Globalisation and Business - Essay Example

?Globalisation and Business Table of Contents Introduction 3 2. Debates on Economic Globalisation 4 3. Current Affairs related to Economic Globalisation 6 3.1 Trade Patterns 6 3.2 Extent of Poverty 8 3.3 Environmental Issues 9 3.4 Changes in GDP 9 4. Consequences of Economic Globalisation 12 4.1 Positive consequences 12 4.2 Negative Consequences 13 5. Responses to Economic Globalisation by Stakeholders 14 5.1 Policy Responses 14 14 5.2 Corporate Responses 15 6. Conclusion 16 7. References 17 1. Introduction The research paper will be framed with the focus on the various dimensions of globalisation and its impacts upon diverse facets of the world economy. The ongoing progression of globalisation, being versatile and complex, faces debatable circumstances from various regions around the world. Although the debates cannot be afforded with space in the modern business context, they cannot be ignored either. This is because the people’s concern that gives rise to the formulation of the public policies and also the challenges related to the process are significantly essential for the future prospects of the world economies. But the debatable concern of the people about globalisation has paved the way for a number of challenging issues for the concept both from the economic and the non-economic perspective (Fischer, 2003). This research paper will be composed of dealing with the economic prospect of globalisation in the modern environment of the world. The most challenging prospect of ‘economic globalisation’ is its effectiveness towards reduction of poverty along with proper sustenance of economic growth. Thus, this issue with respect to the poverty concern will be discussed in this research paper. The paper will also deal with various current state affairs of economic globalisation in the post-modern business world. In this context, the patterns of trade, extent of poverty, environmental issues and alterations in GDP will be taken into consideration. Along with the current state affairs, both positive as well as negative consequences of economic globalisation will be discussed in order to identify the debatable issues. The responses towards economic globalisation by various policy makers and the corporate houses will also be depicted in this research paper. 2. Debates on Economic Globalisation Before going in-depth of the debatable issues of economic globalisation with respect to reduction of poverty, it is essential to recognise the entities that act as the prime contributors towards economic globalisation. The multinational corporations (MNCs) are perhaps the most significant transporter of economic globalisation. The MNCs operate with the organisation of production process and allocation of resources as per the various standards for maximising profits. The globalisation in financial sector also plays an important role towards influencing economic globalisation all around the world. One of the reasons for the formulation of debate over effectiveness of economic globalisation is the fact that the structures of the various industries undergo radical up-gradation and re-adjustment as a consequence of the economic globalisation (Shangquan, 2000). According to the proponents’ views towards the prospect of economic globalisation in the sphere of reducing poverty, the relatively poor economies had undergone tremendous changes after the economic globalisation evolved. For example, in India, since the year 1975, the rate of poverty has declined sharply along with the decrement in inequality. In countries like India, the supporters of economic globalisation consider the process as an entirely benevolent one indicating the long desired delivery of the concept of humanity from economic underdevelopment, despair and backwardness. The proponents to the concept of economic globalisation are of the notion that the process would operate for the betterment of the human beings within a country wherever poverty exists. This would be achieved because the allowance to market forces would keep the trading away from the political issues of the country and would bring about greater growth of the economy and thus for its native as well. On the other hand, the opponents to economic globalisation (powerful intellectual and political parties) consider the process to be a damaging force for the economy. They base their comments against economic globalisation with respect to stagnation. The opponents in this respect would support de-industrialisation against industrialisation, de-nationalisation against fostering of local entrepreneurial environment, de-stabilisation against stability within the economy, along with inequality and insolvency against welfare of the people and many more (Nayar, 2006). Apart from the political forces of the countries, the various students undertaking global studies also form a group of opponents to the prospect of economic globalisation. They base their opposition on the fact that economic globalisation has given rise to increased poverty around the world as a result of the spread in capitalism. But the opponents’ notion can be downgraded on the basis of empirical facts regarding world poverty. According to the calculations of the World Bank, considering the poverty line at USD 1.25 per day, the population of the world living under the line has decreased to 25.2 percent from 51.8 percent during the period from the year 1981 to 2005 (Howard-Hassmann, 2009). The supporters of globalisation essentially point out the sharp decline in the rate of poverty in India and in China in order to build their proposing views. The economic growths achieved through economic globalisation in these countries have been mentioned to be accompanied by opening up to the foreign direct investment and trading system of the international market. The growth brought about in these countries has tremendously assisted in pulling several people out of the category of poor. However, the critiques of globalisation are doubtful about the growth prospect of the countries with the virtues of economic globalisation considering the best example as the trading system. According to them, the political interests of the developed countries which are also powerful in the global platform, such as the United States, act as dominating force over the good sense to an extent. For example, the rich countries sell their patented medicines in the poor countries at very high prices. The financial instability that are generated in the emerging countries like China and India through the strategies adapted by the rich countries sometimes even deteriorate their financial position (Birdsall, 2003). 