The effects of Globalisation - Essay Example

The should generate an Essay or Question that is specific from the general topic area of the effects of Globalisation on Economies, Regions or Businesses, for instance on the European Union, or East Asia or Southern Africa Contents Review of Resources 3 Introduction 4 Discussion 5 Trade 9 Investment 9 Portfolio Flows 10 Labour mobility 10 Inflation 11 Interest Rates 11 Employment level 11 Income level 12 Wages 12 GDP growth 13 Technological diffusion 13 Conclusion 14 References 15 Review of Resources Globalization is a topic that has attracted endless debate from the academicians and scholars. Many literary works done in international politics and economics have aimed at addressing the question as to how globalization has affected different regions, economies and business across the globe. Therefore, I would refer to different literary works like academic books, journals and articles that have been published by different authors on the topic of globalization, the impacts of globalization on different developed and developing countries and the challenges and drawbacks of globalization. I have studied the background and history of the European Union in the cultural, political, economic, social and technological perspectives to understand the connection between globalization and its integration, effects and challenges in the European Union. I would consult the academic resources related to the description of globalization and its benefits and drawbacks to use them in the introduction of the essay.  I will use the literature related to the effects of globalization particularly in the European countries in the body of the essay. I would consult the literary works prepared by different scholars and academicians relevant to globalization and its implementation and challenges. The main sources of the study will be secondary sources taken from libraries and the internet. I have referred to different literary works relevant to the chosen topic, I have studied about globalization, the history of globalization, the effects of globalization in different nations, the role of globalization in shaping up international rules and regulations and the positive and negative aspects of globalization. I have studied how the effectiveness of globalization in a particular nation and in the global economy can be assessed. By studying various topics related to globalization and its impacts in books and the internet, I have been able to assimilate and grasp a number of new concepts and issues related to the phenomenon. I have studied the key factors like gross domestic product (GDP), trade levels, employment levels, inflation, interest rates, portfolio flows, labour mobility and technological diffusion for understanding the effects of globalization and its measures in the European Union. Many studies have been prepared with respect to the globalization process in general and pertinent to developing countries. The effects of globalization in many developing and developed nations have been widely considered as research topics in the international political economy and economics. But, the globalization scholars have not given much importance to the mapping of globalization with the European Union. Most papers published by the European and globalization scholars have not focused on the intricacies of globalization in the European countries. Therefore, I would like to prepare this essay with the aim of dealing with the important pros and cons of globalization as a complex phenomenon in the advanced and developed environment of the European Union countries. I have considered different aspects like the internationalization of the European policies, the integration of the European Union with the international institutions and the effects of globalization on the European Union as well as the role of the European Union in shaping up and managing globalization to understand the effects of globalization on the European Union. Introduction Globalization may be formally defined as the flow of information, goods, services, people, and capital across countries all over the globe. Globalization has affected the European Union in both positive and negative aspects. Globalisation can be regarded as a complex phenomenon which has changed the policies, business environment, social aspects and economies of developed as well as developing countries to a high extent. Globalization encompasses a wide variety of economic, social, technological and political elements. The positive and negative effects of globalization vary for different countries and can be measured in specific terms for specific countries. The increase in the trade value and GDP are some direct expressions used for measuring the effects of globalization on an economy. The European countries have seen a growth of more than 15% in the share of trade value in gross domestic product over the last 15 years. Also, the 10 new states have the share of trade value to be 100% driven by the increasing level of exports in the intra-European Union business processes. Although, there have been many benefits associated with globalization in the European Union and several opportunists have opened up with globalization, many European countries perceive globalization more as a threat. This is because they consider globalization to be a factor that reduces the employment of the Europeans and increases the level of competition in the business world of the EU. This creates a need for the policy makers in the union to devise policies on the basis of whether the union wants to capitalize on, harness, humanize or manage globalization in the European countries. Discussion The European Union is a prime arena for globalization and is known to have been benefitted significantly due to the advent of globalization in the countries of the European Union. A wide array of forces including increased trade opportunities, reduced barriers for investment, higher technological diffusion and policy reforms have accelerated the volume and frequency of the flow of goods, services, ideas, information, people and capital within the European Union as well as between the European Union and