The Impact of the Globalization - Essay Example

Introduction The term ‘Globalization’ has become quite common in this millennium. Not only is it used to describe the elements of communication, human movement and interaction, international economic and political contexts today, but also to justify the apparently diminishing significance of the national borders. ‘Globalization’ also applies to an increasingly relatively uniform social awareness and call for social changes, e.g. homosexuality and gay marriage, etc. Although this trend seems common, there is no doubt that the conceptualization and scope of ‘Globalization’ is subject to time and context, i.e. it is defined differently by different people and from different perspectives. In recognition of this, Mamman and Liu (2008, p. 56) investigate the interpretation of the term from the point of view of Chinese business people and professionals. The implication of this is that the actual meaning of globalization remains somewhat elusive. Hosseini (2010, p. 1) agrees: “The term ‘Globalization’ remains one of the most problematic in social sciences”. For instance, some view it as an economic liberalization, others as a seeming Americanization of the world, others as the expansion of communication/information technologies, and even others as the global poverty growth. Equally, the term poses a linguistic dilemma. Some view it as transitive verb (i.e. it must a direct object, e.g. globalization of the fight against malaria), while others an intransitive verb (i.e. globalization is a character of its own). Nonetheless, whatever one calls it, or thinks it means, there is equally no doubt that globalization, as alluded to above, is the reason for a lot of economic, social and political circumstances and experiences today. These have impacted on not only people and how they think, but also organizations and national governments. This paper aims to discuss these elements: the meaning of globalization, its benefits and costs, how it has impacted on people, organizations and national governments. The Meaning of Globalization Although there is no single definition of the term, ‘globalization’, some meaning can be drawn from its conceptualization. Different scholars and theorists have adopted different perspectives in examining the concept of globalization. Below are the two general perspectives: One such perspective is the view of globalization as a uni-dimensional phenomenon. For example, seeing the flow of capital, goods and trade as helped by new communication and information technologies. Although this approach to the definition provides a higher certainty level in the analysis of reality, it overlooks the complexity of global changes. In this case, for instance, globalization is narrowed down to economic change, while ignoring the social, cultural, political and ecological dimensions (Hosseini, 2010). On the other hand, some social scientists take a multi-dimensional approach (Hosseini, 2010), i.e. they take into account all the factors, including politics, culture and economy in defining the nature of globalization. Although this approach is more comprehensive than the first, it is not free of limitations either; it may lead to abstractness and ambiguity, thereby reducing clarity and certainty level. However, to win over such ambiguities and contradictions, Hosseini (2010) proposes, one should approach ‘globalization’ as a social process aimed at expanding beyond conventional cultural and geographical boundaries. In this sense therefore, globalization is not an independent phenomenon of its own, but a process by which something becomes global. To view ‘globalization’ as a phenomenon on its own is to assume that it is independent of the context in which it is defined. However, this is not realistic. For example, many studies show that the different aspects of globalization, including technology, education, health, etc. have been partial, asymmetrical and influenced by power forces (Held & Kaya 2007, p. 34). The understanding and acceptance of globalization rests on the hegemony of mass media in the human consciousness (Mamman & Liu, 2008). The term ‘globalization’ develops from ‘globe’, which is synonymous with ‘world’. In other words, globalization denotes the way in which different factors and forces of world affairs affect how people view themselves, their world, societies and cultures, and the universe at large. That cannot be one single race, but a combination of different intra-contextual changes occurring either simultaneously or at different times. These would surely move towards a global framework. Ultimately, the concept of globalization, in all its variants, comes to rest on a common premise; expansion and intensification of communicative, exchange and commercial relations beyond ‘national’ and regional boundaries. Benefits & Costs Indeed, a number of positive developments in the world are directly attributable to globalization. However, these developments have not been without their limitations. Benefits Globalization is understood in relation to increased global trade and exchanges as a result of a more open/free, integrated and borderless economy (Intriligator, 2003). Since the beginning of the millennium, the world has witnessed remarkable growth in traditional trade (i.e. goods and services) and exchanges (e.g. currency changes, capital movements, technology transfer, human movement through migration and international travel, international exchange of information and ideas). In 2003, for instance, there was more than $1.2 trillion transacted through New York currency markets every day, and even transactions on the international stock market exceeding this amount (Intriligator, 2003, p. 68). Such developments are attributable to a number of globalization-influenced factors. The international market has enjoyed much openness, worldwide market integration and increasingly fading national