3. Current State Affairs related to Economic Globalisation 3.1 Trade Patterns The amount of goods and services being exchanged among the various nations has been recorded to grow since the concept of globalisation was introduced. International trading patterns have enhanced the level of wealth formulation, specifically through offering of opportunities that induces economic growth. By the year 2007, the international trade exceeded half the amount of global GDP for the very first time. The trade flow in the global context can be divided into two parts, i.e. prior 1970 and after 1970 to the current era, where developing countries have grown in terms of industrial poles and accordingly have also developed their trade relationship with developed markets in terms of merchandises and raw materials (Rodrigue, 2005). The fact can be evidently recognised from the figure represented below. Source: (Rodrigue, 2005). The trade benefits for the countries that participate in globalisation activities stem from the enhanced level of entry for the countries’ producers to the international platform which is obviously huge than the national market. The extreme growth of international trade since economic globalisation has resulted in economic development for various countries in turn, especially the East-Asian countries. There are various aspects through which the countries participating in international trade benefits. For instance, the most important is the sharing of new and innovative technologies among the various partners in trading (World Bank, 2000). 3.2 Extent of Poverty The impact of economic globalisation towards eradication of poverty all around the world is a debatable issue. The extent to which poverty within a country is affected is dependent upon the ability of the country with respect to the operations of various economical and political institutions. Economic globalisation actually opens up various opportunities for eradicating poverty on the part of the various countries. The countries that really want to eradicate poverty should take initiatives for restructuring their prevailing budget along with implementation of better framework of compatible administration and political issues (Bardhan, 2004). The problem with the developing countries relate to the fact that the benefits of economic globalisation are not evenly allocated among all the sections of the society (Nissanke & Thorbecke, 2005). However, a significant reduction in the percentage of poverty can be witnessed in the current day context. For instance, as can be witnessed from the figure below, the world poverty statistics fell by almost 10% in the year 2010 (15.8%) from that of 2005 (25.7%) (Chandy & Gertz, 2011). Figure: Reduction in World Poverty Level Source: (Chandy & Gertz, 2011) 3.3 Environmental Issues It is due to the impact of economic globalisation that people around the world have started to visualise the environmental issue as a global concern. The issues such as protection of the global natural resources along with the atmosphere have gained comprehensive concern of the people all over the world. In the present world economy, environment is termed as the “common heritage of mankind”. As a result of such notion about the environmental issues, the problems related to environmental safeguarding are solved through global efforts due to the fact that environmental issues are such big that efforts of a single nation would not be enough for this (Steiner, 2007). Economic globalisation also provides several opportunities for the countries concerned about environmental issues, utilisation of which can enhance the contribution made by every participating nation towards safeguarding activities with concern to environmental protection (Najam & Et. Al., 2007). 3.4 Changes in GDP The impact of globalisation upon various countries of the world has depicted different scenario as far as the countries’ gross domestic product (GDP) is concerned. The GDP growth in Indian economy can be considered to be comparatively higher than that of the 1970’s. This is because, at that time the rate was as low as 3% in comparison to other developing countries such as Indonesia, Brazil, South Korea and Mexico that depicted growth rate which was double than that of India. However, afterwards with continuous improvement in economic position, India reached the 4th position during the year 2001. India achieved a growth rate of 8% during the period from the year 2003 to 2004 and the role of globalisation is considered to be enormous in this respect (Goyal, 2006). The African countries’ GDP rate was calculated to be higher in comparison to the Asian countries during the period of 1960’s. However, the African countries failed to sustain this position and thus faced low GDP rate during two consecutive decades ending during the early 2000s (Sundaram & Et. Al., 2011). The historic growth trend in the developed and developing countries can be well-observed from the figure demonstrated below. Figure: Historic Changes in the World GDP Source: (International Monetary Fund, 2010). 4. Consequences of Economic Globalisation 4.1 Positive consequences Although there are a number of positive impacts of economic globalisation upon the various countries of the world, the most essential are composed of enhanced level of competition, employment, capital flows and investment and foreign trade. The enhancement of competition gives rise to high quality of products and services all around the world that ultimately benefits the common people of the nations. With the emergence of globalisation, various big companies have entered into the developing countries of the world and have generated employment for the people there. Huge amount of foreign capital inflow can be observed in the countries due to globalisation that enhance the amount of foreign reserves for the countries and thus improve its financial stance. This way the economic growth proliferates within the developing countries. Globalisation has bestowed its positive impact upon the countries due to the foreign trade as well. Institutionalisation of the foreign trade has provided the basis for achievement of the desired quality of goods and services in a compassionate manner through the implementation of common trading norms. With the participating moves of the World Trade Organisation along with several other world organisations, the trading process among various economies has been transformed into controlled and regulated manner. Along with the various mentioned advantages that a country can achieve through globalisation, there are several other benefits such as extended technical know-how, culture, education and impacts of ethical and legal issues (Lee & Vivarelli, 2006). 