Globalization Is Merely a Platform for the Multinationals to Expand Their Global Reach - Essay Example

of the of the Globalization Is Merely a Platform for the Multinationals to Expand Their Global Reach Globalisation has created an environment in which there are more opportunities for multinational companies to develop economically. Commencing trade with China facilitates a company to market its products across various industries and markets in the Asian region. Thus, the geographical importance of a third world country is of great significance for these companies and this allows them to neutralize their competitors, due to the positional advantage gained in this manner. Such positional advantage permits these companies to immediately introduce their products in the markets surrounding that country (Adina). The presence of multinational companies in the third world nations reflects several unforeseen effects on their culture, society and economy. Multinationals mainly operate in the areas of production, services and sales. They operate in countries where there is a possibility of exploiting labour and other resources with scant regard to the damage caused to the environment. Nonetheless, their entry brings in enormous inflow of wealth to those countries. This aspect of globalization creates severe economic inequalities and social divisions (Globalization and the impact of multinationals on local communities). In the process of globalization, the multinationals migrate from one country to another in search of cheap labour and resources. This migration results in large scale unemployment in the regions where they were previously operating. Further, wages paid in the new place are at a lower level. They do not respect the rights of workers and working conditions are dismal. In the year 1998 a survey was conducted with regard to special economic zones in China. It was revealed in that survey that the franchisees or appointed manufacturers of multinationals such as Ralph Lauren, Adidas and Nike were paying wages, which were less than thirteen cents per hour. On the other hand, in the US, the same kind of work fetches ten dollars per hour (Globalization and the impact of multinationals on local communities). Multinational corporations are very powerful and often influence government policies in most of the countries of the world and in international bodies like the European Union and the World Bank. They bring pressure to bear on local governments to privatise certain services and important branches of public administration. This is because multinational companies derive greater profits from privatisation. For instance, in the United Kingdom, the government had blatantly ignored public interest and put up several proposals to privatise hospitals, roads and prisons in order to conform to the diktats of these corporate giants. The national governments acquiesce to the demands of the multinationals, because the latter have sufficient influence over the international entities that formulate international policy. Thus the national governments, which would require the support of these multinationals in their representations at international forums, cannot afford to displease or disobey them (Globalization and the impact of multinationals on local communities) Multinational companies play a major role in the process of globalisation. The growing trans – border capital exchange can be mainly attributed to foreign direct investments. The third world and the developing nations have been made the target for this capital flow. Foreign direct investments encapsulate financial and product markets in those countries. The convergence of goods and capital markets promotes the integration of labour markets across countries (Adina). Dow Chemicals, a multinational company, has invested huge amounts of money, in order to establish chemical plants, in a number of third world countries. Ford and General Motors have established production plants in Brazil and Thailand. These companies produce vehicles, which are marketed locally as well as in other markets of South America and Southeast Asia. In a similar fashion, Intel established its main R&D facilities in the US, water – fabrication plants in Ireland and Israel, and microchip assembly plants in Costa Rica and Philippines. IBM established trade centres in several third world countries, which market its products that are manufactured in some other place (Adina). The cost of labour in developing countries is much less than that of a developed country, and legislation in these third world countries is not stringent with regard to environmental protection. These are the main factors that attract multinational companies to invest in the developing countries and commence production. Globalisation has engendered large scale foreign direct investments. In the mid 1990s there was an economic crisis in the Asian region. This had forced the countries in that region to become a component of the world economy. South Korea and Thailand were called Asian Tigers in those days due to their economic boom. However, labour became expensive and the government initiated special measures to prevent the destruction of the environment (Globalization and the Spread of Poverty). In 1994, the Chinese currency was devalued. These developments attracted multinational businesses towards India and China. In these countries the cost of labour was cheaper in comparison to any other country in the world and there was no environmental awareness in those countries. Subsequently, in Malaysia and Indonesia costs increased significantly, and this resulted in the en masse migration of multinational companies to India, China and the Philippines. These countries have become the favourites of multinational companies that are labour intensive and that create a lot of pollution (Globalization and the Spread of Poverty). A similar situation obtains in Latin America. Manufacturing giants from the West started to search for countries where labour costs were low and where there was insignificant environmental awareness. Argentina proved to be ideal for such considerations. Hence, the multinational businesses of the West established their manufacturing plants in Argentina. Subsequently, labour costs and environmental awareness in Brazil reduced to a level that was lower than what was obtaining in Argentina. This impelled the corporate giants to migrate to Brazil (Globalization and the Spread of Poverty). Mexico, on the other hand, in the 1980s legally maintained lower wages to labour and controlled pollution measures in order to make the country amenable to the corporate