The Impact of Globalisation on the European Economy - Essay Example

Globalization has been viewed by EU economies as threat rather than opportunity. Some EU s have expressed concern with shifts in employment opportunities, social welfare, and way of life. The issue of globalization has generated intense within the scholarly fraternity. Globalization and Europeanization tend to occur simultaneously. Both globalization and Europeanization have close dynamics with deregulation and negative integration of European market. Europeanization tends to reinforce and counteract globalization. Globalization has affected labour and capital markets, relations between central and local governments, and competition for elective posts. Introduction European countries tend to view globalization as a threat rather than an opportunity. Globalization imposes subtle threat to jobs, social welfare, and way of life of Europeans. Opportunities are available for Europeans who are able to penetrate new markets with less expensive inputs. The debate on globalization continues unabated within popular and scholarly fraternity. This issue is of importance because has co-occurred with regional integration. Many European states, regions, and cities have to cope with globalization challenges. According to Jacoby and Meunier, managed globalization has played major role in key European Union (EU) policies for around one decade. There has been widespread discourse concerning managed globalization by European policy-makers and politicians. Nevertheless, this does not necessarily imply that the key stakeholders are really making efforts to ensure its implementation. There is possibility that globalization with adjectives constitute empty rhetoric. Managed globalization could imply paradigm shifts. Through increase in interdependence between global economies in production, trade and financial markets, globalization has become an important phenomenon to the economies of most of the European countries. Despite the interruption in capital flows and global trade because of the financial crisis that rocked various economies in 2008, most European countries have continued to reap the benefits of globalization. Globalization has not only led to an increase in export competition but has also stimulated world demand and increased economic activities in the European economies. The main sectors of economy that have been significantly shaped by the advent of globalization have been market prices, the labor market and productivity. Discussion Globalization and Europeanization have occurred in tandem. These have underlain shifts in results of interest ranging from changes in institutional and policies, growth opportunities, income distribution, and employment opportunities. Nevertheless, Europeanization tends to prevail over globalization. Globalization has cause precipitous increase in European spending, especially in political economies of Scandinavian countries. Some European states, except Finland, tend to exhibit deglobalization patterns, with greater proximate trading agreements increasingly dominating cross-border swap. Intra-European divergence is underlain by diverse responses towards relatively terms of neo-liberalization (Jacoby & Meunier n.d.). Globalization has affected labour and capital markets, relations between central and local governments, and competition for elective posts. Both globalization and Europeanization are closely related to deregulation and negative integration of European market. Europeanization process tends to have relation with globalization, which tend to expedite or slow down globalization effects. Europeanization process may operate autonomously from globalization. The cumulative effect of Europeanization and globalization aggravates globalization effects. European level politics tend to slow down globalization process, with minus globalization results (Jacoby & Meunier n.d.). There has also been variation in density of trade unions and alternative levels at which bargain of wages are established. European states tend to employ policies that impede globalization trends rather than promoting it. The expediting of market reforms in European markets was independent of Europeanization, with speed of reforms being similar to those of non-European countries. In fact, market reforms were also independent of political voluntarism. The increased importance of European markets made political parties seem less relevant. With rising financial globalization, electoral volatility increased in states other than EU states. EU‘s insulating policies tends to minus effects of globalization and an illustration of voluntarism aspect. With regard to relations between regional and central governments, globalization has made spending by the state, although not affecting European states that are allocated significant amounts of structural funding. Europeanization attempts at taming globalization have been unsuccessful. With persisting partisan politics and emergence of politics that antagonize globalization, the management of globalization may be realized in Europe (Jacoby & Meunier n.d.). Ways in which globalization liberalize non-EU states tend to be similar to how Europeanization liberalize European markets. Regulation of telecommunication and electricity industries are held to symbolize best instances of European thesis. Some research liberalization is not caused by Europeanization. Globalization in the telecom sector generated pressure for regulatory shifts, which the European Commission could employ for creating reforms, even despite EU member states being reluctant (Jacoby & Meunier n.d.). Increase in economic performance The European economy witnessed fundamental changes as the liberalization of markets and loosening of government regulations made it possible for the forces of a natural market to come into play. Pologeorgis & Overbaugh, (2011) indicate that some countries in Europe sequenced market reforms and were able to reap the benefits of globalization through a steady growth of their economies. However, this growth was achieved despite the initial setback whereby some of these countries had hitherto been subjected