4.2 Negative Consequences The developing phenomenon of globalisation inclusive of economic globalisation has impacted all the countries of the world. The impact of this phenomenon has been, however, both positive as well as negative for the developing countries. Economic globalisation enhances the standard of living of the people as the access of the government to foreign funds increases. When the access increases, the government becomes selective in spending due to which every citizen of the country loss access to the globalisation benefits. Along with the benefits that globalisation provides in the shape of unemployment and reduced poverty, there can arise wide difference between the wages of the people who are educated and those who are not. Although the educational level of the people in the long run will increase due to the growth of financial stability, in the short run, there is possibility that few of the poor people would become even poorer increasing the income disparity in those nations. Economic globalisation can even contribute towards increasing level of unemployment. This is because the technological development that is brought about due to globalisation reduces the requirements of workers who are not technically proficient. In this way, the number of unemployed people is likely to increase in the developing countries of the world (Ernst & Escudero, 2008). 5. Responses to Economic Globalisation by Stakeholders 5.1 Policy Responses Policy responses to globalisation have a significant impact in directing the aftermath of economic globalisation process. If the policy makers of various countries participating in the economic globalisation desire to retain their internal control, they would have to identify the arenas where they can establish equilibrium between the economic and political perspectives of the various sectors within the economy that are strongly influenced by the process. The policy makers strive to attain the symmetry through various defensive measures in the form of creating tariff and non-tariff barriers, measures to control flow of excessive foreign trade and several other regulatory measures at the national level. Alternative to the defensive strategies, the policy makers often strive to adopt offensive strategies as well. In this case, the countries act as international competitors and attempt to develop beneficial environment for the international companies within their internal territories. The intervention through offensive strategies of the companies usually takes place with the help of a number of economic channels. For example, the government of a particular country attempting to intervene in economic globalisation through offensive moves might deregulate a particular sector or reduce the taxes in order to draw the attention of various business operations within the country’s boundary. Along with the defensive and offensive moves, the government can also attempt desperate moves through measures that can cross the borders and impact external sovereignty. For example, the American Helm-Burton Act imposes grants upon the parent companies in the US that have their foreign affiliates operating in association with Cuba (Liedekerke, 2000). 5.2 Corporate Responses The activities of importing goods through increased globalisation affect the people’s purchasing power in a positive manner. But this positive consequence of globalisation can also impact the domestic companies adversely that also supplies the same imported goods. In such a scenario, the responses of the corporate would come in the form of right management of activities related to business efficiencies (Sewell, 1998). The most essential objective of the corporate in such an environment is to attempt to implement every possible competitive move that can help the corporate keep away the uncompetitive aspects in the international marketplace. Hence, the corporate tend to try out various competitive strategies in order to sustain their position within the domestic market. They comprehensively utilise the support that they receive from the policy makers’ offensive moves against the adverse impacts of globalisation (House of Commons Treasury Committee, 2007). 6. Conclusion It has been observed from the discussion undertaken about economic globalisation in the research paper that this concept of the modern economic environment of the world can neither be termed as good nor bad. The pros and cons of economic globalisation are entirely dependent upon the abilities of the countries to utilise the most of the phenomenon. From the facts that have been evaluated and discussed in the research paper, one essential conclusion can be drawn about the role of economic globalisation towards its contribution in eradicating poverty. It is that ‘better globalisation’ would be essential for the developing countries in order to get rid of poverty. In other words, for the purpose of eradicating poverty, greater political management resulting in better globalisation would be necessary for the developing countries of the world. The debatable issues dealt with in this research paper would provide the basis for identifying the weak areas of the developing countries towards utilising globalisation. The areas can be assessed in efficient manner in the further courses of time so as to determine effective ways of utilising globalisation. 7. References Bardhan, P., 2004. The Impact of Globalisation on the Poor. Policy Paper. 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