Globalization. Its Positive And Negative Effects - Essay Example

? Globalization Introduction Globalization is the process of making extensions of social, cultural and economic relations throughout the national borders. Such extensions are as a result of the free flow of goods, ideas, capital, services, and people. It is the dispersion of service and industrial activities such as research and development, production and distribution, sourcing of inputs, and cross-border networking of organizations through sharing of assets and joint ventures. It is not possible to define Globalization in terms of integration or internationalization as has been suggested by some theorists. Globalization describes the interplay within cultures of macro-social forces (Basu 2008, p.29). Such forces include politics, economics, and religion. Discussion Globalization can universalize and erode a local group’s characteristics. It has significant social, business and economic implications. Major factors in globalization are Advances in telecommunications infrastructure and transportation including the emergence of the Internet. They generate further interdependence of cultural and economic activities. Since the mid 1980s use of the word globalization has been on the rise; further, environmental challenges like cross-boundary air and water pollution, over-fishing of the ocean and climate change are associated with globalization (Zurich, Cairns and Ramaphosa 2000, p.219). Globalizing processes are affected by the natural environment, work and business organization, socio-cultural resources, and economics. Globalization is a process that leads to some substantial changes for businesses and markets to address the expansion of trade in services and goods between countries, increased labor migration levels, internationalization of services and products and development of global brands. Globalization also leads to increased labor migration levels, changes in consumption and production such as the expansion of off shoring and outsourcing of support and production services. It also leads to the entry of nations into the worldwide trading system including former nations of the Soviet bloc and China. A major outcome of globalization is the growing inter-dependence of economies. For instance, most countries in the world depend on each other for macroeconomic health, and economies of newly industrializing countries are growing faster than rich developed nations and they are winning an increasing share of world trade (Stiglitz 2003, p.39). In 2000, the IMF; International Monetary Fund named four primary aspects of globalization; investment and capital movements, transactions and trade, dissemination of knowledge and movement and migration of persons. With regard to transactions and trade, developing nations increased their share of global trade, from 1971’s 19 % to 1999’s 29 %. Nevertheless, there is massive variation among key regions. For example, the NIEs; newly industrialized economies of Asia succeeded, but African nations as a whole did not prosper. The makeup of a nation’s exports is a vital indicator for success. Manufactured products exports soared, dominated by NIEs and developed countries. Commodity exports, such as raw materials and food were commonly produced by developing nations. As a result of this, investment and capital flow can be identified as another primary feature of globalization. The movement of Private capital to developing nations soared in the 1990s, replacing development or "aid" assistance which dropped substantially after the early 1980s. FDI; Foreign Direct Investment became the most vital category. Bank credit and portfolio investment increased although they have remained volatile, falling steeply in the wake of late 1990s financial crisis (Basu 2008, p.30). The movement and migration of individuals can also be identified as an important aspect of the process of globalization. Between 1965 and 1990, the migration of labor forces approximately doubled. A lot of migration occurred between LDCs; Least Developed Countries and developing countries. The movement of people to advanced economic nations was claimed to offer a means by which worldwide wages converge. A study by the IMF noted the possibility for skills to be taken back to developing nations as wages in those nations rise. Finally, the dissemination of knowledge can be highlighted as an integral feature of globalization. Technological transfers benefit most Least Developing and the developing countries as illustrated in adoption of mobile phones (Stiglitz 2003, p.40). Globalization is made up of five dimensions; political, economic, cultural, ideological and ecological. Economic Dimension; Economic globalization is the stretching and intensification of economic interrelations across the world. It comprises such things as the internationalization of finance and trade, the emergence of a fresh global economic order, the enhanced role played by international economic institutions, and the transforming power of transnational corporations (Smith 2005, p.18). Political Dimension; Political globalization is the expansion and intensification of political interrelations across the world. Features of political globalization comprise the system of modern-nation state and its transforming place in the current world, the direction of global political systems and the role played by global governance. Native New World crops that are exchanged globally include tobacco, potato, tomato, vanilla, cacao, rubber and maize. Cultural Dimension; Cultural globalization is the expansion and intensification of a cultural movement throughout the world. Culture has many facets, and it is a wide concept. However, in the globalization discussion, it means the symbolic construction, dissemination and articulation of meaning (Boran and Cox 2007, p.6). Ecological Dimension; Ecological globalization is what refers to the global environmental issues. Ecological globalization includes access to food, population growth, global decline in biodiversity, global environmental degradation, the gap between the poor and rich between the global South and the global North, and human-induced climate change. Ideological Dimension; globalization works on an ideological dimension full of a variety of narratives, beliefs, claims, and norms concerning the phenomenon itself. There are three main forms of globalism; justice globalism, which builds an alternative