giants. With the advent of globalisation, Mexico began to lose its clientele to other Central American and Caribbean countries, where labour costs were lower and where the legislation regarding the environment was much less stringent. It is a fact that the countries that played host to the multinational companies depicted industrial growth but failed to demonstrate economic growth (Globalization and the Spread of Poverty). The multinational corporate giants have exploited the third world countries in the process of globalisation. The wages in third world countries are diminishing gradually. Even in the most favoured countries in the third world, there is no correspondence between productivity growth and wages. Wages are always disproportionately lower in comparison to the industrial growth in these countries. During the years 1994 to 1997, there was a steep decline of wages in Indonesia and it was of the order of twelve percent. The Philippines registered a six percent decrease and China registered a wage decline of five percent. Moreover, workers did not receive any pension (Globalization and the Spread of Poverty). Globalisation has caused the African nations to invite multinational companies. The World Band and the IMF function is a manner that compels the nations of Africa to invite multinational companies to deplete their precious mineral resources as a part of the process of globalisation. The enactment of the African Growth Opportunity Act served to invite the Western multinational corporate giants to their countries. Nigeria and Ghana were the first to join the globalised economy and provide new opportunities to the multinational companies. Such exploitation is inevitable under the process of globalisation (Globalization and the Spread of Poverty). . There are very large corporations like the General Motors and Ford motor companies. Their assets are larger than the gross domestic product of the entire region of sub Saharan Africa. These corporate giants have control over a major portion of the international manufacturing field. They grow much larger by resorting to mergers and takeovers. Such corporate giants identify specific places of geographical importance to establish their manufacturing units. The process of globalization helps these corporate giants to accomplish this task in a trouble free manner. These companies are referred to as multinational corporations or transnational corporations. They originate in wealthy and advanced counties. They establish parts of their production in several favourable locations all over the world, particularly in the less economically developed countries (ESSAY What are the advantages and disadvantages of transnational (multinational) corporations? The Hutchinson Unabridged Encyclopedia including Atlas). This helps them to reduce production costs by procuring labour at a cheaper rate than the country of their origin. On the other hand, the host country is also benefitted by this globalization because there is a heavy inflow of capital. This capital investment can be utilized by the host country in development projects. In addition, the workers in the host country will obtain a steady income and receive training in the use of sophisticated technology and equipment. Multinational companies provide health care facilities to their workers and promote their development by imparting training to them and providing their children with educational opportunities (ESSAY What are the advantages and disadvantages of transnational (multinational) corporations? The Hutchinson Unabridged Encyclopedia including Atlas). Therefore, the host country would be relieved to a significant level from the burden of unemployment. To avail themselves of these advantages, most of the developing countries are imposing less stringent pollution control measures and are assuring the uninterrupted supply of labour to these multinational companies. Furthermore, these nations offer multinationals free trade zones (ESSAY What are the advantages and disadvantages of transnational (multinational) corporations? The Hutchinson Unabridged Encyclopedia including Atlas). Economic globalization is highly beneficial to the third world countries. Globalization allows the multinationals from the industrially developed countries to expand their business activities and to avail themselves of the benefits of free market zones and border areas. Such measures permit them to reduce import tariffs and serves to relax restrictions. Developed countries resort to protectionism, which protects the home industries from foreign competition (Tricks of Trade Treaties. In The Korea Herald, Lexis-Nexis). This is accomplished by imposing heavier taxes and other levies on foreign companies. Companies from the third world cannot compete with the companies of the developed countries on account of such protectionism. Moreover, they are unable to comply with these stringent conditions. Nevertheless, they are vulnerable to the multinational companies, which exploit the market conditions and development opportunities. In addition, labour is cheaper in developing countries in comparison to the developed countries, from which these multinational companies originate (Tricks of Trade Treaties. In The Korea Herald, Lexis-Nexis). Multinational companies influence market opportunities and this has a negative effect on the economic growth of third world nations. On the other hand, living conditions prevailing in third world countries are improved by the process of globalization. It promotes job opportunities and the expansion of market and trade opportunities in developing countries. Moreover, the process of globalization stimulates economic growth. For instance, multinational companies established sophisticated and costly technology in China (Iritati and Dickerson). This enabled China to improve its exports. The government of China restructured its trade policies by making its legislation less stringent and by redrafting its economic policies with regard to cross border trading. The sophisticated technology improved Chinese production. There were a few controlling barriers in China that regulated the multinationals and prevented them from indulging in antitrust policies and dominating local companies. In this manner, China fully utilised the benefits of globalization by regulating production activities and by effectively using its large workforce to the maximum possible extent (Iritati and Dickerson). Globalization has become a platform for the multinational corporations since MNCs operate through complex networks and in coordination with several other international entities in the context