Features and Consequences of Globalization - Term Paper Example

Features and Consequences of Globalization Introduction Globalization is not a buzzword today. It is seen as the central driving force behind a number of the rapid changes (socioeconomic and political) that are reshaping the world order. Globalization initiatives are rapidly breaking down Trade and investment barriers between countries and corporations are spreading their operations across the globe. Consumers are able to access an ever-growing basket of goods and services. Countries, companies and individuals are increasingly beginning to take into account what is happening across the world, rather than in only the country in which they are based. In short, globalization is affecting a vast section of the society, whether people realize it or not. Globalization has rapidly changed the lifestyles of many people without their even being unaware. To take an example, most people had not even heard of the Internet in 1990. Also, few people had an e-mail address then. But today the Internet, cell phones and e-mail have become essential tools that many people just cannot live without, in both developed and developing countries. But globalization does have its opponents. This essay examines the fundamental aspects of globalization such as meaning and definition, features, aims and organized and un-organized globalization. Meaning and Definition Globalization is commonly understood as the process by which physical, political, economic, cultural barriers separating different regions of the world are reduced or removed, thereby paving the way for exchanges of goods and knowledge. Globalization facilitates freedom of movement without political and geographical hazards and this seems to be the attraction of globalization to most people. Globalization also promotes mutual reliance. As the number of exchanges of goods and of information increase, the result is a growing interdependence between countries as they come to rely on various imported products, services, and cultural input. Thus, from economic point of view globalization is the integration of world economies into a single economy. Definitions Globalization means and includes increased closeness among countries most notably in the areas of economics, politics, and culture. The term 'globalization' has been defined by various authors in different ways. In fact, it has as many definitions as there are authors. The most commonly used definitions include the following: 1. Globalization is "a complex set of distinct but related processes-economic, social and also political and military-through which social relations have developed towards a global scale and with global reach, over a long historic period" (Rajaee Farhang, 2000, p.44) 2. The prominent Islamic scholar, Muhmoud Ayoub, defined globalization in the following way: "It is said that we now live in global village. To extent that it is true, it is a negative process. Globalization is a latest manifestation of Western Imperialism" (Rajaee Farhang, 2000, p.30) 3. In its most concise definition, globalization "simply refers to the complex of forces that trend toward a single world society. Among these forces are mass communications, commerce, increased ease of travel, the internet, popular culture, and increasingly widespread use of English as an international language." (Lautier Frannie, 2006, p.34) Features of Globalization Globalization means the integration of an economy with the rest of the world so as to ensure free flow of goods and services without any legal political and geographical boundaries. Globalization is different to different countries. The way in which one country approaches globalization phenomenon is different from that of another country. It depends upon the nature of economy, the political scenario and many other similar factors. However, the common features of globalization remain the same to all countries. They include: (OECD Handbook. 2005. p. 18) 1. Reduction of barriers to trade 2. The high interaction of financial markets is increasingly impacting on the conduct and performance of the industrial sector 3. Foreign direct investment is becoming a crucial factor in the world-process of industrial restructuring and the development of genuinely global industries 4. Multinational companies constitute one of the main vectors of economic internationalization. 5. Close linkages between trade and direct investment 6. Evolving multilateral frameworks for trade and investment 7. Internationalization of production: Multinational origin of product components, services and capital often characterized by cooperation or subtracting agreements among firms. 8. Location strategies for the activities of multinational firms are strongly influenced by the comparative advantage of countries and regions. 9. A significant proportion of world trade has become intra-firm. 10. Accelerating international disseminating of technology and simultaneous shortening of the cycle of production and technological innovation 11. Simultaneous competition in markets between numerous new competitors from all over the world, places acquired positions at risk, necessitating extremely rapid structural adjustments in numerous areas. 12. Substantial interdependence of the various dimensions of globalization 13. Compression of time and distance in international transactions and reduction of transaction costs 14. Multiplication of regional free agreements Advantages of Globalization There have been many debates about the impact of globalization to gauge whether it is good or bad to the economy and to the society. It is possible by comparing the positives and negatives of globalization. Positive Aspects As immense capital is poured in to developing countries, there is a greater chance for the people in those countries to economically succeed and hence increase their standard of living. . The people will have more choices so that world class articles can be purchased and consumed. Those who love foreign music, movie, clothing, food and more can get greater access. Economically poor and growing countries can take the advantage of improved technology and its benefits at less cost. They need not worry about the burden of developing new technologies. Globalization is of immense help to countries to share innovations in financial products and to work in a interactive and cooperative environment so that international relations can be improved. Global competition encourages creativity and innovation and keeps prices for commodities/services in check. It paves the way for new job opportunities for the people in one country through outsourcing. The possibility of war between the developed countries decreases As the cultural barriers reduce, dream of global village will become more realistic Negative Aspects It may create many jobless in one country because of outsourcing job from the country to another where labor is cheap and/or money value is lower. Although different cultures from around the world are able to interact, they begin to meld, and the contours and individuality of each begin to fade. There may be a greater chance of disease spreading worldwide, as well as invasive species that could prove devastating in non-native ecosystems. There is little international regulation, an unfortunate fact that could have dire consequences for the safety of people and the environment. Organized Globalization An organized globalization is one which is well planned and organized at the political level of a country with that of another / rest of the world. A political agenda for an organized globalization is warranted because in the absence of political intervention, it will have no global security. Therefore, it is necessary to acknowledge themselves that people