Globalization is a process of interaction and integration among the people, companies, and governments of different nations, a process driven by international trade and investment and aided by information technology. This process has effects on the environment, on culture, on political systems, on economic development and prosperity, and on human physical well-being in societies around the world. It is generally used to refer to economic globalization: the global distribution of the production of goods and services, through reduction of barriers to international trade such as tariffs, export fees, and import quotas and the reduction of restrictions on the movement of capital and on investment. Rise of Globalization
Many people associate Globalization with the emergence of multinational firms, the formation of trade blocs together with the increased amount of trade, investment (i.e. freer movement of goods and capital) and cultural exchange taking place between nations. However, these are the main effects of Globalization rather than its causes. Countries did not suddenly start trading more with each other, nor were multinationals created without reason. The fall in transport costs is one of the main factors contributing to Globalization. Through improvements in technology, more cost efficient ways of travelling were invented over time. A very significant one among these factors was computerization and the increasing use of the internet that took place after the 1980s. The internet made distance a factor of low importance for communication, resulting in increased exchange of knowledge, ideas and culture among people which is a very fundamental part of Globalization. It also allowed people to view prices of, and order goods and services from all over the world.
This contributed to Globalization and international trade a lot as a single world market with complete price transparency was created for many goods. A second source of globalization has been trade liberalization and other forms of economic liberalization that have led to reduced trade protection and to a more liberal world trading system. This process started in the last century, but the two World Wars and the Great Depression interrupted it. It resumed after World War II through the most-favored-nation approach to trade liberalization, as embodied in the 1946 General Agreement on Tariffs and Trade (GATT) and now in the World Trade Organization (WTO). As a result, there have been significant reductions in tariffs and other barriers to trade in goods and services. After World War II most countries were in an economic mess. Governments were the only entities large enough to get economies repaired and moving again. For three decades after WW2 the government led economies worked reasonably well.
However, the US monetary system had a problem left over from a 1930’s quick fix, and this problem began to catch up by the 1970’s. In 1971 the US economy was technically as good as bankrupt. President Nixon took an easy way out by severing the link between the US dollar and gold. This allowed the US to have adequate money supply, where previously gold had stifled it. While this fixed the short-term problem for the US, it created several long-term problems globally. Now US dollars had become freed from the restraint of a gold standard and the US banks could create as much money as they chose to, virtually without effective regulation. The ensuing flood of money aggravated economic malfunctions within many other countries that were still on the US dollar standard. After global currencies lost the regulation of gold, the raising of interest rates no longer curbed borrowing like it did under the gold standard. During the earlier 1980’s so much money continued pouring into circulation that many people could afford the higher interest rates and they kept on borrowing, which took inflation even higher.
The global banking fraternity could have regulated the inflation chaos that occurred after the US severed its link to gold, but they did not. All the banks had to do was cut back on the number of loans they granted, but instead banks kept on lending to the unwary world. Why? Because the banks knew that when it stalled, they would be in a position to take control of vast amounts of property and businesses, when the people that built them inevitably defaulted their loans. It was good business. As nations became debt burdened, privatization and deregulation did effectively deliver public property and businesses into multinational control to pay off national debts. In Africa and South America the 1980’s are referred to as the lost decade. Great Britain was brought to its knees, and the Mexico currency crisis nearly destroyed the global economy. The 1990’s were when Japan, SE Asia and the USSR crashed economically. The real cause of the economic instability was the willingness of the global banking fraternity to oversupply a faulty money system. This was quietly ignored. In the early 1980’s, England under Thatcher was the first country to embrace the principles of privatization and deregulation.
The USA under Ronald Reagan quickly joined in. The magic fix of the market led deregulated economy seemed to work in the failing economies, and the economies began to stabilize. But as countries bit the bullet through loss of national assets and jobs all that really happened was that their economies were being painfully reset to an even ledger again after selling the farm to pay off crippling debts. New debt would continue to accumulate as it had before. Getting out of debt made governments look impressive to voters and gave the voters false hope that perhaps now the economy might be fixed. The global crashes of the 1980’s and 1990’s were caused by deregulation of the global financial system and business decisions made by banks, not government ineptitude. Through privatization and deregulation, banks and other multinationals could now begin to purchase and control infrastructures and businesses that had previously been run by national governments for reasons of national security. Much of the essential business of running countries was now being put on the market for sale through privatization. With the fall of USSR, it became clear that socialism was not a means of driving the world economy.