borders, which have also increased global flows. These have been boosted by global trade liberalization as well other economic liberalization forms in the world trade system that has reduced trade protectionism. This has been in line with the 1946 policies of General Agreements on Tariffs and Trade (GATT), which has become the World Trade Organization (WTO) (Intriligator, 2003). These aspects of liberalization have increased capital movement and other production factors. Technological advances have significantly reduced transportation and communication costs. As result, the costs of data processing, information retrieval and storage have reduced dramatically. These are directly attributable to developments of electronics, especially computer and microchip revolutions. Due to improved communication, organizations have a much expanded reach. Thus, business organizations have expanded their production facilities and markets to include international and global targets. In this sense, globalization has promoted higher productivity by way of allowing producers to adjust and arrange their processes of production in ways that they find most effective (Carney, 2008). Equally, this increased productivity is attributable to specialization, i.e. firms specialize and concentrate on those areas of production in which they possess comparative advantage (Mair 2005, p. 20). Also directly linked with the advances on communication and information technologies is the way that globalization has led to the introduction of a novel global management of supply chain. These advances have reduced the costs of transportation and communication, leading to a new range of tradable goods and services. For example, in the 30 years preceding 2008, the percentage of imports on manufacturing production had tripled to almost 30 percent (OECD 2007, p. 56). One of the key advantages of this has to do with increased commercial competition on a global scale, which has since increased efficiency in production. This is attributable to the division of labor and specialization that results from competition. And economies of scale can help reduce costs and prices, which is quite beneficial for growing economies (Intriligator, 2003; Carney, 2008). Competition, Carney (2008) notes, leads businesses to “compress their margins” so as to remain competitive as well as absorb increasing costs. Costs The discussions above make globalization seem free of any blemish but that is barely true. Even pro-globalization minds do agree that the positive aspects of globalization are not untainted. One main problem has to do with the distribution of global wealth. For instance, many have posed a question on who or which nations, really benefit from the benefits that it presents? Intriligator (2003) admits that there have been substantial problems with equitable distribution of the benefits and gains of globalization, with much of it going to the rich people and nations, thereby creating even greater inequalities and causing potential national and international conflicts (pp. 10). Some opinionists (economists) have suggested a possible convergence of global income based on the general assumption that poor countries are actually growing relatively faster than the rich nations (Intriligator, 2003). However, this observation is not accurate as it is not complete. The reality is that this faster growth rate is only or mainly observed among the so-called ‘tiger economies’, that is, a small group of East Asian countries. Otherwise, other least developed countries in other parts of Asia, Africa and Central & South America have even been growing at a rate slower than even the rich nations. IMF (2008) agrees, noting that while poverty had fallen in South and East Asia, it had actually risen in sub-Saharan Africa. As a result, the poor countries are becoming more and more marginalized. Instead of the suggested convergence, there has only been divergence, i.e. worldwide income polarization, with the rapidly growing economies joining the already rich nations and the poorer countries being left further and further behind. But it would be unfair to individuals to view this only from the international perspective. Many people are also individually feeling the pinch of inequality. Carney (2008) acknowledges the finger-pointing against globalization for inequality and the falling of wages in some sectors of industrialized economies, especially as a result of shifting lower-skilled jobs offshore. In agreement, an OECD (2007, p. 67) report, Employment Outlook shows that for over the preceding two decades, labor income share in comparison to GDP had reduced in most of the member countries. However, since the 1990s, the workers topping the wage distribution relative to the workers at the bottom of distribution had enjoyed a rise in earnings in 16 of the 19 countries, where data was available. This increasing disparity has caused disaffection as well as conflicts as the poor nations strive to benefit from the share of world wealth in their attempt to join the rich league. Another cost has to do with potential international instabilities stemming from worldwide economic interdependencies. Local economic crises could easily have regional or global implications. Over years, this has grown from mere theory to reality. For example, the Asian exchange rate problem and the consequent financial crisis of 1998 began in Thailand in 1997. Yet it spread to the rest of Southeast Asia, got to South Korea and even delayed effects in Russia as it fell in August 1998 (Intriligator, 2003, pp. 11). Even a better example is the 2007 global recession caused by the bursting of the house bubble in the US (McKibbin & Stoeckel, 2006). As predicted by Intriligator (2003), the depression has seen a recall of the interdependencies, especially by the US and a return of a certain degree of protectionism. However, this problem is not only economic, but social