The History of Multinationals and the Creation of Global Capitalism - Coursework Example

Running Head: Globalization. Globalization Your Name Course name Instructor’s name Date of submission Globalization is the integration and democratization of the world’s monetary status, culture and infrastructure by transitional investment, intensified proliferation of communication and modern information technology and how the international, local and regional economies are impacted by the introduction of the free local market. Globalization is no longer a myth but a reality as it is a process that can be traced back from the early trade by mankind. The latest invention in the transport, communication and business transactions has made the world’s economic space and time to be shrunk progressively. This can be traced back from the early explorations and industrial revolution processes. The state ventures in colonization have to an extent driven the globalization process and has had its effects reflected on the market. This is evident through the exploitation of smaller upcoming markets by the larger developed markets in the world that is full of opportunities (Griffin, 1991). The earlier periods witnessed the internationalization of capital due to a strong demand from regions outside the Western Europe that was accelerated by the exchange rate system that was fixed, lack of regulatory restrictions and the abundance of capital mainly in the Western Europe regions. The era ushered in the yardstick of global reintegration due to the fact that the international commercial and monetary relations attained levels that had never been achieved before. The international economy at this point was in favor of Europe. Most of the major investments and business transactions radiated from the Western Europe region. The era also witnessed a sharp divide between the countries that were debtors and those that were creditors. Infrastructure determined their export zones whereas the regions that had mineral resources for exploitation being favored by the foreign investors. The Western Europe gave loans to countries that were struggling with their economies or needed financial aid in the exploration of minerals that were in their countries. This witnessed the increase in the proportion in debenture holdings and companies’ equity (Douglas and Wind, 1987). The great depression in most regions began in 1929 and lasted until the late 1930s. The depression which had its roots in the United States saw the sharp fall of stock prices and eventually the cr7ush of the stock market in October of 1929. The era saw a surge in oil prices, revenue tax, transactions profits and the plunge of the international trade by more than 50%. The employment rates rose sharply to 25% in the US and even 33% in some other countries. Economic gains in the construction industries were halted as most of the construction in most countries was stopped (Griffin, 1997). The effects of the depression were mainly blamed on the weaknesses in the economic structures. The massive decline in employment and income had an effect on the expenditure rates thus the economy reached its equilibrium at low rates and levels in the economic activity and high unemployment. The economies were expected to rise if the countries increased their spending and cut down on the tax. Most countries that depended on foreign trade suffered more as their trade sharply declined. Countries like the US, called in on her loans to the German state (Ghemawat, 2001). Globalization is believed to be caused and driven by factors and measures that governments have put in trade to make trading easier. Governments have taken innovative steps in the introduction of General Agreement Tariffs and Trade (GATT) including the successor organizations like the World Trade Organizations. In addition, most countries have set up free trading areas, common regional markets like the European Union and custom unions. In free trade areas, the states agree to remove the limitations that existed in tariffs and even quotas that existed on the goods from other members. The member nations have the freedom of setting the tariff levels that are imposed on the import and export products in the trade market. In common unions, member states agree on the setting up of common and agreeable tariffs on products from non member states. Member states will agree on having their goods, services and labor to move freely in their regional market (Held, 1999). In this economic age, there has been a decrease in the restriction on the movement of goods and services across the regions as economies quest for the expansion of their market territories. This has been made possible in the multilateral and bilateral levels through negotiations in international institutions which include general agreements on the GATT and WTO. Governments have increased the economic linkages by signing treaties that aim at setting up regional trade areas (RTAs) like the EU which have removed the barriers that existed in the movement of products and services. Members of the countries referred to as the third world have set up Export Processing Zones that are aimed at the promoting economic development by facilitate the movement of capital in their economies. This has facilitated the creation of employment of many citizens effecting on to improved economy (Gupta, 2004). On the other