The Concept of Globalization. Main Effects of the Process of Globalization in the Contemporary World - Essay Example

[Supervisor’s Globalization and Its Effects Introduction Globalization, in its simplest terms, refers to the integration of economies around the globe via the removal of restrictions on trade and finance. In essence, globalization means that money--as well as labor, materials, technology and production--can flow between countries with relative ease. Globalization is so pervasive that even when it is not directly mentioned in the news, it is a major force shaping the world. The problem of combating terrorism around the world, for example, may be discussed without specific references to globalization. But, analysts say, globalization underlies many of todays hottest domestic and international topics of debate such as terrorism, poverty, development and international relations. Globalization is a phenomenon that affects all countries, from the richest to the poorest. This presents some problems, analysts say, because the interests of disparate nations are often quite different. But since the larger, more influential countries are better able to advance their own interests, they usually win policy debates about globalization. Some people are totally opposed to globalization, claiming that, among other ill effects, it hinders the efforts of poor nations to climb out of poverty. They believe that the process of opening borders to trade and the free flow of money and ideas should be abandoned. One of the central tenets of globalization is the concept of free trade. (Randy 65-70) Unsurprisingly, experts say, free trade is also at the center of the debate about the future of globalization. Although free trade means that policies that protect a countrys industries--such as high trade tariffs on imported foreign goods--are abandoned, in theory at least, the truth is that, for rich countries, that is often not the case. As evidence, analysts cite the signing in early 2002 of a steel tariff bill by President Bush (R) and a farm subsidy bill that Bush signed in May 2002. Proponents of the status quo say that globalization is a positive force that is making the world a better place. In fact, they say, economic and social indicators--such as poverty rates, infant mortality and education--show that the worlds people are better off than they were before globalization, even if they are still very poor. The solution to economies that are not sufficiently open to trade is more globalization, in the form of free trade, not less, they say. Globalization, supporters say, not only lifts people out of poverty, but is also the best method of bringing democracy and freedom to many parts of the world that currently lack them. Critics, however, contend that, as practiced, globalization has been more of a way for the rich countries of the world to maintain their position of dominance than a way for the poor to rise out of poverty. History of Globalization Although the common perception is that globalization is a new phenomenon, some economists and historians say that it has been taking place for centuries. Similarly, while many critics of globalization claim that it is simply a way for Western countries, specifically the U.S., to spread their cultural and economic principles, the process is not the exclusive domain of Western cultures. For the U.S., as well as the rest of the world, the era of free trade as the dominant economic philosophy began just after World War II (1939-45), with the signing of the General Agreement on Tariffs and Trade (GATT) in 1947. (Randy 65-70) GATT operated as an international trade forum that sought to reduce or eliminate tariffs. In 1993, the U.S. signed the North American Free Trade Agreement (NAFTA), which eliminated trade barriers between the U.S., Mexico and Canada. And in 1998, the leaders of the Western Hemisphere nations began formal negotiations for a Free Trade Area of the Americas (FTAA), a free trade zone that would encompass the entire region. Globalization as a positive change As globalization has swept around the world over the last few decades, the plight of the worlds poor has improved, supporters say. They concede that there are still millions of people living in poverty around the world. But that number would undoubtedly be higher and the level of poverty deeper if not for the advances, such as open economies and technology transfers, brought about by globalization, they argue. In fact, supporters say, those countries that have opened their economies the widest, which means dropping tariffs and blockades to trade, have had the best-performing economies, while those countries that continue to cling to protectionist policies have been largely left behind. (Went 55-61) It is clear, they say, that the answer to poverty around the world is more economic openness, greater access and more participation in the global economy by those poor countries, not less. Supporters point to a 1995 study by two Harvard University economists, Jeffrey Sachs and Andrew Warner, that showed that open economies grew much faster than closed ones. Of the 117 countries that the pair studied, the countries that maintained the most open economies during the 1970s and 1980s saw their economies grow at an average annual rate of 4.5%. Those countries with closed economies grew at an average annual rate of just 0.7%. (Torres 190-196) A 1998 Organization for Economic Cooperation and Development (OECD) study showed similar results. Supporters say those studies show that opening economies is the best way to achieve growth. And since growth is the accepted precursor for development and improved living standards for people in developing countries, they say, increasingly free trade will lead to better living conditions around the world. For further evidence, supporters point to the experience of many South American countries in the 1970s and 1980s. During that period, several South American countries tried to implement what became known as import substitution industrialization (ISI). At its core, ISI entails creating goods for the domestic market rather than for export to other countries. The goal of ISI was to create a solid manufacturing infrastructure in countries that had previously lacked one, and thereby make those countries self-sufficient, or at least less dependant on foreign goods. "In contrast to the failed policies in South America, certain countries have managed to dramatically improve their living standard by deregulating their domestic economies and opening up to global markets," (Aristide, 78-83) The advantages that globalization offers to developing countries, supporters say, are numerous and substantial. Reducing poverty in the developing world is a real possibility with globalization and free trade, supporters say. And in practice, the countries in which the greatest poverty reduction has taken place have been countries that are following the trend toward openness, they say. "My research on income mobilitysuggests that globalization has brought substantial benefits and opportunities for upward mobility for large numbers of low-income individuals in the emerging economies," (Friedman 150-158) In addition to alleviating poverty, by raising the standard of living, globalization aids in the spread of democracy, supporters say. It is not an