The Positives and Negatives Associated with Globalisation - Essay Example

Running head: THE POSITIVES AND NEGATIVES OF GLOBALISATION The Positives and Negatives Associated with Globalisation The purpose of this essay is to discuss the positives and negatives associated with globalisation and to examine how the economic integration brought about by globalisation has affected the political, economic and social landscape. In order to achieve these objectives, the essay will start by providing a definition of the concept of globalisation and discussing how globalisation leads to global economic integration. This will be followed by an analysis of the merits and demerits of globalisation along with the impacts of globalised economic integration on the social, political and economic landscape of nations across the world. Definition of the Concept of Globalisation The term ‘globalisation’ can be defined in various ways. For instance, a text written by Soubbotina and Sheram (2000) for the World Bank has defined the concept as “the growing interdependence of countries resulting from the increasing integration of trade, finance, people, and ideas in one global marketplace” (p. 66). Similarly, based on Wild and Wild (2013), globalisation can be defined as a trend towards greater economic, political, cultural, and technological interdependence among the economies and national institutions of the world. Based on these two definitions, it can be seen that globalisation involves increased coming together and interaction of institutions and economies of different countries through trade, transfer of ideas and technology, and movement of people and finance among other matters. As Lawn (2013) puts it, globalisation involves the economic integration of the world, and integration is the act of bringing together separate but interrelated elements into a single whole. Therefore, from a business point of view, globalisation can viewed as global economic integration or the process of bringing different elements of the world economy into one interconnected marketplace. Cross-border investments and international trade are the main ingredients of the global economic integration (Soubbotina & Sheram, 2000). Through globalisation, companies can disperse their production activities worldwide to minimise labour costs and reach a wider market. Also, consumers are able to have access to a wider range of products and services produced from different counties. Positives Associated with Globalisation Globalisation creates new market opportunities for companies that are involved in manufacturing various products (Wild & Wild, 2013). This stems from the fact firms across the world are able to sell their products and services to a wider market in terms of consumers located in different countries. Changes such as improvements in communication and transportation have increased globalisation in all markets, meaning that firms can locate more markets for their products and supply them with their goods (Deardroff & Stern, 2002). This is facilitated by improvements in technology such as the use of the Internet, which enables seamless communication, remitting of payments and so on. The movement of goods and services is however subject to rules such as those outlined under the now defunct General Agreement on Tariffs and Trade (GATT) and the World Trade Organisation (WTO). Countries that are signatories to these agreements agree to rules regarding when they may impose trade barriers, particularly tariffs, so as to prevent the use of trade policies that can harm other countries (Deardroff & Stern, 2002). This means that the movement of goods and services between countries may be subject to political, social and economic considerations such as countries’ political and economic stability and relations between the countries that are involved. Globalisation also leads to access to better technical expertise and production inputs (Wild & Wild, 2013). The creation of new markets for products and services means that firms have to be innovative in terms of the technologies they use as well as production inputs so as to meet the market needs (Chandra, Eröcal, Padoan & Braga, 2009). Along this line, firms can source for the inputs from countries where they are available and use them elsewhere. For instance, automakers in the United States and Europe are able to source for some automobile components from original equipment manufacturers located in Asia. Similarly, some companies are able to set up assembly plants in countries that would ordinarily not be able to set up large plants due to lack of expertise, such as some nations in Africa or Asia. Through such initiatives, there is exchange and movement of labour, ideas and technology. For instance, by establishing a vehicle assembly plant in Kenya, Toyota, which is headquartered in Japan, is able to benefit from the low-skill expertise required for vehicle assembly, which is readily available in Kenya. At the same time, the company provides managerial expertise to the country, which leads to exchange of knowledge and learning of new cultures between people of the two countries. Another benefit of globalisation is access to low-cost labour (Wild & Wild, 2013). This happens because companies in developed countries such as Australia, the United Kingdom, and the United States, where labour costs are high, are able to outsource their labour-intensive operations to establishments located in countries with comparatively lower labour costs such as Vietnam, Taiwan and India. As noted by Abramyan (2005), poor countries are convenient locations for establishing production units due to the low cost of labour. Consequently, the hosting countries (such as those stated in the previous example) receive