International Business Globalization and Income Gap - Essay Example

Globalization Globalization The problem with globalization is that there is not enough ofit’ In twentieth century, globalization has become one of the most important contemporary phenomena. The term was firstly, initiated in 1983 to describe the changes that were occurring in the modern economy. Globalization can be defined as an intensified social interrelation within the different regional and distant locations (Scherer et al., 2009). The term globalization can also be explained in terms of market in which the business competes to sell its product and services and the market in which it competes for productive inputs (Scherer et al., 2009). Hence, it is an effort to integrate or transverse some of national boundaries that reduce the national barriers and the businesses can compete for productive inputs and customers across the globe. In other words, it can be explained as an effort to reduce national barriers and establish broader market that permits all buyers and sellers to persuade business activities at a global level. The process of globalization can not only be identified as a buzz word but it will provide opportunities to accelerate pace of major business. Despite the fact, globalization will provide greater opportunities for the business to expand its markets, improve the pace of its performance and productivity. Globalization still remains to be one of the debatable and controversial issues in contemporary times. Researchers claim that the globalization is an excellent concept to boost up economic prosperity but elimination of national barriers cannot be attained. It has created a confusion and paradox situation for the business entities to integrate its operations at a global platform. The statement ‘The problem with the globalization is that there is not enough of it’ indicates that the concept of globalization is not absolutely attainable that has created problem itself. Therefore, the present essay paper will critically analyze advantages and disadvantages of Globalization to interpret the statement. Werhane (2012) explains globalization as an integration process of national economies within the international economy, through trade flows, foreign direct investments, short capital flows, technologies flow and labor forces (Werhane, 2012). The integration of the economies has increased diversity, complications, and controversies because of its multi dimensional nature. Sebastian and Elisabeta (2014) Claim that with the passage of time globalization stresses on the increasing process of integrations among countries within regional economies and political structures, with respect to globalize economy (Sebastian & Elisabeta, 2014). Moreover, the integration processes has derived the needs for the individuals to understand the transmissions of business cycle and fluctuation among the nations. Scherer and Palazzo (2014) argues that the globalization has influenced business cycles transmission in a manner that the it influence two or more countries to experience similar pace of economic development and growth in terms on values in the same direction (Scherer & Palazzo, 2014). Hence, the globalization of the markets entitles greater responsibilities of business entities to measure occurrence and effects on the phenomena. In response to integrate the process, economic and financial agreements are developed. The main function is to form a certain framework to assess the fluctuation prevailing in the countries. One of the examples can be derived from the General Agreement Tariffs and Trade (GATT) and The World Trade Organizations (WTO) that addresses to reduce the physical and administrative international barriers. However, the activities of both of the organization are criticized for irrational approaches to determine economic growth of countries. In addition, it is sated that the both of the organization do not promote rational economic behavior for the countries to improve its economic performance. WTO and GATT stresses on the justification on providing equal and fair distribution of social fairness, where in terms of economics, justification means the optimal allocation of the resources. Thus, it is can be determined that the statement of the GATT and WTO itself derives economies in a corrupt manner in order to attain social outcomes rather than focuses on economic outcomes. Considering the labor market in USA and Europe it can be determined that USA has relatively flexible labor market than Europe. It is because of social and legal framework of the countries that differently accounts on the decision for allocation of resources, production, wages and product money flow. The per-hour wages for the labors in USA is more than the per-hour wages of the labor market in the other countries, such as, Africa, Asia and other European countries. Herein, it can be determined that the main functioning of GATT and WTO itself is contradictory that prevents the major social and political disruption. In addition, the direction of globalization provide for global trading system also remains to be a controversial issue. Kunnanat (2013) in the study claims that the globalization itself has greater massive disruption in socio-economic and cultural barriers for developing countries (Kunnanatt, 2013). He claims that the promises of the globalization seem to get abrupt with the passage of time because of the strategically designed political and economical framework and policies (Kunnanatt, 2013). It can be determined that in contemporary times, WTO