How Globalization Has Impacted Government, and Decision Making - Dissertation Example

How Globalization Has Impacted Government, and Political Decision Making? Some people visualize globalization as a blessing whereas others witness it as a curse. In any case, it is a fact that globalization brought revolutionary changes in public life all over the world. Earlier countries were more selfish in their approaches and concentrated only on safeguarding their own interests. However, globalization succeeded in changing such selfish beliefs and collective growth is accepted as the slogan as part of globalization. It is difficult to define globalization in few words because of the complex parameters involved in it. Economists, sociologists and politicians have their own interpretations and definitions for globalization. Globalization has too many dimensions such as economical, political, cultural, social etc. Reich (1998) defined globalization as “a process through which events, decisions and activities in one part of the world can come to have a significant consequence for individuals and communities in quite distant parts of the globe”1. In simple words, globalization is the process through which economies, societies, and cultures are exchanging their resources for mutual benefits. It is also a process which integrate global network of political, technological, economical and cultural ideas through communication, transportation and trade. Even though globalization brought many opportunities in the world, it brought many challenges also. The increased economic and cultural interconnectedness between countries brought many new challenges and controversies in the world. Governments forced to make lot of changes in their policies and decision making in order to strengthen the cooperation with other countries. These policy changes often raised many questions and controversies. This paper critically analyses how globalization has impacted government, policy, and political decision making. Globalization: Government, policy, and political decision making China and America were two entirely different countries with respect to culture, politics, beliefs, economy, legal systems etc. America is a secular democratic country whereas China is a communist country. When globalization was initially appeared in the global arena, China watched it suspiciously since they perceived some hidden agenda at the back drop of globalization. China earlier perceived globalization as the continuation of capitalism2. China thought, globalization as an effort by the capitalist countries to loot the resources and wealth of other countries. So, China stayed away from globalization initially. However, after few years from the introduction of globalization, China’s illusions and misinterpretations about globalization started to melt down. At present China is the number one exploiter of globalization and they opened their economy and market wider than any other country in the world for foreign direct investment. Moreover, China is the number one trade partner at present for United States. The ideological differences or the different opinions on global issues never prevented China from establishing close trade relationships with America. In short, globalization succeeded in bringing contrasting cultures and political systems much closer. According to Lauder et al (2006), many people tempted to think globalization as the “process of transportation of jobs, ethnic and cultural composition of nations etc from one country to another”3. The above assumption is true up to certain extent. As stated before, many Chinese people are currently working in America and many Americans are doing business in China at present. It was difficult to think of an American firm establishing business ventures in China, a couple of decades before. Earlier, China disallowed the foreign direct investments in their soil because of their suspicions about the intentions of the foreign firms. However, at present China realised that without foreign direct investment, a heavily populated country like China cannot develop properly. Dharam Ghai (1997), has mentioned that “free market and private enterprise were the principal mechanisms for promoting economic activities in the sphere of economic globalization”4. Free markets and Special Economic Zones (SEZ) were came into exist in order to attract foreign direct investments. Single window clearances for completing legal formalities of international business is established in many of the special economic zones by different countries. Not only China, countries like India, Brazil, Russia etc also doing everything possible to attract foreign direct investments. Outsourcing and offshoring like business terms entered this world because of globalization. Cross cultural or international business is growing day by day because of globalization. India is the number one exploiter of outsourcing industry. Millions of American jobs are outsourced to India at present because of the increased cooperation between India and America. Moreover, India has recently signed an agreement with America for nuclear cooperation. Earlier, India was more aligned or polarized towards the Russian side in defence deals and agreements. However, after the destruction of Soviet Union, and the introduction of globalizations, many changes happened in the global power structure. India has realised that a strategic tie up with America would be more useful for them than that with either China or Russia. The increased tie up with America forced India to make certain changes in their foreign policies. These changes in foreign policies brought many controversies also in India. Earlier, India was a member of nonalignment movement (NAM) and expressed neutral opinions on global matters. Now India forced to support America on many issues because of their strategic tie up with America. For example, India recently avoided a proposal from Iran to extend a gas pipeline from Iran to India through Pakistan and Afghanistan. India’s energy crisis could have been solved up to certain extent because of this trade tie up with Iran. However, America succeeded in preventing India from signing this deal, offering India the nuclear