of production and marketing. A number of strategic alliances exist between many of these companies, in order to protect their advantageous position in the global market. In this globalization era the governments are also acting like competitors to secure economic development. There are provisions that extend support for research and development and other activities like imparting training to senior managers in the area of global finance. There are governing entities such as the World Trade Organization and the International Monetary Fund (Douglass). The objective of all these developments under globalization is to maintain the stability of the national economy and to monitor inter – governmental and government – multinational shared objectives. Eventually, the economic development achieved in third world countries is on a shared basis rather than individual competence. This environment is perpetuated due to the process of globalization, which causes the multinational corporate giants to prefer third world countries. The governments in third world countries are maintaining market friendly economies, to ensure more trade growth, by inviting multinational corporations to their countries (Douglass). Earlier to the globalization, trade usually took place between governments. Subsequent to the World War II, there was a rapid growth in industrial area. Primarily, the transport industry had flourished with the invention of locomotives and land based automobiles. Communications increased and became cheaper. At international level, several negotiations with regard to trade and tariff took place. These global trade and tariff summits had literally removed several barriers to trade practices such as trans border trading. Most third world countries had cut down their trade and tariffs on the impositions of the International Monetary Fund and the World Bank. These two international entities are the chief actors of globalization (Douglass). The International Monetary Fund and the World Bank began to impose stricter conditions on the developing countries. These measures by the IMF and the World Bank were due to the undue influence, which was exerted on them by the industrially developed wealthy nations. At the same time, the third world countries faced financial crisis in the mid 1980s, due to which they were unable to repay the loans that they had obtained from the IMF and the World Bank (Douglass). These financial institutions utilized this opportunity to compel these hapless third world countries to avail themselves of their stabilization and structural adjustment plans. Under these plans they would be sanctioned loans, if they agreed to the conditions laid down by the IMF and the World Bank. These conditions included economic reforms like market friendly changes in national policies and permitting the multinationals to operate freely in their countries (Douglass). Thus the process of globalization was initiated and third world nations changed their economic policies to incorporate the reforms required under the structural adjustment policy. The reforms created social inequalities and generated unrest among the workforce. For instance, Japanese companies started to eliminate their customary practice of providing lifetime employment to workers. South Korean government withdrew job guarantee and incorporated the practice of removing workers from service in its policy. The pressure of globalization made the Latin America countries to change their trade policies, remove government control over the economy and privatize a number of crucial public sector undertakings (Douglass). The proponents of globalization deem it to be a saviour of the third world countries, whereas its detractors accuse it of having destroyed their economies. Their contention is that the process of globalization poses a significant threat to the poor and developing countries of the world. This seems to be justified to some extent, if one considers the effects of globalization in Latin America, which has forced the poorer countries to undergo an economic crisis. The critics of globalization are vehement in their allegation that economic recession, financial setbacks and political instability are the principal drawbacks of globalization. When this process commenced, many assumed that it would have beneficial effects, but the reality has proved to be otherwise (Mejia-Vergnaud). The opponents of globalisation argue that a disparity between the wealthy countries and the poor countries is engendered by globalization and its concept of free trade. However, globalization has brought about a positive relationship in which free trade and economic growth are negotiable. Research in this regard has clearly indicated that enhanced economic growth has bettered living conditions in third world countries and helped to reduce their poverty (Mejia-Vergnaud). Opponents of globalizations argue that labour conditions in the third world countries are deteriorating. They base their complaints on the fact that many multinational labour intensive corporations are establishing their plants in those countries because the wages to be paid are very low. This is a fact and multinational companies are guilty of exploiting workers in third world countries, hence such practices have to be condemned (Mejia-Vergnaud). Certain important aspects of globalization are expansion of international trade, developing telecommunications, mutual coordination with regard to funds, encouraging multinational companies, mutual cooperation in the field of technology and science, cultural exchanges, migration and regulation of refugee inflows and better relations between the rich and poor countries (In-House Seminar On Globalization and the Third World: Prospects and Challenges). Globalization is considered by some people to connote a process in which the principles of a liberal economy flourish. However, globalization does not permit the existence of traditional economic states; every country is reduced to a mere economic unit. This compels a number of nations to acquiesce to the supranational bodies like the International Monetary Fund, the European Union and the World Bank. In addition, nations have to respect the multinational corporations and Non Government Organizations. In this manner a global civilization has emerged, in which the technocrats and skilled individuals are treated as global citizens and are no longer confined to their country of origin (In-House Seminar On Globalization and the Third World: Prospects and Challenges). The United Nations Millennium Development Program states that globalization created a global civilization in