and EU have been knocking doors of the developing countries to open their doors for the economic development by allowing foreign trade and investments (Kunnanatt, 2013). Free trading and investment has massively disrupted socio-economic conditions of developing countries rather than bring benefits to them. However, it has also showed positive and negative impacts on the prosperity of the countries. For example some of the researchers claim that the reason for increasing poverty and underdevelopment in the region of Africa is because the rejection and resistance of the nation towards globalization. On the contrary, countries like India and China claim that the reason for their success parameters are based on its resistance to globalization that has results in the significant reduction in the poverty and improved economic output (Roodman, 2009). It can be determined that the economic growth of the economies is diversified in the different regions. Despite the fact, some of the countries claim that the globalization, free trade and direct investment have provided greater opportunities for the economies to grow (Jenning, 2014). Some of the researcher claims, that these countries only perceived that they are benefited of the globalization. In order to explain this, Samimi et al (2012) state that the countries that have low cost labor are one of the major attractions for MCNs to invest (Samimi et al., 2012). Considering the garment industry in Bangladesh, India, China and Pakistan that Nike has established for the production of its sports garments and products are relatively cheaper because of cheap labor. The same garments if produced in America or other developed country the labor would cost more than $5 per hour. The profit generated by the sales of the product will be much higher than the amount these MCNs have invested in the developing countries. Hence, it can be determined that the countries that believe opening gates for the globalization would improve the income gap between the countries is conditional. The circumstance varies with the passage of time, the investment of the MCN are only made with intention to obtain relatively higher output that would eventually go in the hands of the parent countries, resulting in a very few improvement in the developing countries and a major improvement in the income of the developed countries. In addition, it is claimed that several trading and traffic policies of the countries are made in the political interest of the countries. The impact of historical events is still practices under the name of policies and regulation. Russia is highly rich in natural resources; it can be one of the largest providers of energy to different countries at cheaper prices. However, the western world would never consider making trade with the Russian countries because of its negative political relationship in the past (World War I and II). Despite the fact, WTO restricts discriminatory treatment of the countries towards particular countries, as it should only focus on global economic development. In the similar manner, it is evident that the countries that are in state of war with the other country, like Palestine and Israel it can be observed that these countries itself develop trade barriers to import or export products and services to these countries. Furthermore, the countries that want to establish their industries often impose sanctions on the imports of those products in order to improve its industry. The VITO countries have made lobbies that would like to invest in certain countries. The discriminatory perceptions are evident from the regulation and policies of the countries and WTO does not take initiatives to control these concerns. Thus, Scherer et al (2009) claim that the globalization itself promotes discriminatory behaviors of the countries, rather than take measures to control or regulate the discriminatory policies of the countries (Scherer et al., 2009). The motive of Globalization is to promote social and economic prosperity. However, the international financial and trade organization itself have created a wide gap. Elmawazini & Nwankwo (2013) in the study analyzes indexes of developed and underdeveloped (African Countries) to study the impact of globalization to reduce income gap (Elmawazini & Nwankwo, 2013). They claim that globalization has no impact on the reduction of the income gap between the developed and income developed countries (Elmawazini & Nwankwo, 2013). It is because of the limited scope and forces of globalization that has provided very little opportunities for growth of the countries. Considering the automatic welfare gain that is an economic phenomenon that does not considers the structural shift that took place in the world economy. The drift in the economic growth of certain countries, such as China are evident from the recent technological boom of twentieth century that has increased the output. In the similar fashion, Ritzer (2009) claim that the global economic recession (2007-2010) shows that the decline in the outputs of the developed countries during the period significantly increased the output of the emerging market economies, such as China and India (Ritzer, 2009). It clearly indicates that the countries that decline the output of developed countries significantly impacted the output of emerging market economies. Thus, it can be determined that the globalization itself is a channel to widen the income gaps between the developed and developing countries. Kunnanatt (2013) in the study claim that business entities, multinational companies