modern technologies and get accustomed to the culture of the developed countries while the local population receives appropriate training. Globalisation is also associated with an improvement in the standard of living of people in poor countries. This is due to increased income streams (Wild & Wild, 2013), increased productivity (Carbaugh, 2013), and overall economic growth of poor countries (DuBrin, 2012). Notably, productivity increases at a faster pace when countries produce services and goods in which have a comparative advantage and can find a market for them. This raises people’s standard of living as more people are able to get employment and hence earn income. Negatives Associated with Globalisation One of the negative effects associated with globalisation is that it leads to loss of jobs in the developed countries which outsource labour-intensive operations to low-cost labour countries. For instance, it has been reported that millions of people in the United States have lost their jobs as more and more companies export their jobs to countries where they can obtain cheap labour (Carbaugh, 2013). As well, many people fear losing their jobs particularly given that their companies are operating under great pressure and are forced to reduce wages and other rewards or even to shut down due to competition from companies that heave outsourced their operations to countries such as Malaysia and Pakistan (DuBrin, 2012). The quality of jobs outsourced to the developing countries is also affected since many people have to toil in sweatshops that supply large companies as executives in such firms are compensated highly (DuBrin, 2012). For example, Walmart, a large American retail corporation, has been accused severally of making its workers in China work for low pay and denying them some legally required benefits, subjecting them to poor working conditions, and violating workers’ human rights (Hong, 2011). Such cases increase economic and social disparities between the developing countries and the developed ones. Another issue is that the technology gap between the developed countries and the developing ones is increasing due to globalisation. Notably, it is argued that developed countries that have modern technologies are advancing more rapidly compared to the developing countries (Abramyan, 2005). For instance, it is inarguable that the use of technologies such as the Internet for online payment is increasing rapidly and thus increasing economic integration. However, the reality is that since such technologies are not advanced in most developing countries, many of them have to rely on technologies made in the developed countries such as Visa, PayPal and MasterCard for digital payments. This only ends up benefiting the large and technologically advanced firms since they are the ones with the capacity to handle such transactions. Governments are also increasingly losing control over firms that operate internationally due to globalisation. According to Goldstein (2007), governments in poor nations have particularly seen their power dwindle as the International Monetary Fund (IMF) and WTO insist on less government intervention in countries’ economic life. Lack of control by the government emanates from the conditions set by the IMF, which influence the economic policies formulated by government, as well as from WTO, which calls on governments to espouse deregulation and hand-off policies towards the running of multinational corporations (MNCs) that operate within their national borders. In such cases, MNCs make decisions on what and how to produce and determine where they will sell their products and at what price (Dasgupta, 2005), which means that they eliminate some of the government’s control over them. Conclusion In summary, the positive effects of globalisation include increased access to new market opportunities for firms, access to better technical expertise as well as production inputs, access to low-cost labour and an improvement in the living standard of people in poor countries. The negatives include loss of jobs especially in the in the developed countries, a decline in the quality of jobs outsourced to developing countries, an increase in the technology gap between developed countries and the developing ones, and loss of government control over firms. The implication of these effects is that whereas globalisation increases market access and advancements such as technology, it causes economic and social disparities through loss of jobs and decline in the quality if jobs. More importantly, since government control over business is minimised due to globalisation, governments are not able to fully exercise their political and economic role in international business. References Abramyan, E. (2005). Civilization in the 21st century. Retrieved from https://books.google.co.ke/books?id=t-PwZ4EyOqAC&pg=PA148&dq=advantages+and+disadvantages+of+globalisation&hl=en&sa=X&ei=W5_2VPXCCIOWygO0wILIBQ&ved=0CCEQ6AEwAQ#v=onepage&q=advantages%20and%20disadvantages%20of%20globalisation&f=false Carbaugh, R. J. (2013). International economics (14th ed.). Mason, OH: South-Western. Chandra, V., Eröcal, D., Padoan, P. C. & Braga, C. A. P. (2009).Innovation and growth chasing a moving frontier: Chasing a moving frontier. Paris: OECD. Dasgupta, B. (2005). Globalization: India’s adjustment experience. New Delhi: Sage Publications India Pvt Ltd. Deardroff, A. V., & Stern, R. M. (2002). What you should know about globalisation and the world trade organisation. Review of International Economics, 10(3), 404-423. DuBrin, A. (2012). Essentials of management (9th ed.). Mason, OH: South-Western. Goldstein, N. (2007). Global issues: Globalization and free trade. 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