overnight process, supporters acknowledge, but it is a real effect of free trade. Analysts point to Taiwan and South Korea as examples of the democratizing effects of global trade. There are exceptions to that trend, specifically India (which is democratic but maintains a closed economy) and Singapore (whose economy is open despite autocratic rule), but they are isolated exceptions, supporters say, and do not refute the idea that open economies lead to democracy. On another front, acquiring the level of technology necessary to compete in a global market is greatly facilitated by globalization, proponents say. When a company sets up a manufacturing facility in a country that has very little technology, a process called technology transfer takes place, in which local workers are indoctrinated in the use of technology and can then offer their expertise to other employers. As countries open their economies more fully and become a functional part of the global economy, they retain their national sovereignty, but have trade partners to answer to. The result is that globalization "encourages governments to follow more sensible economic polices," (John 103-106). For instance, if a country takes action that causes its currency to become devalued, companies might no longer wish to operate within that country and could pull their money out. The present form of globalization has offered other advantages to developing countries, supporters say. With the exception of decreased life expectancy rates in countries most ravaged by the AIDS virus (generally in Africa), the life expectancy in developing countries rose to 65 years in 1997, from 55 in 1970. That substantial increase is attributable, at least in part, to improved medical care made possible by globalization, (Randy 65-70). Supporters acknowledge that globalization as it exists in the world today has created some pain along with its positive effects. Globalization Has Failed the Poor, Critics Charge To date, globalization has failed to deliver the promised benefits to the worlds poor, critics charge. There have been marginal improvements in certain areas, such as health care and infant mortality rates in some parts of the developing world, they concede, but, overall, the vast majority of wealth and opportunity still goes to a disproportionately small percentage of the worlds population. The result, critics say, is that there are still hundreds of millions of people living in utter poverty across the globe at a time when the rich have never been richer. "All globalization, it seems, is local, the rules drawn up by, and written to benefit, powerful nations and powerful interests within those nations (Randy 65-70). "No sensible person is against globalization," (Charles 36-42). Those choices, critics say, have led to globalization being implemented unfairly and its benefits being distributed unevenly. In other words, those critics argue, globalization can be a good thing--because it can produce wealth that is desperately needed by poor countries. Although critics acknowledge the potential benefits of globalization, they say that blind allegiance to the type of globalization that has transformed the world is misguided. They point out that experts from all political persuasions disagree about the efficacy of globalization at eradicating poverty. For instance, according to Rosenberg, the number of people living on $1 per day has dipped slightly over the past 15 years, but the number living on less than $2 per day is slightly up. Critics are quick to point out the difference between themselves and those who have protested against globalization at meetings of the World Bank. The protesters, critics say, often fall into the trap of romanticizing the plight of worlds poor by saying that trade itself is the enemy. This is a misguided position, critics say. "No nation has ever developed over the long term without trade." (Stiglitz 112-115) However, while agreeing that globalization and free trade should not be abandoned, critics do charge that globalization, as it is practiced, is not benefiting the poor because the conditions under which nations have to develop today are vastly different than the conditions under which the U.S. and Western Europe developed centuries ago. While the U.S. and Western Europe were free to place steep tariffs on imported goods--thereby protecting their domestic manufacturing sectors--developing nations today cannot follow the same course because international trade laws forbid those types of protectionist policies. Supporters of globalization often point to the success of the Asian Tigers as an example of how an embrace of free trade leads to an increase in wealth. "Unfortunately, the rules of global trade now prohibit countries from using the strategies successfully employed to develop export industries in East Asia," (Went 55-61). Today, countries are forced to drop all protectionist policies as a condition of receiving much-needed money from the IMF and World Bank. So the fact that jumping headlong into global trade worked for several countries 30 years ago, when the rules were different, does not mean that countries today can expect the same results from globalization, critics contend. Furthermore, while developing countries cannot implement protectionist measures such as tariffs, developed nations can still employ them at will. The difference, critics say, is that a country like the U.S. does not need any money from the IMF or World Bank, and can therefore flout global trade regulations at will. Critics also downplay the impact that globalization has on the spread of democracy. The terms that those organizations impose on loans often include diverting money from public education projects toward infrastructure improvements or other areas that are often more useful to the corporations doing business in a country than to the citizens of that country. Globalization in the Future Any effort to halt globalization would be futile, analysts say, because the mechanisms of globalization are so firmly in place. But there is still a healthy debate over just how globalization should be implemented, and whether todays version of it is the one that should be followed in the future. Works Cited Aristide, Jean-Bertrand and Flynn, Laura. Eyes of the Heart: Seeking a path for the Poor in the Age of Globalization. Monroe, Maine: Common Courage Press, 2000, 78-83 Friedman, Thomas. The Lexus and the Olive Tree. New York City: Alfred K. Knopf, 2000, 150-158 Kevin Watkins. "Making Globalization Work for the Poor," Finance and Development, March 2002, 27-34 John Cavanagh et al. Alternatives to Economic Globalization. San Francisco: Berrett-Koehler, 2002, 103-106 Randy Albelda and Ann Withorn, eds. Lost Ground: Welfare Reform, Poverty, and Beyond. Cambridge, MA: South End Press, 2002, 65-70 Charles W. Kegley Jr., ed. The New Global Terrorism: Characteristics, Causes, Controls. Upper Saddle River, NJ: Prentice-Hall, 2002, 36-42 Stiglitz, Joseph E., “Globalization and its Discontents” W.W. Norton and Co., New York, June 2002, 112-115 Went, Robert Globalization: Neoliberal Challenge, Radical Pluto Press 2000, 55-61 Torres, Raymond Towards a Socially Sustainable World Economy : An Analysis of the Social Pillars of Globalization International Labour Office Bureau International du Travail 1999, 190-196 Read More