power between the multinational corporations and the indigenous organizations in different nations. The resulting integration is the “by product of the US initiated multilateral economic order” (Martinelli, 2003, p. 98). The governments as well as private corporations of the some of the powerful Western nations play a key role in giving shape to the relations of trade in the global market. Neo liberals offer a confident argument to the debate. According to this group, non-zero sum outcomes are received in the globalization process and benefits hold much more weightage than the costs. Neo Marxists and radical thinkers, however, portray a more discouraging picture about the system of globalization. According to this sector, the process allows the most influential economic factors to dominate over the rest of the economy. Yet, Neo liberals as well as Neo Marxists agree on one fact that the globalization process leads the countries to lose their sovereignty and their autonomous state power (Sassen, 2000). New Marxists argue against the comment that the benefits of globalization weigh more than the costs. Since the impersonal forces of demand and supply originating in international market become more powerful than the national governments, states cannot control the flow of people and information or goods and money for the benefit of their particular nation. Hence, the welfare policies that are developed by the state have to be readjusted (mostly bringing reduced level of welfare) according to the policies of the international market developed under the rule of global competition (Hill, 2003). Protectionist measures Protectionist policies allow a country to preserve its own policies and regulations. It helps the country to protect its domestic industries and markets from the steep competition of the international market. Cut throat competition prevails in the international market due to competitive prices, low cost of production, quality of product, technological advancement and innovativeness of the company. Several countries are currently deviating from globalization and following the path of trade protectionism (Ali, 2009). The most noticeable examples of protectionist measures are set by Russia, India and some countries in the EU (Economist, 2009). Russia has increased import duties charged on vehicles. This increase of tariff is intended to reduce the volume of the import of vehicles that are manufactured in foreign countries and sold in the Russian market. By raising tariff government would support the domestic vehicle industry in two ways. Firstly, on increasing tariff the domestic demand would not be totally satisfied by foreign goods and some consumers would shift their demand to the domestic producers. Thus demand for indigenously produced vehicles would rise. Secondly, by raising tariff, the market price of the product rises. The domestic sellers also sell their products at this market price. Thus producers’ surplus rises and they earn higher profits (Morrison, 2011). India has raised tariff on import of steel. This would boost up the steel industry in the country. Steel is a heavy industry that helps to develop the backbone of a country. Once the domestic steel industry flourishes, it would make the country more self dependent and it would be able to compete with the strong foreign competitors in the international market (Economist, 2009). The member countries of the EU have introduced export subsidies on several dairy products. This is also aimed at boosting up the dairy firms to make them produce more goods. If the products are subsidised, the government bears a proportion of the cost. Producers therefore, produce more of the product. It can be exported to other countries. This protects the country’s industries and also strengthens it such that it might become eligible for facing the steep international competition once the protection is removed (Economist, 2009). All these three cases describe the circumstances under which these countries have considered it justified to adopt protectionist policies. The primary reasons that might encourage any other country to protect its own industries are to boost up production of its domestic industries (with the long term aim of making them competent enough to face foreign competition), to develop its infant industries and to strengthen its basic and heavy industries to increase infrastructural facilities of the country (Abboushi, 2010). Effective protectionist would ultimately help different sectors in the economy to become competent enough to survive competitive environment in the long run. Reference List Abboushi, S., 2010. Trade protectionism: Reasons and outcomes. Competitiveness Review: An International Business Journal, 20 (5), pp. 384 – 394. Ali, A. J., 2009. Changing premises of globalization. Competitiveness Review: An International Business Journal, 19 (4), pp. 21-28. Cavusgil, S. T., Knight, G. A. and Riesenberger, J. R., 2013. International business: The new realities. New Jersey: Pearson Prentice Hall. Chase-Dunn, C., Kawano, Y. and Brewer, B. D., 2008. Trade globalization since 1795: Waves of integration in the world-system. American Sociological Review, 65 (1), pp. 77-95. Economist, 2009. Turning Their Backs On The World. [online] Available at: < http://www.economist.com/node/13145370 > [Accessed 8 November 2013]. Gilpin, R., 2000. The challenge of global capitalism: The world economy in the twenty-first century. New Jersey: Princeton University Press. Hill, C. W. L., 2003. International business: Competing in the global marketplace. New York: McGraw-Hill. Hipsher, S. A., 2006. Re-evaluation of underlying assumptions and refocusing of objectives in criticisms of international business. Critical perspectives on international business, 2 (2), pp. 114-127. Joshi, R. M., 2009. International business. Oxford: Oxford University Press. Martinelli, A., 2002. Democratic Global Governance and the European Union. The Tocqueville Review, XXIII (1), pp. 49–71. Martinelli, A., 2003. Global order or divided world? Current Sociology, 51 (95), pp. 95-100. Morrison, J., 2011. The global business environment: Meeting the challenges. Basingstoke: Palgrave Macmillan. Sassen, S., 2000. Territory and Territoriality in the Global Economy. International Sociology, 15 (2), pp. 372-93. Young, S., 2001. What do researchers know about the global business environment? International Marketing Review, 18 (2), pp. 120 – 129. Yuzon, I. F., 2005. The informal labor sector amidst globalization. Humanomics, 21 (1), pp. 21 – 29. Read More