Benefits and Drawbacks of International Business in the Globalisation Context - Essay Example

International Business: Globalisation Name: Course: Tutor: Date: Introduction Globalisation defines the process through which regional economies, cultures and societies have become incorporated through an international network of political ideologies through trade, transport, and communication. The term “globalisation” is closely linked with the term “economic globalisation.” Economic globalisation refers to the incorporation of national economies into the global economy through foreign direct investment, trade, the spread of technology, capital flows, military presence, and migration. However, globalisation is normally recognised as being influenced by an integration of socio-cultural, technological, biological and political factors. The term can also be applied in reference to the trans-global exchange of ideas, languages and a popular culture through acculturation (Bayar, 2006, p. 3). Globalisation is a crucially vital element of human development both in the recent past and going back to the era of antiquity. With the rise of specialised merchants, far-flung communities were brought together, and so were urban centres and civilisations. Additionally, the integration of traders from other nations not only facilitated the exchange of goods but it also enabled the exchange of ideas. Subsequently, these ideas served as the basis of significant different forms of social alteration - everything from the peaceful quest of mutual benefit, to violence, that is, war (Craig, 2010, p 1). The aim of this paper is to analyse globalisation in an international business perspective. The paper will highlight the key differences and similarities between the first age of globalisation and the contemporary one through a comparison of the two. Differences and similarities between the first age of globalisation and the contemporary era of globalisation: benefits and drawbacks There are quite a number of tangible benefits attributed to the current globalisation era in that the relationship between states and markets has been amplified through globalisation. This implies that the relationship between nations trading with each other is cordial. Through globalisation, the most globalised countries have had the benefit of bearing the greatest equality, comprehensive political systems, reduced corruption levels, sound environmental protection measures, and gender equality in the sense that women have advanced socially, academically, and economically. Incidentally, continuous globalisation is taking firms within globalised nations into markets that were previously isolated (Chan, 2002, p. 57). Consequently, this amplifies competition on a global level hence the production of quality products and services. Some critics argue that the global economy at the end of the 19th century was just as globalised as it is today. There are some indicators that support this argument. For instance, the world trade to GDP ratio was very high, and so was the amount of foreign investment. The heights reached at the end of the 19th with respect to economic globalisation were almost as high or even higher compared to the levels hit in the 1990s in the same respect (Fischer, 2003, p. 4). However, it is worth noting that the levels of indicators were higher in the 1990s compared to those observed at the end of the 19th century because global trade was still picking after the World War II. Economic globalisation prospered in the period prior to 1914 but suffered a setback due to the Great Depression and the two world wars. The global fiscal order was established when World War II came to an end. The establishment sought to do up the volume of world trade. The effects of this re-establishment as of 1973 were synonymous with the world trade GDP percentage of 1913 when the first age of globalisation initially thrived - and it has continued to thrive every year since (Fischer, 2003, p. 4). Capital flows to developing countries gradually grew. Towards the end of the 1970s and early 1980s, they mainly consisted of bank loans. They also took the form of direct foreign investment and purchase of marketable securities in the 1990s. And with the increase in volume of global capital flows of the more developed countries as well as the developing ones, the impossible trinity once again resurfaced. Subsequently, each country was compelled to forego its pegged exchange rate and enable the currency to float. By this time, the gross volume of global capital flows compared to the global GDP surpassed the levels reached in the period prior to 1913 by far. However, the foreign direct investment net flows of the current era of globalisation have not yet attained the extraordinary levels they were in the decade prior to the First World War (Fischer, 2003, p. 4). Apparently, there are economic parallels between the current age of globalisation and globalisation in the first age. Today, just like the period prior to 1914, protectionism from time to time poses a threat to free trade orthodoxy. By the pre-1914 United Kingdom standards, the big economies are already implementing protectionism measures with regards to agriculture. The European Union, the United States, and Japan all apply tariffs and subsidies to cushion their farmers against foreign competition (Ferguson, 2005, p. 69). In the current globalisation era, no one can be certain on the stability of the global monetary system, but one thing is certain: it is not certain as the global monetary system before the World War I began. Although gold is not the basis of the fiscal system any more, pegged exchange rates are in existence today, just like in 1914. There is a monetary union in Europe, and so is the dollar standard in Asia. However, both systems are based on flat currencies. Incidentally, the main central banks in Frankfurt and New York determine the amount of currency to be produced, and this they do on the basis of a mixture of discretions and rules. This is in contrast to the pre-1914 period (Ferguson, 2005, p. 69). It therefore implies that the current era globalisation has to a larger degree brought about instability in the international monetary system. Conclusion With the advent of globalisation, a lot of things have changed in the global arena particularly with regards to the global monetary system. Since its inception, globalisation has influenced the way of doing things on a global front, more so in the area of trade. This was evident in the first age as well as in the current era of globalisation in the sense that in both periods, globalisation touches on cultural, political, and religious aspects of the society. These elements play a dominant role in determining trade activities as they significantly influence the society in many respects, hence the inherent influence with respect to globalisation. Reference List Bayar, F, 2006, “The alliance of civilizations initiative in globalization era: concept, prospects and proposals,” Available from http://www.sam.gov.tr/perceptions/volume%20xi/Au_Win06_firat_bayar.pdf (16 March 2011). Chan, S, 2002, Coping with globalization: cross-national patterns in domestic governance and policy performance, Oregon: Routledge Publishers. Craig, D, 2010, Business in the era of globalization, School of International Service, Massachusetts Ave NW. Ferguson, N, 2005, Sinking Globalization, University of Oxford. Fischer, S, 2003, “Globalization and its challenges,” Available from http://www.iie.com/fischer/pdf/fischer011903.pdf (15 March 2011). Read More