as well. The improved transportation that has boosted human movement are also reason for alarm for many, e.g the outbreak of Swine Flu in Mexico easily spread to other parts of the world, including Texas, UK, Malaysia, France, Ireland, New Zealand, Canada, etc in only a matter of days (Williams & Edge, 2009). Another problem is the plight and fate of national economies. Many feel that the control and running of national economies is shifting from the hands of social governments to other hands, including those of powerful states, multinationals and other international organizations. Thus, many see national sovereignty as being at the mercies of global forces. Intriligator (2003) argues that this feeling could make national leaders feel helpless in the face of globalization and disaffection among the electorate. This could even lead to extreme nationalism, which may be manifested in such acts or behaviors as xenophobia, accompanied by calls for increased protectionism. Even worse, there could be growth for fundamentalist and extremist political movements. Challenges to National Governments Indeed, globalization has altered the contexts in which national governments operate. In fact, even traditional domestic issues: social, economic and political are increasingly viewed- individually or collectively- relative to international actors and events beyond the reach of national governments. This has caused much fear that the autonomy of national policy, and even sovereignty, are being undermined. But whether these fears are founded or not, globalization is here and its influence is taking an increasing toll every day. Therefore, the question that remains is whether national governments are adequately set to deal with the problems of globalization and get the best of its potential benefits. But this getting ‘set’ is not without its challenges. Global Policy Role Both national and international interest groups, the worldwide global media, multinationals and the elements of globalized financial markets all put pressure upon governments and the options of policies available to them. Governments’ participation in international organizations and even their consequent adoption of international agreements do reduce the governments’ capacity to maneuver (Boris, et al. 2009, p. 46). These international signings may even demand adjustment and modification of long-standing and much valued practices and policies. A good example is the case of Nordic tradition that calls for open and free access of the public to government information. However, now being a member of the European Union, such access may have to be restricted in accordance with the Union’s emphasis on confidentiality. Indeed, interdependence is evidently reducing the level of autonomy or independence of domestic policy as unilateral action is the new trend, the effective means to achieve policies that would meet the fundamental needs of citizens in an interdependent setting. Nevertheless, even in acknowledging the significance of interdependence and submitting to it- rationally of course- still presents certain challenges. Governments today are more aware that to meet challenges of globalization and play an effective role in the international arena, mechanisms for internal policy co-ordination are essential (Boris, et al. 2009, p. 49), i.e. credibility of a government at the international level depends on internal coherence and consistency of policy. However, this requires other governments to trust that a government will abide by its commitments. Unfortunately, due to the conflicting agendas between lower government levels and line ministries, co-ordination, especially for the sake of the international commitments is becoming more and more unmanageable. Thus, it becomes hard for governments to speak with one voice. Without effective mechanisms of management, inter-ministerial disputes are forwarded to the international level. This poses even a bigger challenge of management for the national government, including improving co-ordination of internal policy actors, their international activities and contacts (Boris, et al. 2009, p. 51). However, even with an effective internal co-ordination mechanism, a smooth role in the international platform is not guaranteed. In addition, globalization seems to be affecting the balance of power between a nation’s governance levels. For instance, some sub-national governments are out for direct international representation, leading to conflicts with central governments. In Spain, for instance, a number Spain’s self-governing communities have been placing direct representation in Brussels, much to the chagrin of the central government, although supported by the constitutional court. Globalization and Democracy Policy process is not the only area in which globalization poses a challenge to national governments. Globalization-inspired democracy is another challenge. Because of improved information technologies and transport, citizens are increasingly informed through cable TV and the internet. As such, government control and censorship are not as easy. Exercising control over the information that goes out, e.g. human rights abuses, and information that goes in, e.g. pornography, information on terrorism, etc (Rudra, 2005, p. 724) has become difficult. This access to information has increased democracy; easily politicizing citizens and mobilizing them to take action. For example, citizens compare themselves with other neighboring governments against which they measure their governments’ successes and failures and put pressure for the things they need. For example, the successful revolution in Tunisia started the Arab spring that has since seen the ousting of Egypt’s Mubarak, the death of Libya’s Gaddafi, demonstrations in Yemen and Syria. In addition, the Arab spring has been the inspiration behind Occupy Wall Street, which is increasingly growing globally (Baker, 2011). These