Government across the world (including China) acknowledged the fact that they need to have a capitalistic perspective if they want their country to prosper. Communist countries were naturally against free markets and free trade with capitalist countries in capitalist terms. They had an inward orientation, aiming to be self sufficient. With the collapse of socialism, these countries, even the ones that still claimed to be ‘communist’ like China, opened up to free trade and foreign investments, increasing the size of the global market significantly. As a result, countries (especially in Asia and Africa) started to allow foreign companies to venture into their motherland. But still countries were cautious in their approach.
The proof of this can be seen from the fact that most of the governments had some kind of regulation that forced the companies to either * to open a local subsidiary which would be registered in their country as an independent business entity or * Have a strategic alliance with an already existing native organization. Politically, the United States has enjoyed a position of power among the world powers, in part because of its strong and wealthy economy. With the influence of globalization and with the help of The United States’ own economy, the People’s Republic of China has experienced some tremendous growth within the past decade. If China continues to grow at the rate projected by the trends, then it is very likely that in the next twenty years, there will be a major reallocation of power among the world leaders. Pro Globalist
Advances in communication, transportation, genetics, and computer technology have all played a role in making the world a smaller place. With the right equipment, people can talk to friends and family from the other side of the world. Traveling from America to China, which once required months at sea, now only takes hours in the air. Computer networking and fax machines allow world businesses to conduct negotiations and money transactions, within a matter of seconds. Highlights:
* It helps in the growth of native as well as the foreign country. Opening of economies of second and third world countries will help foreign investors to invest more freely and confidently in these markets and will make the local manufacturers competitive at the global level. When the source will be located near the market, the cost of goods reaching the end-user will reduce many folds thereby making the commodity available at a cheaper rate. We have wide-screen TV’s. We have cheap Chinese goods. The cheaper prices are not a lasting result of globalization though, but rather a reflection of the non-level playing field that currently exists within the global economy. * Pro-globalist argues that globalization will create new employment opportunities in various parts of the world. Setting of offices in these countries will also mean that foreign exchange will be flowing into the economy; it will boost the economy as a whole and will raise the living standard of the individuals there.
A higher standard of living means better living conditions, better health and civic amenities which implies a healthy nation. * Inventions happening in one country can be used in manufacturing goods in another country faster than ever before. Today, companies are launching there newer models across the world at the same time. This is a remarkable progress we have made due to globalization. Companies are now working on global delivery model. * Technology is expensive and is developed by richer nations and then put in poorer nations for production. The poorer nation can benefit from the expensive technology as a rich nation generates the new technology, a multinational corporation invests in the production, and the unskilled labor of the poor country will have jobs that pay a better wage. Nations that embrace these policies will benefit from trade with international Market benefits.
In doing so, these companies are able to share capital, people and technology that can benefit both countries without engaging in direct unilateral gift exchanges, in the form of aid. * Globalization does not destroy local civilization and customs, but proliferates individual culture by using modern communication like the Internet and television satellite, so that a culture is not limited by location. A person in their home country will go about their routine without giving any thought to their identity; however, when they travel to another country for employment or vacation, like the Mexican laborer in the US, they become more aware of their national identity. Globalization as a destroyer of cultural identity is a misconception that encourages poor countries to remain in the same cycle of poverty. Poor nations remain in the same cycle of poverty because of their culture is not growth oriented, has high population growth, low-level of education and a distrust of wealthier nations placing conditions on their economic aid.
Anti-globalization is a term most commonly used to describe the political stance of people and groups who oppose current global trade agreements and trade-governing bodies such as the World Trade Organization. The anti-globalist zone is divided into two camps. There argument is mainly based on the threat of job loss in these countries due to globalization and increase in un-employment of skilled people. The second camp is from developing countries who are considering globalization as a threat to their economy, cultural & social values and political independence. They believe that globalization or rather neo-liberalization will give access to their country’s economy to few MNCs who will use it for their own benefit ignoring the overall growth of the country. Highlights:
* The availability of cheap labor in Asia, Africa and South America will result in companies shutting down there operations in the host country. Such kind of mass unemployment can result in increased crime in these countries to the minimum and may even rise to the order of social backlash in worst case. South Africa, some 300,000 textile workers have lost their jobs due to the influx of Chinese goods. The increasing U.S. trade deficit with China has cost 2.4 million American jobs between 2001 and 2008, according to a study by the Economic Policy Institute (EPI). A total of 3.2 million – one in six U.S. factory jobs – have disappeared between 2000 and 2007. Brain drain An opportunity in richer countries drives talent away from poorer countries, leading to brain drains catastrophe. * The anti-globalist believes globalization will make the poor even poorer and the rich even more rich. Their fear is that this will be caused by a major loss of jobs due to the competitive nature the global factor will make and to lower paying countries getting their jobs.
