Why globalization works - Essay Example

WHY GLOBALIZATION WORKS Introduction The debate on globalization has elicited diverse views from scholars and members of the public in respect of economic inequality among states. Since the emergence of increased open economy campaign by capitalist ideologies, interdependence in global trade has surged. The reality of globalization is indisputable, but its efficiency, effectiveness and relevance in eliminating economic growth disparities remain contentious. It is in this respect that proponents and opponents advance diverse theories to explore the phenomenon. The trend in global economic trend is viewed differently, and this explains the intense debate based on research (Wolf, 2004). Martin Wolf explores the critical aspects of globalization and rejects criticisms against the gains of globalization. In this text, Martin offers insight into the fundamental assumptions and common misconceptions held against globalization. In fact, he asserts that despite overwhelming criticisms fashioned against globalization, the developing world has significantly made steps due to the same. It is worth to make informed augments through scholarly support, existing data and critical observation of the world’s socio-economic and political trend. The question, therefore, focuses on the validity of Martin’s claim that globalization can work. Analysis Discussion of globalization captures the economic strides that developing nations have made versus the expansive industrialization of developed world. The epicenter of the debate remains the size of economic development gap between developing economies and the industrialized world. Besides, economic factors that characterize globalization are pointed out to ease understanding of the underlying concepts. The political influence and social restructuring that is experienced across the world is all recipe for globalization. In essence, Martin notes that the criticisms are derived from the complex relationship that exists among, politics, society and globalization. The views of Martin are supported by observed actions across the world and enlist the work of other authors on the same issue. In that regard, the sensitivity of globalization and its effect so far is portrayed. In-depth assessment of Martin’s argument sheds some truth concerning marginal economic development in developing countries. Translational firms are used as the basis of argument. It is common knowledge that Multinational corporations originate from developed nations (Sparke,2013). The Multinationals enjoy the economy of scale with superior production technique, vast market size and greater competitive advantage(Wolf, 2004). In the wake of globalization, Multinational corporations have distributed value creation activities in the low-cost high-labor parts of the world. In most cases, the developing economies have surplus labor with cheaper wage bill prospects to the multinationals. It is in view of perceived low wage advantage that critics point out multinationals as exploitative. However, the same critics fail to carry out wage comparison against the local firms. The obvious observation indicates that multinationals pay higher than local companies hence boost the living standards of the local people in developing nations. The increased income is reflected in the marginal rise in consumption that translates to growth in the economy through the multiplier effect. Martin, therefore, refutes exploitation claims against multinationals and notes the misguided development gap analysis. Globalization has improved the quality of human capital and overall productivity of developing nations in the 21st century. Arguments of Martin on this trend are true. The relationship between foreign direct investment, multinational companies, and globalization has seen the transfer of knowledge and technology boost quality of local manpower in developing nation (Sparke, 2013). In fact, through multinationals, there is an upsurge in emerging economies as seen in tiger nations that include Singapore, Malaysia, among others. These are an example of developing nations that have gained from multinational establishments in their lands. Critics of globalization as an agent of poverty fail to consider the emerging imperialism generated by “new kids” in the market that explain increase in income inequality. As Hillary puts it, the emerging economies that include India and Brazil muscle up for resources with historical transnationals and the consequence are neglect of local economy, gains by host nations and eventual lower returns. From such new imperialism practiced by developing nations, the mistake rests with the local government and hence need to dissociate their failure to globalization. To some extent, Hillary’s arguments are genuine in the sense that developed nations have stronger market entry restrictions for multinationals from emerging markets (Hilary, 2013). Besides, Hillary points out the overriding political policies and the socially prohibitive business environment in developed nations for prospective multinationals from developing economies. The overall effect from such skewed global market share translates to dominance by developed nations through intensive foreign direct investment. The observed industrialization in global economic powers is a function of efficiency. High-quality training, more investment in research and development that translate to innovations and competitiveness enhances the concept of comparative advantage. In that respect, value creation activities must be evaluated and achieve at the lowest cost possible. Outsourcing is an aspect of globalization that has become the norm for today’s business. Martin portrays outsourcing as the best success decision leverage for developing countries in an attempt to close inequality gap. From an economic perspective, outsourcing constitutes human capital and technology based on comparative advantage (Yunus & Weber, 2009). The result is increased productivity, lower prices, and improved living standard. However, the question that remains unresolved is the net effect of such a production concept. Martin explains outsourcing from two dimensions, and that is raw materials and manpower. Critical evaluation of this idea shows the increasing possibility of developing nations loosing from globalization. It is from this approach that Martin’s nullification of Globalization critics brings confusion(Hilary,2013). The imperialism politics still influence the distribution of resources across the world. For instance, resources are unexploited in developed nations due to primitive production techniques and the multinationals take such advantage (Sparke, 2013). This means exploitation of such natural endowment, pricing at raw value, processing and selling finished products to developing countries at exorbitant prices. The net effect is more importation of finished products and exportation of low-value raw materials by developing nations, hence widening incoming inequality among countries. Despite Martin’s defense on the viability of outsourcing, its absolute advantage in improving equality gap is just but partially true. It is worth noting the double cutting edge effect of outsources from the unemployment rage among some developed nations due to the transfer of manufacturing activities to other countries by Transnationals. Sparke offers another perspective of globalization from the commodity supply models. The increasing interdependence in markets is reflected in the emergence of new supply models (Sparke, 2013). The increased efficiency characterized by massive information communication technology infrastructure explores the gains of globalization and its potential for further progress. The complex trade and politics relationship that characterize globalization gives developed nation’s upper hand in international business agreements (Sparke, 2013). The established multinationals continue to suppress the growth of local infant firms in developing nation’s hence counterproductive o the same goal for which it was created. Another aspect of economic imperialism is emerging where multinationals influence the even political decision in host nations through their financial muscle and economic significance (Sparke, 2013). Although outsourcing is good, it simply perpetuates the dominance of Transnationals (Norberg, 2003). A new twist of globalization is evident in the specialization and division of human resource training and value creation locations. For instance, the Silicon Valley is a center of innovations where creative brains are nurtured and transferred to different value creation locations around the world. Such programs of human capital development seem to work in favor of Martin’s argument as even developing nations sponsor their people to gain knowledge and bring home. Conclusion It is worth to conclude that globalization has yielded marginal economic growth, but development is not clearly defined. It is slowly bridging the gap between developing and developed economies as the growth statistics reflect an improving living standard of the majority underdeveloped nation’s citizens. References Hilary, J. (2013). The poverty of capitalism: Economic meltdown and the struggle for what comes next. Norberg, J. (2003). In defense of global capitalism. Washington, DC: Cato Institute. Sparke, M. (2013). Introducing globalization: Ties, tension, and uneven integration. Chichester, West Sussex, UK: Wiley-Blackwell. Wolf, M. (2004). Why globalization works. New Haven [u.a.: Yale Univ. Press. Yunus, M., & Weber, K. (2009). Creating a world without poverty: Social business and the future of capitalism. New York: PublicAffairs. Read More