examples show how fast globalization can facilitate a quick mobilization and organization of people. Impact on Shell Globalization has had direct impact on a number of organizations, e.g. multinationals. These impacts can be understood as results of the organization’s attempts to adopt new business strategies in accordance with new global perspectives. For the sake of demonstrating this, this paper picks Shell as an example. Perhaps the biggest impact on Shell’s operations, as has been the case for many other organizations, is its approach to coordination through information management. For instance, Shell adopted a paper outlining its aspired application of information management in its exploration and production processes. The paper recommended that, in order to improve efficiency, as well as create and organize a common point of accountability for Shell’s global Information Technology and delivery, there was need to merge all the information management activities concerned with its exploration and production (Heye, 2005). This was aimed at developing a design for the new global information management services that, in accordance with new global trends, would result in: cost reduction, quality and service levels driven by business needs, adoption of new global processes of information management application and integration with the global information management infrastructure and application (Heye, 2005). However, equally important is the broadened scope of the responsibilities and roles of organizations not only to the people, but also to the environment. Shell has in recent times adopted more social responsibilities in line with today’s plight of corporations. For instance, through its ‘enterprise-based’ approach to business, Shell has become a partner in several projects with the local people in the countries in which they do business. This is move to help elevate poverty (Shell Foundation, 2007). In addition, in its commitment towards the protection of the environment, Shell has adopted a project it calls EMBARQ by which it aims to help cut traffic congestion and air pollution in cities. It does this in conjunction with all stakeholders in the transport sector to identify the key problems and the appropriate solutions (Shell Foundation, 2007). These examples, amongst many others, show how Shell has changed from merely being a products and services providing company to also being committed to today’s social and economic problems, e.g. poverty. Conclusion The debate on globalization will still go on and so will its scope and impact on our world. It is important to acknowledge that globalization has and will increasingly become a significant influencer and effecter of change. This includes the way that social changes are organized through championing interdependence of social spheres/spaces, including political, military, cultural, technological, legal and environmental. Bibliography Baker, B. (2011). NBC: Occupy Wall Street Like an ‘Arab Spring,’ is ‘Drawing Historical Comparisons’, News Busters, October, 8. Retrieved 2 April 2012, http://newsbusters.org/blogs/brent-baker/2011/10/08/nbc-occupy-wall-street-arab- spring-drawing-historical-comparisons Boris, S., Chaminade, C. & Edquits, C. (2009). The Challenges of Globalization: Strategic Choices for Innovation Policy” in G. Marklund, N. Vonortas and C. Wessner (eds.) The Innovation Imperative. National Innovation Strategies in the Global Economy, Cheltenmen: Edward Elgar. Carney, M. (2008). The Implications of Globalization for the Economy and Public Policy. British Columbia Chamber of Commerce and the Business Council of British Columbia, Retrieved 2 April 2012, http://www.bankofcanada.ca/2008/02/speeches/implications-globalization- economy-public-policy/ Held, D. and Kaya, A. (eds.) (2007). Global Inequality: Patterns and Explanations. Malden. Cambridge: Polity Press. Heye, D. (2005). Next stop: global? A study in globalization at Shell Exploration and Production, Business Library, Retrieved 2 April 2012. http://findarticles.com/p/articles/mi_m0FWE/is_2_9/ai_n13787591/ Hosseini, H.S.A. (2010). Contested Meanings of Globalization: main themes, key concepts, Global Alternatives, Retrieved 2 April 2012, http://globalalternatives.wordpress.com/2010/03/19/week-1-rd-framework- contested-meanings-of-globalization-main-themes-key-concepts/ IMF Staff (2008). Globalization: A Brief Overview. International Monetary Fund, Retrieved 2 April 2012, http://www.imf.org/external/np/exr/ib/2008/053008.htm Intriligator, M.D. (2003). Globalization of the world economy: potential benefits and costs and a net assessment. Policy Brief, no. 33. Retrieved 2 April 2012, http://www.milkeninstitute.org/pdf/globalization_pb.pdf Mair, J. (2005). "How the Appreciation of the Canadian Dollar Has Affected Canadian Firms: Evidence from the Bank of Canada Business Outlook Survey," Bank of Canada Review, pp. 19–25. Mamman, A. & Liu, K. (2008). The Interpretation of Globalization Amongst Chinese Business Leaders: A Managerial Organizational Cognition Approach, Brooks World Poverty Institute Working, Paper No. 48, Retrieved 2 April 2012, http://dx.doi.org/10.2139/ssrn.1265639 McKibbin, W. & Stoeckel, A. (2006). Bursting of the US Housing Bubble. EconomicScenarios.com, Issue 14. Retrieved 2 April 2012, http://www.economicscenarios.com/public/pdfredir_sample.asp?issueNo=14 OECD. (2007). Economic Outlook, No. 81. Rudra, N. (2005), Globalization and the Strengthening of Democracy in the Developing World. American Journal of Political Science, vol. 39, pp. 704-730. Shell Foundation (2007). Down to Business: New Solutions to Old Problems. London: Shell Center. Retrieved 2 April 2012, http://www.shellfoundation.org/download/pdfs/sf_brochure_16pp_aw_2.pdf Williams, R. & Edge, A. (2009). Swine flu cases around the world. The Guardian, Retrieved 2 April 2012, http://www.guardian.co.uk/world/2009/apr/27/swine-flu- mexico1 Read More