The fear of little nations being completely ruled and dominated by the more industrial nations such as the United States, Russia, and Japan, is also a fear they have. In their eyes, globalization stands for capitalism, job loss, and the rich only becoming more in power. This is a probably outcome for globalization. The Human Development Index (HDI) of the poorer nations have grown at a slower rate to the richer nation’s which, as some economists put it, shows that globalization is another word for the continual plundering of the poorer and weaker nations by the rich and powerful economies. In addition, the forces of globalization take no account for social injustices nations. Developing nations, while experiencing growth, have not reached the same levels as high income nations, there for widening the income divide globally. . There for globalization on the whole has come as a benefit throughout the world, yet these benefits are still heavily weighted towards the already rich nations, while the developing economies struggle to maintain growth on par with the higher income nations. * Globalization has created new kinds of stress into everyday life.
Even proponents of globalization admit this, on the basis that “markets are relentless”. Corporations rationalize jobs whenever possible. This can be done by laying off workers or importing cheap workers from other countries. Job insecurity and the escalating workloads of existing jobs are eroding quality of life. At any time fuel prices or interest rates may raise so much it hurts. What if there’s a recession? What if the stock market crashes? What if the real estate market spikes up high – or down low? A new culture of “fear of the future” is entering society, caused by multiple long-term insecurities stemming from the new economy. * The destruction of natural resources like clean water, forests, arable land, ocean fish stocks, coral reefs and so on are already causing extreme concern even in the traditionally conservative ranks of society. Earth is clearly not coping with the demand for resources in the present sized global economy. At present rates of growth in 30 years the global economy would be about 4 times larger than today, and in 60 years it would be 10 to 20 times larger than today.
The global economy, which must grow exponentially in order to survive, does not recognize the realities of the natural world. The logic behind the present global money supply system is like sustaining your life by eating your own body from the feet up. The global economy is presently on a course to destroy itself through the planet’s lack of ability to sustain it. Like a cancerous growth, the global economy is growing so vast that it will soon kill it host. * Globalization has also affected negatively the environment through global warming. This is as a result of greenhouse gas emissions caused by rapid industrialization in the developing world, and a heavy dependence on fossil fuels. The average global temperatures have increased tremendously over the past years. In addition, the transport sector and gases from factories have immensely contributed to global warming. * The people of a nation care about the well being of their environment and society. Multinational corporations have no such national sentiments. They would give the world for a dominant market share, and presently they appear to be doing just that. Summary
Globalization has been reshaping the world faster than ever in the last two decades. Globalization is an objective process, and is an outcome of all the preceding development of the world society. It cannot be cancelled, just like the history cannot be reversed. As any historical process, globalization has its benefits and challenges for all people. The entire range of countries – poor and rich, small and large are forced to adapt to both negative and positive aspects of globalization. In order these adaptive changes be more dynamic and occur with less costs, coordinated efforts and integral collaboration of the entire world’s community are clearly required. Therefore, rather than discussing whether it is welcome or not, one must discuss whether it is being managed decently or not and how to manage it in a better way. Foreign aid to poor countries should be able to help the government develop the infrastructure and institutions to eventually become self-sufficient. Rich nations have been giving considerable amounts of aid, including low-interest rate loans to developing nations for the last half of the 20th century, yet many of these nations are still poor.
This is done through direct foreign aid from a donor country and through international organizations like the World Bank. Even if a country chooses to accept aid to improve the conditions of its people, the people may not be able to benefit due to corrupt leadership and institutions. They are more concerned with staying in power and tend to reward people that will help them stay in power. The developing nations suffer from poverty not because of high debt burdens, but because inefficient governments redistribute the existing economic pie to privileged political elites rather than trying to make the pie grow larger through sound economic policies. Example is the government of North Korea that has spent its resources developing nuclear weapons while its people are starving. Whether one sees globalization as a negative or as a positive development, it must be understood that it has clearly changed the world system and that it poses both opportunities and challenges. It is also clear that the above technological, policy, institutional, ideological, and cultural developments that have led to globalization are still very active. The result will be continued moves toward a more open and a more integrated world as it moves closer and closer to a planet without borders and to a more integrated, open, and interdependent world economy.