hand, improvement in the modes of communication has reduced transport costs have eased the movement of goods, capital, services, labor and people from one region to the other. The increased technological advancements in the telecommunication sector has made it easier for the countries and people to transact the businesses across the region as this enables people to be able to communicate and travel over long distances at relatively low costs with great ease. Great innovations in the areas of internet use and the reduction in the costs of the various products that have made it easier to access the gadgets that facilitate this communication have made it easier for companies to operate businesses and firms from long distances. Firms are also able to learn the new advancements to enabling the growth of the businesses from regional to international through linkages and partnerships. Traders in stock can be able to monitor the trading and movement of shares across the globe thus being able to invest not only locally but internationally as well (Richardson, 1995). Globalization has resulted in to various consequences as the world economies try to compete against each other in levels. Globalization has led to increased Foreign Direct Investment. In recent years, the third world regions have experienced a growth in the economy as of the capital markets being increasingly integrated. A lot of foreign exchange is witnessed crossing over as the regions and states trade for services and other products. The regions have seen increase in the exchange of labor and ideas that have led to partnerships and collaborations in financial transactions. Secondly, the increased trading and investments has witnessed the reduction of transport and communication costs across the regions. Many regions and firms are seen to competing against each other as they open up to new ventures and ideas (Dicken, 2007). When new businesses open up to new environments they are faced with different factors which include political, laws, culture, tax systems and competition policies. They are always complex and risky as many businesses who will not receive the full support of the new environment fail in the long run. The removal of trade barriers not only opens up markets and businesses that were once not in existence but brings more revenue and economic growth to the region. The new firms are able to employ national inhabitants to fill up positions in the firms thus reducing the number of the unemployed persons in the region. For example, the expansion of the major car manufacturing companies into regions that they had not set base has not only increased the revenue of the affected countries but also decreased the level of unemployment thus affecting the countries economies directly. Moreover, globalization has effected into firms accessing products, resources and services cheaply. The ease in the access of the products has directly led to the decrease in the products prices thus making them more affordable to the ordinary persons (Levitt, 1983). The cost effectiveness of the production and supply of the products has decreased sharply thus the firms are able to sustain the production of the various commodities while at the same time not compromising of the quality of the products. In conclusion, in as much as globalization has led to the cheap, availability of commodities and increase in the economic conditions of various regions, there are still some resistance to the full attaining of a totally free market as their exists bullying and dominance of the major markets that control the treaties and rules that govern this. This form of economic corruption has made it difficult for the globe to realize the full effect of globalization. In addition to this, some regions are rigid in removal of the restrictions that exist in the creation of a free trading market. Most place tariffs on goods that are so high and can not be fully sustained by the firms thus increasing the cost effectiveness of production. Lastly, the increase in technology has opened up new avenues for crime mainly fraud which gives severe blows to the advancement of some economies. On the other hand, the growing insecurities regions experiencing regime change have made it increasingly difficult for foreign investments as the fear of no returns is evident. References Douglas, S. and Wind, Y. (1987). Columbia Journal of World Business, Winter87, 22(4), p.19-29. Ghemawat, P. (2001) ‘Distance Still Matters: The Hard Reality of Global Expansion’. Harvard Business Review, September, 137–47. Held, D., et al. (1999) Global Transformations. Stanford: Stanford University Press. Gupta Anil K. G. (2004) Global Strategy and Organization. New York: John Wiley & Sons. Levitt, T. (1983) ‘The Globalization of Markets’. Harvard Business Review, May–June, 91–102. Dicken, P. (2007) Mapping the Changing Contours of the World Economy, 5th edn. London: Sage. Richardson, J. (1995). “Income Inequality and Trade: How to Think, What to Conclude.” Journal of Economic Perspectives. 9(3): 33-55. Griffin, K. (1991) ‘Foreign Aid after the Cold War’, Development and Change 22(4): 645–85. Griffin, K. (1997) ‘Globalization and Development Cooperation: A Reformer’s Agenda’, in Albert Berry, Roy Culpeper and Frances Stewart (eds) Global Governance and Development Fifty Years After Bretton Woods, pp. 22–49. London: Macmillan. Read More