Globalisation and its Effects on Markets and Production - Coursework Example

Globalisation and the Globalisation Debate Student’s Name: Course: Tutor’s Name: Date: Introduction Globalisation is a topic that is widely discussed among scholars, business analysts and the non-professionals alike. Although the exact meaning is contentious, it is widely agreeable that globalisation has brought down the geographical, regional and cultural barriers that existed before thus making the world more integrated. On an economic perspective, globalisation has been defined as a trend that has led to the integration of economic systems throughout the world (Hill, Cronk & Wickramasekera 2011); ‘the increasing interdependence of markets and production in different countries through trade in goods and services, cross-border flows of capital and exchanges of technology’ (Nunnenkamp, Gundlach & Agarwal 1994, p. 1); or the ‘international integration of markets in goods, services, and capital’ (Garrett 2000, p. 942). Specifically, it has been argued that globalisation has occurred on two facets, namely markets and production (Hill et al. 2011). Other authors (Dollar 2001; Intriligator 2003) have however defined the concept more widely by including other facets such as culture, homogenisation and labour mobility. In this essay however, the concept by Hill et al (2011) will be adopted as the working definition. This essay starts with a general introduction of globalisation and its effects on markets and production, but narrows down to the globalisation debate. The essay notes that from whichever angle one looks at the globalisation debate, it appears that there are no clear conviction of whether globalisation is a good or a bad thing. Seeing that globalisation has already rolled out and considering it would be hard to restrict its progress, the essay recommends that global governments together with supranational organisations, the corporate players, and the non-governmental organisations, should collectively develop norms and rules that will minimise the negative effects of globalisation. Globalisation: The effects on markets and production Globalisation effects are everywhere: the food, the cars, the clothes, and the general lifestyle people adopt (Hill et al. 2011). Today, a person in Africa will drive an American-made car; a person in Asia will drink African coffee; while people all over the world will dress in clothes made in Asian factories among other things. Even work has transcended the geographical boundaries because one may be working for a multinational company, or working for an export company. As Hill et al (2011) note, globalisation of markets occurs when historically separate or distinct national markets merge into one marketplace. Among the factors that have contributed to the merging of markets is the scrapping off of trade barriers, which in turn create opportunities for businesses to expand their markets beyond the national boundaries, and by so doing promote globalisation. Such integration and openness in the market hence leads to what Peng (2009, p. 14) terms as global business, which fundamentally means that a business can treat ‘the entire global economy’ as a potential market. As globalisation becomes commonplace, some of the needs, tastes, and preferences of the consumer markets across the world are converging towards similar things (Hill et al. 2011). Examples of how tastes and preferences converge on a global scale include: the global demand for Coca-Cola, the international market penetration of multinational corporations such as Starbucks and McDonald’s and leisure items such as Sony’s PlayStation. The convergence of tastes and preferences does not however mean that consumers are becoming homogenous everywhere; rather, it means that some brands are able to penetrate the different consumer market segments in the global economy. Unlike globalisation of markets, globalisation of production does not seek to attain expanded global markets; rather, it sources products and services from global locations, and by so doing, it is able to take advantage of the labour, capital, and land differentials to save on production costs while enhancing the quality of manufactured products (Hill et al. 2011). Companies that have adopted the globalised production strategy do so in the hope that the lower costs of production, and/or the enhanced quality of goods will make them more competitive in the domestic and global markets. As Hill et al. (2011) further note, the main goal of globalising production is to lower costs and/or improve the qualities and functionalities of the products for purposes of gaining a competitive advantage. Combined, the globalisation of markets and products can perhaps fit it Friedman’s (1999, p. 8) description of a world that is ‘being tied together into a single globalised marketplace and village’, and which according to him, is steered by ‘the global spread of free-market capitalism to virtually any country in the world’. One of the widely cited reasons why globalisation has occurred at a fast pace is technological change. According to Hill et al. (2011) for example, while the removal of trade barriers made globalisation theoretically possible, it was technological advancement that made it a reality. The advances in communication, transportation, and information processing as evident in the use of World Wide Web, web-based transactions, commercial jets, super freighters, and containerised cargo are just some of the examples of how technological advancement has aided globalisation (Hill et al. 2011). Source: Morrison (2008, p. 40). Despite the wide acceptance that globalisation has increased and deepened the interaction that businesses and individuals in the world have, a thoroughly globalised world is still a contentious debate as noted by Morrison (2008). On one hand are people who argue that globalisation is an exaggerated concept, and that markets still function (at least mostly) along the regional and national boundaries. On the other hand are theorists who predict that globalisation will eventually lead to the demise of the nation-state, as states become more interdependent and integrated (Morrison 2008, p. 39). These contentions have brought forth the globalisation debate discussed hereunder. The globalisation debate As Hill et al. (2011) note, it is a fact that the world is shifting towards greater integration and interdependence; however, it is not agreeable whether such a shift is a good thing. In other words, the globalisation debate is about