and corporation have its personal interest, that is to generate a higher profit. He claims that the corporations operate on the basis of political engagement that does not has any contribution for the welfare of the state or the people it aims to operate. Perhaps business firms are subjected and objected to communicative political processes to regulate economy (Kunnanatt, 2013). Thus, the course of action of the business firms can be identified on the bases of political role. Globalization promotes socio-economic prosperity through develop stronger trading and business relations among the countries. However, it can be determined that the corporation often acts as political actors, as they are designed to make profits. They barely involve in social and environmental development of the business firms that eventually hinders the legal development of the organization to generate profits. Thus, currently the concept of Corporate Social Responsibilities (CSR) has emerged to be one of the dominant aspects of the organization to engage in the environmental sustainability concerns. The theoretical underpinning of neoclassical growth theory can be implied to understand income gap. The theory explains that the productivity and technology gap between the developed and developing countries shall converge over time. It can be determined that the innovation of the developed countries can be imitated by the developing countries, that we can clearly observe in the early development of china that has lead to convergence in the growth rates among developed and developing countries. Moreover, the theory of dependency theory and world system theory can also be implied. The theory claims that the innovation will increase the pace of economic growth and globalization will widen the gap between the income of the developed and developing countries. Hence, it can be derived that the countries with higher literacy and skilled labor are predicted to have gain economic prosperity early as compared to other countries. Cook and Underwood (2012) in their study determine the impacts of the educational attainment on the attitudes of globalization (Cook & Underwood, 2012). He claims that the individuals with the greater knowledge of economic globalization intend to have positive impact on the attitudes on economic globalization. It can be determined that the countries that have knowledge about economic globalization, focuses on reduction of trade barriers and trade investment are more likely to improve its performance and economic output. However, there is great difference between economic knowledge and awareness about the economic concerns. Thus, the countries that have higher economic awareness resulted in a greater economic growth. Therefore, the countries like Africa that have a higher rate of illiteracy are more likely to hinder in the race to attain economic prosperity (Peng, 2009). Despite the fact, researcher claim on integration of education regimes to attain economic prosperity (Ferrell & Fraedrich, 2012). It can be identified that the still the meaning of globalization remains incomplete. There is a significant difference between economic awareness and education that has to well understand by the nations. We can only observe that the globalization stresses on education but the concerns of practical implication of the knowledge is essential to overcome these issues. On the basis of above information it can be determined that the globalization itself is contradictory statement that does not addresses the integration of socio-economic concepts. Besides the fact, the message globalization delivers On the surface, it might appear that globalization has cut down the boundaries to conduct international business operations. There has been an ongoing development undertaken so far in bringing all the elements of business together under the umbrella of globalization. However, it has surely a number of limitations as well. These would include barriers in leveling regulations and policies. In addition, many incidents of discriminatory behavior has been observed in the real world such as economic institutions namely WTO, GATT etc. The fact remains that in order to embrace globalized way of conducting business; one has to look at right, left and in all directions to sustain balance. There are many critics who have also proposed similar views and underpinnings with relevant cases and experiences. There are still a number of aspects and elements that are needed to be improved so that the process of globalization is justified. Notwithstanding, there is a strong debate that is posed when it comes to defending globalization. However, few limitations are overthrowing those developments (Ritzer, 2009). Therefore, it is rather suggested that tools and implementation of policies is undertaken by measuring cause and effect of any business operation that is conducted under the influence of globalization way of conducting business. It will also ensure the pace of business in the coming future. The nature of business transactions and the pace of economic production have raised many concerns in the past few decades. It is about time that adjustments are made to revisit the issues that were ignored during major economic downturns in the history (Trevino & Nelson, 2010). List of References Anon., 2013. Global Wage Report 2012-2013. Geneva: Internation Labour Organization. Cook, N.P. & Underwood, R., 2012. Attitudes Toward Economic Globalization: Does Knowledge Matter? Global Economy Journal, 12(4), pp.1-5. 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