throughout the world must support only globalization, which is organized with the help of politics. Consequences of globalization In the last two decades, globalization has been enabling individuals, corporations and nation-states to reach around the world farther, faster, deeper and cheaper than ever before. Globalization has accelerated capital flows across the world. In 1975, at the height of the Cold War, only 8% of countries worldwide had liberal, free-market capital regimes. By 1997, the number of countries with liberal economic regimes constituted 28% and foreign investment totaled $644 bn. As a result of globalization, the impact of regional economic crises (like Mexico in the mid-1990s, Southeast Asia in the late 1990s and Russia at the end of the 1990s) is being felt throughout the world. If currencies fall in Asia, the contagion quickly spreads to Latin America. Stock markets in India are strongly influenced by the stock price movements on New York Stock Exchange and the Nasdaq. Governments are learning from each other and some are trying to replicate best practices. Globalization is rapidly eroding national cultures. So countries have to take steps to prevent their cultures from being erased by the homogenizing impact of global capitalism. Given the force and speed of globalization, those cultures that are not robust enough to do so will be wiped out. One of the most negative effects of globalization is the growing income gaps between the haves and have-nots. Friedman describes the phenomenon of "winners take all." The winners in any field today can become really rich because they can sell their services in the global marketplace. But those who are just a little less talented, or not skilled at all, can sell only in their local market and therefore tend to earn much less. The gap between first place and second place is growing larger and the gap between first place and last place is becoming staggering. In many fields, there is rarely one winner. But those near the top get a disproportionate share. The more that different market gets globalized and become winner-take-all markets, the more inequality will there be within countries and between countries. Globalization has enhanced freedom and contributed to the alleviation of poverty in ways that previous systemic change and technological leaps could not. In general, it has promoted better, more accountable government and given individuals; activist groups and companies much greater power to shape the new world. The poor are beginning to understand this and exploit it. Technology and globalization Technological change and globalization go hand in hand. Thanks to technology, telephone calls can be made cheaply from anywhere. Innovations in miniaturization have steadily reduced the size and weight of computers, phones and pagers. Now they can be taken to more and more far-flung places and afforded by ordinary people. Technology has also made it possible for people around the world to get connected and exchange information, news, knowledge, money, family photos and music in a cost- effective way that was unimaginable before. The Net is also facilitating the faster diffusion of new technologies and innovations from the developed to the developing countries. In the past, it had taken decades and sometimes, even centuries for the benefits of innovations such as railways, telephones and electricity, to trickle down to developing countries. Thanks to the Net, emerging markets can catch up much faster with developed countries. Removing misconceptions Globalization arouses strong sentiments for various reasons. It has its champions as well as critics. Trade and capital flows, while facilitating the more efficient use of resources, are also increasing volatility in international financial markets. Another contentious issue is that the benefits of globalization may not be spread equally among countries or for that matter, among different sections of people within a country. The protests in Seattle during the WTO ministerial meeting in November 1999 were the result of such disgruntlement among workers and environmental groups. The WTO, the World Bank and the IMF evoke hostility in many parts of the world. A technologically driven phenomenon Symbols of globalization such as the WTO evoke hostile reactions from politicians in countries like India. But what people don't understand is that globalization is largely a technology-driven phenomenon, not a trade-driven one. Trade which is tangible has come to symbolize for many people all the anxieties associated with rapid change and globalization even though the main causes of those anxieties are new technologies and deregulation. Impact on the poor Globalization does harm some of the poor. Free trade and foreign direct investment may take jobs from workers in the advanced industrial economies and give them to cheaper workers in poor countries. For example, due to the North American Free-Trade Agreement (NAFTA), American manufacturers can close old factories in the United States and open new ones in Mexico. The globalization of capital The globalization of capital has been blamed for many of today's problems. But there are various misconceptions about the flow of foreign capital. FDI has not invaded developing countries and threatened their sovereignty as third world politicians often argue. Most outward Foreign Direct Investment (FDI) from rich countries goes not to poor countries at all, but to other rich countries. In the late 1990s, roughly 80% of the stock of America's outward FDI was in Canada, Japan and Western Europe and nearly all of the rest was in middle-income developing countries such as Brazil, Mexico, Indonesia and Thailand. The poorest developing countries accounted for 1% of Conclusion Globalization has brought significant growth in the worldwide trade, investment flows and capital transactions. By dismantling economic boundaries, it has opened up new opportunities for millions of people. As a development paradigm, globalization is now widely accepted. Many developing countries have, in fact, shown a great urge to globalize their economies. Countries perceive globalization as an instrument not just for achieving economic efficiency and competitiveness, but for meeting broader objectives like eradicating poverty and overall advancement. The experience of some developing countries suggests that globalization in this form may, in the long run, prove detrimental to the industrialization prospects of many developing countries, and would lead to their further marginalization. References Balakrishnan Chandrasekharan. Impact of globalization on developing countries. Answer.com. Viewed 7 December, 2008. http://economics.about.com/od/globalizationtrade/l/aaglobalization.htm Frannie Lautier (2006) Cities in a Globalizing World: Governance, Performance, and Sustainability. World Bank Publications. Viewed 7 December, 2008, http://books.google.co.in/booksid=QTpTEjWI1KAC&pg=PA34&dq=Globalization+-+definition&as_brr=1&ei=C2g7Sam6K4zckATXtcnOBA Gurria Angel (2007). Reaping the benefits of globalization: The Importance of Public Policies. Viewed 7 December, 2008. Jones Sarah. The cost and benefits of globalization to U.K. The Market Oracle. Viewed 7 December, 2008. http://www.marketoracle.co.uk/Article126.html Montout Sylvie & Benjamin Delozier. How the new features of globalization are affecting markets in Europe. Viewed 7 December, 2008. OECD Handbook (2005) OECD Handbook on Economic Globalization Indicators-Organization for Economic Co-operation and Development OECD Publishing. Viewed 7, December, 2008. http://books.google.co.in/booksid=FWxQVPGv3YoC Rajaee Farhang (2000).Globalization on Trial: The Human Condition and the Information Civilization. Viewed 7, December, 2008. Read More