globalization vision according to egalitarian ideals of distributive justice and global solidarity; jihadist globalism which struggles against justice and market globalism as it aims at mobilizing the world Muslim community of believers in defense of Islamic beliefs and values that are deemed to be endangered by the forces of consumerism. There is also secularism and market globalism which aim at endowing globalization with neoliberal meanings and free-market norms (Zurich, Cairns and Ramaphosa 2000, p.220). The First World War, the Second World War and the Great Depression caused Globalization to take a significant step backwards. Following the Second World War, politicians agreed on the establishment of the Bretton Woods conference. This was a significant governments’ agreement to lay down a framework for finance and commerce, international monetary policy, and the founding of some international institutions aimed at facilitating economic growth and lowered trade barriers. GATT; General Agreement on Tariffs and Trade resulted to many agreements to eliminate trade restrictions. World Trade Organization, which built an institution of managing the trading system, was the successor of GATT (Boran and Cox 2007, p.7). Exports of gross world product doubled from 8.5% to 16.2% in 2001. Use of global agreements to enhance trade stumbled following the Doha round ‘s failure of trade negotiation. A lot of countries then transformed to smaller multilateral or bilateral agreements, like the 2011 United States– South Korea Free Trade Agreement. As of the 1970s, aviation had become affordable increasingly to middle classes in most developed countries. Low-cost carriers and Open skies policies have aided in bringing of competition to the market (Milanovic 2003, p.667). Globalization is good in terms of the open markets opportunities and efficiencies it creates. Business can communicate effectively and efficiently with their customers, partners, and suppliers. Further, the can better manage their distribution network, inventories, and supplies (Smith 2005, p.19). Local producers are in a position to sell their goods in markets far away with the same speed and ease as their domestic country. For instance, Sony Corporation can sell its game and Television consoles with as much ease in Tokyo as in New York. Likewise, Intel, Apple, and Cisco can now sell their high quality gear with as much ease in New York as in Tokyo. This results in profit potential for a large business by creating global labor specialization, and passing on reduced costs from one nation to another where the price of the same products is higher. Globalization spreads investment worldwide so that the investors’ profits are maximized. It also encourages worldwide technological innovation. Also, globalization has led to rising leverage and easy credit. This is because money flows easily across national and local boundaries, and creditors are unable to distinguish between evil and good borrowers thus boosting aggregate demand. Globalization has helped set the economy of the world into a virtuous cycle of employment and income growth. Leverage and easy credit fuel financial bubbles that feed into euphoria, which eventually perpetuates the virtuous cycle (Milward 2003, p.29). Another good side of globalization is its ability to provide a range of products to an average person. Today, most people own products that originate from many parts of the world. For instance, some people have shoes from Dubai, T-shirts from Malaysia, cars from Japan, Cell phones from China. Globalization further allows the world’s brainpower to converge on a certain problem, which is better than having 100 different individuals re-inventing the wheel without contacting each other. The negative effect of globalization is the new uncertainties and risks that result from the high level of integration of local and domestic markets, product and business destruction, intensification of competition, profit and price swings, and high level of imitation. Corporations that had previously enjoyed the benefits of globalization, today face unpredictable and unstable business and demand opportunities (Rodrik 2011, p.9). Their products become commodities hence leaving them with little or no pricing power. Additionally, they face constant pressure from new competitors and these pressures undermine profitability. Another negative effect of globalization is deleveraging, declining money movement across national and local boundaries and tightened credit. Creditors tighten credit to bad and good borrower hence depressing total demand. This sets economy of the world into a vicious cycle of employment and income declines (Boran and Cox 2007, p.7). Deleverage and tight credit lead to a burst of financial bubbles which feed into euphoria that eventually perpetuates the world economy’s downward spiral. Finally, globalization deprives the poor. The human is reduced to a factor of production, to be utilized to the maximum. Employees in poorer nations suffer because they may get employment but lose livelihood such as access to free services, higher prices for necessities of life, increase in prices of products, distress and to some extent famine and death. References List Basu, P. K. (2008). Globalisation: an anti-text : a local view, Delhi, Aakar Books. pp.28-30. Boran, A., & Cox, P. (2007). Implications of globalisation: papers from a conference held at University College Chester, November 2003, Chester, Chester Academic Press. pp.5-9. Milanovic, B. (2003) The Two Faces of Globalization: Against Globalization as we Know It, World Development 31(4), pp.667-668. Milward, B. (2003). Globalisation?: internationalisation and monopoly capitalism : historical processes and capitalist dynamism, Northhampton, MA, Edward Elgar Pub. pp.28-30. Rodrik, D. (2011) The Globalization Paradox: Why Global Markets, States and Democracy can't Coexist, Oxford, Oxford University Press. pp.8-10. Smith, N. J.-A. (2005). Showcasing globalisation: the political economy of the Irish Republic, Manchester [u.a.], Manchester Univ. Press. pp.18-20. Stiglitz, J. E. (2003). Globalization and Its Discontents, New York: W. W. Norton. pp.38-40. Zurich, A., Cairns, E., & Ramaphosa, C. (2000). Globalisation: policies, strategies and partnerships : the summary report of the Commonwealth Business Forum in London, 18-20 september 2000, London, En, Commonwealth Business Council. pp.218-220. Read More