to economic recessions, hyperinflation widespread unemployment and destabilization of their industries. Nevertheless, these countries were able to maintain their economic stability through the mitigation of destructive effects of competition from the new global entrants. These interventions were instrumental in ensuring that the countries achieved a significant growth in their economies. Countries such as Slovenia were able to achieve huge economic benefits from globalization as the country recorded a 160% increase in per capita income. Increase in trade and competitiveness in Europe due to Globalization Globalization has led to the emergence of global players like China, which have caused a significant increase in the world trade and boosted exports from the European countries. Through the emergence of competition from players like China, most European economies have lost share, which has been attributed to export specialization of almost all the countries in Europe. With regard to imports, globalization has led to a dramatic shift by low-cost countries in Europe towards imports. In the light of this, these countries have begun to import consumer goods and intermediate imports. Anderton & Hiebert (2009) indicate that upon a careful examination of exports in Europe, it is vivid that economies in the region are losing the share in export market, with countries like China gaining a share of the market. However, though there is a decline in the share of export market, the volume of extra export has been growing as a proportion of the GDP owing to the persistent escalation of foreign demand towards the end of 2008. The favorable conditions of global demand may have been partly driven by forces of globalization. Most of the countries in Europe have witnessed improvements in terms of trade due to globalization. Pologeorgis & Overbaugh(2011) indicate that globalization has produced a downward pressure on the import prices of manufactured goods, which has brought significant improvements in terms of trade. Globalization and productivity in European Economy Through globalization, European countries have witnessed technological advancements, which have been instrumental in fostering productivity. This has been achieved through an increase in capital flows and trade, which have led to an increase in technical efficiency in these economic regions. Globalization has led to technology transfer, which has been achieved through the flow of inputs such as labor and capital and through the transfer in multifactor productivity. Due tom technology transfer, production paradigms shifted significantly. Anderton & Hiebert (2009) highlight that globalization led to an increase in scale and composition effects whereby the European economy witnessed a increase in productivity due to increased specialization in the firms and scale of operations. Furthermore, globalization was responsible for triggering defensive innovation in the European firms. Defensive innovation is a phenomenon, which occurs when firms become more innovative in response to competitive pressures emanating from global players. Globalization led to trade openneness, which had a positive impact on productivity in the manufacturing sector of the European economy. Improvements in the labor market Anderton & Hiebert (2009) indicate that globalization had an enormous influence on the European labor market. This influence was felt through two primary channels. The redistributive channel was the first channel to experience these changes with globalization affecting distribution in occupational, sectoral and skill composition in the European economies. Low- skilled workers were adversely affected by these changes as they favored the high-skilled workers in the European economy Anderton & Hiebert (2009) also indicate that jobs were lost due to import competition. Globalization also led to changes in specialization and the implication of this was job losses, which were later offset by gross gains in the sectors such as manufacturing. Conclusions and Recommendations Europe’s efforts to manage globalization must transcend empty rhetoric by politicians and policy-makers. Efforts should focus on setting benchmarks for regulation within European economies and non-EU economies. International organizations need to be empowered for successful globalization management. European stakeholders must establish strategies for enlargement of domain for EU influence. The management can also incorporate efforts to redistribute impacts of globalization. The EU must take into account its vulnerability due to agenda change. The EU should acknowledge loss of trade instances, the result of which counteracts the legitimacy of their efforts. The efforts by EU to draw various states into multinational trade organizations seem to undermine their bargaining power within these organizations (Jacoby & Meunier n.d.). The commitment by EU to multilateral system create significant shortfall to surmount, while the United States aggressively shifted towards greater bilateral trade accords. The EU had for a long time sustained embargo on multilateral deals. Globalization through trade can only succeed if more nations and issues are considered. This may jeopardize management because the management is likely to against EU interests, unless EU seeks methods of imposing embargo on non-EU states. As the tensions accumulate, the EU has to surmount looming financial crisis that threatens entire EU capitalist economies. References List Anderton, R., & Hiebert, P. (2009). The Impact of Globalisation on the Euro Area Macroeconomy. Retrieved July 9, 2012, from http://www.nottingham.ac.uk/gep/documents/papers/2009/09-14.pdf Jacoby, W., & Meunier, S. (n.d.). Europe and the Management of Globalization: Respondiing to Globalization Pressures. Working Paper , pp. 1-26. Jacoby, W., & Meunier, S. (n.d.). European and Globalization. Chapter 15 , pp. 355-374. Pologeorgis, N., & Overbaugh, S. (2011). Socioeconomic and Environmental Effects of globalization on the Transitional Economies of Eastern and Central Europe. International Journal of Business & Economics Perspectives , vol.6, no.2, 55-69. Read More