technology for solving their energy crisis. In short, globalization often raises many challenges also for trade tie ups. Globalization is intended for decreasing the gap between; rich and poor, different religious beliefs, different political and social ideologies etc. it is possible for poor countries to mobilise their resources with the help of increased tie up with other countries. Some poor countries may have enough natural resources; but they may not have the infrastructure or technological expertise to exploit it. Globalization can help such poor countries to mobilize their resources more effectively with the cooperation from rich countries. Mexico is the best example to study how well globalization can help a poor country to develop. Mexico was a poor country earlier and the following statistics provides data about the economic growth in Mexico after the introduction of globalization. Mexico has become the eighth exporting country in the world and the first in Latin America. Exports have grown steadily; in 1981 there were a mere 6.5%, in 1990 they were already 27%, in 1996 they were an impressive 66%. Manufactured goods represented 33.8% and in 1993, they already represented 71.9% in 1993. Productivity has increased very significantly since the opening of the Mexican economy, while at the beginning of the eighties it was decreasing at a rate of 0.7% and 0.8%, in 1982 and 1983 respectively, in 1987, 88, 89 it started growing at rates of 2.5, 3.2 and 4.1%, and at the end of the nineties it was reaching rates of 9.0, 2.7, 8.7% in 1994, 1995 and 1997 respectively 5 Holst (2007) has mentioned that economic interpretations of globalization cantered around three forms of capital; financial, productive and commercial (Holst, 2007). In fact globalization has succeeded in achieving more economic balances between regions and countries. Global wealth was once accumulated heavily in less populated American and European regions whereas today it is shifting towards more densely populated regions like Chin and India. BRIC (Brazil, Russia, India, and China) countries are believed to be the rapidly developing countries at present, mainly because of the global changes happened as part of globalization. According to Robinson (2003), one of the distinctive features of globalization is the rise of transnational capital6. Cross cultural businesses started to grow as a result of globalization. Most of the countries and the governments made lot of changes in their policies in order to attract more private capital or foreign direct investments. Big organizations on the other hand were looking for an opportunity to expand their wings. Many of the big organizations in America and Britain like countries were experiencing saturation in their countries before globalization. For example, Starbucks was facing severe problems in America as far as expansion was concerned. In almost every corner of America, Starbucks had coffee shops. Globalization helped Starbucks to explore their expansion possibilities outside United Sates. Vodafone is another company which exploited globalization for their greatest advantages. Vodafone is currently competing with many other telecommunication companies for achieving dominance in heavily populated Indian market. Coke and PepsiCo like American companies also utilized globalization opportunities to expand outside the territories of America. Perrons (2004) has pointed out that because of globalization, people and place are increasingly interlinked through the organization of work, the flow of goods and services and the exchange of ideas7. The import and export procedures are smoother now than before. The exchange of workforce is also smoother at present between countries. Countries which struggle to find enough manpower can now bring manpower from overseas countries without many hurdles. Thus, Indians, Pakistanis, Sri Lankans etc are getting the work permits from countries like America or UK easily. The work culture and organizational principles also underwent drastic changes. Global organizations currently have extremely diverse workforce. For example, it is difficult for PepsiCo to handle their business operations in India or China with the help of Americans alone. They need the support from the locals in order to manage their business successfully in overseas countries. Only the locals may have better knowledge about the local markets and it is necessary for the international companies to exploit the local expertise for their success. Outsourcing is another business term entered the world as a result of globalization. It is the process of getting the work done from another country. As mentioned earlier, Americans and Europeans are facing severe manpower shortages in clerical, administrative and IT sectors. They can get their work done from India or China because of the developments in communication technologies and internet. The labor markets in India or China are cheaper compared to that in America or Europe. A task worth $5000 in America can be completed in India for around $ 3000. Thus outsourcing helps the organizations to save huge money. Controversies around globalization Globalization is not free of controversies. Even though globalization is good in principles, many countries failed to implement it practically. The initial claim of globalization was to help the poor countries in stimulating their economic growth. However, even after decades, some of the poorest countries remain as it is and globalization did nothing to their economic growth. According to Dreher (2003), those countries with the lowest growth rates are those who did not globalize. Countries like Rwanda or Zimbabwe insulated themselves from the world economy. They have poor institutions which repress growth and promote poverty8. Poor countries do not have enough resources or infrastructure facilities to exploit globalization properly. Lack of visionary administration and political stability are another reason for the failures of poor countries in exploiting globalization. In other words, it is difficult for poor countries to exploit globalization properly, if they lack infrastructure facilities. In short, globalization failed to achieve its declared major