the goodness or badness of globalisation. Notably, a substantial number of experts hold the opinion that globalisation is advantageous in that it promotes prosperity in the world economy, creates jobs, and enhances competitiveness in the price of goods and services (Hill et al. 2011). However, contrary opinions from other experts indicate that the effects of globalisation to the world are negative. For example, they believe that globalisation is to blame for the decline of jobs in developing countries, since such jobs are taken abroad to low-wage countries (Hill et al. 2011). In a counter argument however, pro-globalisation analysts argue that the total value of benefits acquired through free trade outweighs the costs associated with job losses. Globalisation critics have also argued that free trade has encouraged (and will continue to encourage) firms from developed nations to move their manufacturing activities to less developed countries where there are lax labour and environmental regulations. Their argument therefore is that globalisation is making developing countries worse off both economically and environmentally by exposing labourers to poor working conditions and pay, while contributing to more environmental pollution (Hill et al. 2011). The pro-globalisation analysts however argue that the investments made by firms from developed countries in developing countries encourage the latter to raise their income levels and environment standards (Hill et al. 2011). Another area that is the focus of the globalisation debate is the perceived shift of economic power from national governments to supranational organisations (Hill et al. 2011). The globalisation critics argue that supranational organisations such as the World Trade Organisation (WTO), the International Monetary Fund (IMF), the World Bank (WB) and the United Nations (UN); and regional bodies such as the European Union (EU) are slowly assuming powers that may eventually render national governments powerless (Hill et al. 2011). In a counterargument however, the pro-globalisation analysts argue that the supranational organisations operate within powers granted to them by the member states. Additionally, they observe that such organisations promote the collective interests of the member states, and would therefore not be expected to support policies that render the member states irrelevant (Hill et al. 2011). The final point of debate as indicated by Hill et al. (2011) is related to the widening economic inequalities between the world’s rich and poor people. Globalisation critics argue that the phenomenon has contributed to the widening inequalities, especially because the benefits accrued from globalisation are not equally shared. While accepting that the inequalities are widening, pro-globalisation analysts argue that globalisation is not to blame for such inequalities. Specifically, the pro-globalisation analysts argue that the policies that individual countries uphold should be blamed for the rising inequalities. Morrison (2008, p. 8) has supported the latter argument by arguing that individual ‘governments are in a position to redress inequalities through policies and spending priorities’. Similar views are also expressed by Rodrick (1997, p. 25), who argues that national policy makers ought to create targeted safety nets that would compensate, train, and provide social insurance for groups that are exposed to risks in the face of globalisation. By so doing, such governments would be availing equal opportunities to all citizens, hence empowering them to take advantage of opportunities that come up as a result of globalisation. Analysis From whichever angle one looks at the globalisation debate, it appears as if there are no clear convictions of whether globalisation is a good or a bad thing. One thing is clear however, that globalisation is an economic, social, and even cultural force which will probably break any barriers erected to suppress it. As Baumol (1967, p. 415 cited by Nunnenkamp et al. 1994, p. 1) notes, ‘there are some economic forces so powerful that they constantly break through all barriers erected for their suppression’. Seeing that there are negative effects that globalisation will cause, it remains the responsibility of collective global national governments to work with agencies such as the UN, the non-governmental organisations, and corporate players who benefit most from globalisation, for purposes of setting norms and rules that will address the wider societal issues. According to Morrison (2008), some of the issues that need urgent addressing include poverty (rising economic inequalities) and the negative effects of climate change. Conclusion Overall, it appears as if globalisation is untameable; as such, the best that the global community can do is to seek solutions to the identified negative consequences. Specifically, the national governments, the supranational organisations (EU, UN, WB, IMF and others), non-government organisations, and corporate players need to set the rules and norms of operation in order to ensure that the negative consequences of globalisation are minimised. In this essay’s opinion, the globalisation critics are doing a commendable job at sensitising people about the negative effects of the phenomenon; however, it is highly unlikely that they would influence governments and all other interested parties involved into reversing some of the factors that have contributed to globalisation. References Dollar, D 2001, ‘Is globalization good for your health?’, Bulletin of the World Health Organization, vol. 79, no. 9, pp. 827-833, viewed 26 September 2012, Garrett, G 2000, ‘The causes of globalisation’, Comparative political studies, vol. 33, no. 6/7, pp. 941-991, viewed 26 September, 2012, Hill, CWL, Cronk, T & Wickramasekera, R 2011, Global Business Today: An Asia-Pacific perspective, 2e, McGraw Hill/Irwin, Sydney. Intriligator, M D 2003, ‘Globalisation of the world economy: potential benefits and costs and a net assessment’, Milken Institute Policy Brief, no. 33, pp. 1-21, viewed 26 September 2012, . Morrison, J 2008, International Business: Challenges in a changing world, Palgrave Macmillan, Basingstoke, Hampshire. Nunnenkamp, P, Gundlach, E & Prasad, J 1994, Globalisation of production and markets, Tubingen, Mohr, Germany. Peng, M W 2009, Global business, South-Western Cengage Learning, Mason, OH. Rodrick, D 1997, ‘Sense and nonsense in the globalization debate’, Foreign Policy, vol. 18, no. 107 (summer), pp. 19-37, Viewed 26 September 2012, Read More