which the prerequisites of a civil society have to be made global; accordingly all the nations are required to ensure human rights for global citizens irrespective of age, sex and marital status. This perspective of globalization is mainly dependent on the growing wealth and it demands the creation of a human society characterized by caring and sharing. It does not accommodate a dominant position for any country (In-House Seminar On Globalization and the Third World: Prospects and Challenges). The opponents of globalization are of the viewpoint that it establishes a unilateral vulnerability to the markets in the third world countries. These countries cannot negotiate matters relating to trade, investments, migration and telecommunications. The dominant countries occupy the weaker countries by employing military force in order to capture their economic resources and control them. This is exemplified by the US invasion of Iraq, so as to control its vast resources of oil. The supranational bodies impose sanctions on third world countries if they fail to accept the conditions laid down by them. Moreover, these organizations unilaterally withhold subsidies to further the interests of the developed countries. As such the extant variety of globalization is discriminatory globalization (In-House Seminar On Globalization and the Third World: Prospects and Challenges). Globalization brings about the international mobilisation of labour and technology and entails cultural, environmental and political interests at the international level. Thus globalisation attempts to create a global community that has no national boundaries, cultural identities and political dissatisfactions. It promotes scientific advancement and industrial growth, which would improve the living standards of people in third world countries (Ekwuruke). Global free markets promote opportunities for people to access large markets across the whole world. This facilitates increased capital inflows, access to sophisticated technology and the import of goods at lower prices. Further, exports also benefit from globalization. Member countries of the global market have to accept certain policies in order to share the profits and dividends that the global market produces. These dividends are based on efficiency and this compels the developing countries to seek financial support of the supranational bodies like the IMF and the World Bank, in order to comply with the requirements of the free market policies (Ekwuruke). Some of the expectations of the process of globalization are that it will allow third world countries to grow economically, to procure sophisticated technology and to improve their education facilities. There are several dangers and threats involved in the process of globalization, which require the exercise of caution by the governments of the poor countries. Furthermore, the governments of the third world countries have to prevent breach of human rights and maladministration due to the process of globalization (Ekwuruke). The IMF and the World Bank require the countries seeking loans to fulfil certain conditions, which compromise the fundamental rights of citizens of those countries. For instance, the inhabitants of the countries in the southern hemisphere were subjected to harsh economic policies, adverse exchange rates and other abnormalities in the global market by the IMF and the World Bank, while seeking loans from these supranational bodies. The structural adjustment policies put forth by the IMF and the World Bank to the loan seeking nations invariably bring about an increase in their poverty rather than in their development. As such globalization is a measure employed by the multinational companies to expand their global reach. Organizations like the IMF and the World Bank are controlled by these companies and protestations to the contrary are noting but blatant lies. The current policies of the IMF and the Work Bank have to be transformed so that they promote the welfare of the poor countries, rather than destroy their prosperity and economic growth (Ekwuruke). Free competition in developing countries is restricted, in the context of the multinationals. This is because there will be no legislation to prevent the practice of monopoly and oligopoly that are consequent to the trade agreements between the host nation and the multinational firms. Such monopolistic practices hinder the prosperity and growth of the third world countries. Small scale industries in the host countries are forced into liquidation, because they will find it difficult to compete with multinationals, which offer similar products at lower prices and of a better quality (Sosa). Some people view globalization as economic terrorism, due to the fact that the socio economic and political avenues of the poor countries suffer further deterioration and subordination. Such adverse effects are due to globalization, which exists in order to promote the economic interests of the wealthy countries (Irogbe). The inequality in political, military and economic coordination between third world countries and the dominant superstructure economy compel the dependent third world countries to modify their economic interests in order to comply with the requirements of the dominant economy. Domestic requirements of third world countries are compromised in this fashion (Irogbe). Works Cited Adina, Negrusa. The multinational companies’ strategies in the global market. 22 November 2007 . Douglass, Gordon K. The globalization of economic life. 25 March 2003. 23 November 2007 . Ekwuruke, Henry. Globalization and the developing World! 26 November 2007 . ESSAY What are the advantages and disadvantages of transnational (multinational) corporations? The Hutchinson Unabridged Encyclopedia including Atlas. 2005. 23 November 2007 . Globalization and the impact of multinationals on local communities. 22 November 2007 . Globalization and the Spread of Poverty. 11 June 2001. 22 November 2007 . In-House Seminar On Globalization and the Third World: Prospects and Challenges. 26 November 2007 . Iritati, Evelyn and Marla Dickerson. "Sleeping Giant China Awakes, Flexes Muscles." Los Angeles Times (n.d.). Irogbe, Kema. GLOBALIZATION AND THE DEVELOPMENT OF UNDERDEVELOPMENT OF THE THIRD WORLD. Spring 2005. 26 November 2007 . Mejia-Vergnaud, Andrés. The Effects of Globalization: AView From the Developing World. September 2003. 26 November 2007 . Sosa, Karla. Globalization and Economic Development in the Third World: Hazard or Enhancement? 23 November 2007 . Tricks of Trade Treaties. In The Korea Herald, Lexis-Nexis. 6 February 2003. 23 November 2007 . Read More