objectives even though it helped many developing countries to give momentum to their economic growth. In fact the emerging economies like India, China Brazil etc are the major beneficiaries of globalization compared to the developed countries or poor countries. Some people argue that poverty is still prevailing not only in underdeveloped countries but also in some of the developed countries. It is difficult to eradicate poverty over a night with the help of a single policy like globalization alone. Globalization has limitations in giving answers to the entire problems of the world. At the same time we can safely say that the current economic conditions or climates of the countries which embraced globalization was superior to the ones who failed to accept it. The global trade imbalances are causing problems to the regional growths even though globalization and liberalization policies were accepted by most of the countries. Along with the recent global economic recession, trade imbalances also caused severe problems to some regions and countries in particular. Asian countries in general and China, India and Indonesia in particular escaped from recession and trade imbalances while most of the American and European countries struggled to survive. Caroline Freund in her research found that global trade imbalances must be reduced as much as possible in coming years in order to ensure financial stability. She has also found that because of the economic growth and growing import rates in India, China, Brazil and Indonesia like countries, rest of the world were blessed immensely. She has warned the world that these import growths might be temporary as the domestic consumption has not grown in a sustainable way9. The concept of outsourcing, which is the brain child of globalization, has also brought many controversies. President Obama is currently doing everything possible to discourage outsourcing. Outsourcing results in huge capital outflow from outsourcer to outsourcee. For example, huge capital outflow is taking place from America like capitalist countries to India like countries because of outsourcing of works. This is not good for the economic growth of America like capitalist countries. Obama has already warned the business groups in America to stay away from outscoring their jobs. He has also warned that the outsourcing companies will not get tax benefits in future. However, American organizations cannot stay away from exploiting the cheaper labour markets in overseas countries. They are saving more than 18 billion dollars per year because of outsourcing. It is difficult for them to avoid such huge benefits in order to protect the nation’s interest. Obama needs to make some policies which may not cause problems either to the interest of the country or to the interests of the business people. Conclusions Globalization has brought many revolutionary changes in the world. Economical, cultural and political circles underwent tremendous changes as part of globalization. Globalization forced many governments to change their policies and principles to exploit the opportunities. Foreign direct investments were earlier treated suspiciously by countries; however, globalization succeeded in removing the concerns about foreign direct investments and currently countries are competing each other for attracting more FDI. Globalization helped countries to increase their mutual economic, cultural and political cooperation. It promoted the slogan of global culture. It helped to solve the imbalances in global wealth distribution. Global wealth started to shift from moderately populated areas to heavily populated areas because of globalization. It also helped some of the heavily populated countries to exploit their manpower resources for their economic progress. Free trade or free market, special economic zones (SEZ), export processing zones (EPZ), outsourcing, offshoring etc are some of the new terms brought to the world by globalization. Even amidst many of the brighter sides, globalization brought many controversies also. Poor countries failed to utilize globalization properly even though the declared aim of globalization was to stimulate the economic growth in poor countries. Outsourcing and offshoring like new business policies caused the capital outflow from one country to another. The global trade imbalances are causing problems to the regional growths. Even amidst these minor drawbacks, globalization is generally perceived as a blessing rather than a curse. Bibliography 1. Bizberg, Ilan. Globalization and Democracy in Mexico. http://docs.google.com/viewer?a=v&q=cache:s6ZTjAwvMK0J:www.colmex.mx/centros/cei/Paginas%2520profesores/Articulos/Bizberg/Globalization%2520and%2520Democracy%2520in%2520Mexic1.doc+Globalization+and+Democracy+in+Mexico&hl=en&gl=in&pid=bl&srcid=ADGEEShzJ-r3z7VDSMq9M2hQp4Juz2nac5UGIwNutFus4zXuyWBXUqhLAgZ-EeAWgQ6p5tLZ9jl7HLRwRsrHc6jKH2of_ZIdVh7voLsYACXUSNjEOmMvUjCn8iZK6p-Sa1LLWjxbJmtl&sig=AHIEtbQF9vnLEyPg-e8DPBPB60-C0Hp2mQ [Accessed on 22 March 2011] 2. Dreher, Axel. 2003. Does Globalization Affect Growth?. http://129.3.20.41/eps/dev/papers/0210/0210004.pdf [Accessed on 22 March 2011] 3. Freund, Caroline. 2010. “Adjustment in Global Imbalances and the Future of Trade Growth”. Centre for Economic Policy Research 2010. ISBN: 978-1-907142-11-6 A VoxEU.org Publication 4. Ghai, Dharam. 1997. ECONOMIC GLOBALIZATION, INSTITUTIONAL CHANGE AND HUMAN SECURITY. http://www.unrisd.org/80256B3C005BCCF9/(httpAuxPages)/C458AA6EE636796C80256B67005B6ED7/$file/dp91.pdf [Accessed on 22 March 2011] 5. Hersh, Jacques & Schmidt,Johannes Dragsbaek. 2000. “Globalization and Social Change”. Publisher: Routledg. 2000 6. Lauder Hugh, Brown Phillip, Dillabough Jo Anne. & Halsey A. H. 2006. Education, Globalization and Social Change. Publisher: Oxford University Press, USA (September 7, 2006) 7. Perrons, Diane. 2004. Globalization and Social Change: People and Places in a Divided World. Publisher: Routledge; 1 edition (May 20, 2004) 8. Reich Simon. 1998. What is Globalization?. http://nd.edu/~kellogg/publications/workingpapers/WPS/261.pdf [Accessed on 21 March 2011] 9. Robinson, William. I. 2003. Transnational Conflicts. Publisher: Verso, Meard Street. London Read More