the other countries of the world. These forces and changes have fostered many benefits in the European countries including strong inflows and outflows in investment, increased inflow of labours, high growth in imports and exports, diffusion of advanced technology, accelerated GDP growth, higher incomes levels, increase in remunerations, decreasing interest rates and inflation etc. It is indicated that the European Union is experiencing a high growth in the economic as well as social perspective due to the adoption of the globalization perspectives in the region. Globalization includes faster economic interdependence and integration wherein agents with varying cost structures and production abilities can compete in the local market. This increases the mobility of final goods as well as production thereby imposing social and economic adjustments in the particular country. To understand the effects of globalization on the European Union, it is necessary to identify the key elements that can be used to evaluate and explain the major changes and their impacts on the union driven by globalisation. In the case of the European Union, it is much difficult to isolate the causes and impacts of globalization on the economy from the effects of the increased regional integration commonly termed as Europeanization. The EU has acted as a Trojan horse in popularizing globalization in Europe and has been the major defence for Europe against the negative impacts of globalization (Van Brabant, 1999, p.20). The divergences in the intra-European economic environment are indicated to have been caused more by neo liberalization than by globalization (Bordo, Eichengreen and Douglas, 1999, p.114-115). In the global financial perspective, Europe has been playing a crucial role for facilitating financial globalization through the policies and rules implemented by the European Union and by the Organization for Economic Cooperation and Development (OECD) (Bach and Newman, 2007, p.90). The EU has been considerably affected by the globalization forces but on the other hand, the union has been able to impact and control the globalization processes through the various policies and rules created by the efficient internal authoritative institutions (Berger and Moutos, 2004, p.90). The European Union has been able to control the contours of globalization because it is the largest market in the world and has many shared competencies, supranational institutions, and the capability to achieve the integration of diverse interests in the economy (Campbell, 2004, p.214). Therefore, the European region has been an active influencer of globalization and a passive receiver of the phenomenon. Globalization has created a number of challenges in various domains in the European Union including the political aspects, financial systems, multicultural aspects, international relations, local implementation, ideologies, and nationalism and so on (Bohle and Greskovits, 2007, pp.443-466). The potential impacts of globalization on the union can be measured with respect to the key economic variables like gross domestic product (GDP), employment, wages, interest rates and inflation and diffusion and dissemination of technology. A table is given below to summarize the impact of globalization in the European Union based on these key variables. The table indicates that there are two main elements of the impact including the total effects of globalization which appears positive for the fundamentals of the Union and the profound variations of impact on different regions and business sectors which can be clouded by the overall impact. Globalization has created increased global mobility of goods, capital, information and other resources and has also accelerated the foreign direct investment levels and the cross border trading activities (Alvarez, 2006, pp.124-126). The European Union has got greater access to the resources and markets existing in other countries of the globe. Also, other nations have been granted access to the European market which is one of the wealthiest and most developed economies in the world. Therefore, the process of globalization has been mutually beneficial for both the European Union and the global economy through the creation of a win-win situation for other nations as well as the European countries. The effects of globalization in the different perspectives of the economy in the European Union can be evaluated to understand the net gains, losses and challenges of globalization in the economy. (Source: Centre for Transatlantic Relations, 2008, p.12) Trade The European Union has been a strong economy and a highly developed nation. With the advent of globalization, Europe has emerged as one of the largest economies in the world with respect to the global trading activities. Though much hype has been created regarding the development of the emerging nations like India and China in the export activities, Europe has been continuously increasing its export levels after the adoption of globalization and the related aspects of globalization like privatization and liberalization. The European Union is ranked as the leader in the export market for more than 20 different categories of products exported by the union (Salvatore, 2008, pp.44-48). The share of exports of Europe in the global business market has been increasing continuously and has increased from 42.8% in 2011 to 45.4% in 2013. The periphery of the European Union has emerged as a capable and dynamic source for cross border trade activities. The net effects of globalization in the trade activities have boosted the economic growth of the European Union and the earnings of a number of European countries. This in turn has helped to promote an increase the income levels and employment levels among the workers in the EU. The strategies of the European Union to make globalization work include the Doha Round of world trade liberalization which is the biggest trade deal till date that would help in generating more than USD 200 billion per year. This amount will be used for the betterment of the developing economies. Investment The expanding investments of the European Union in the global world have led to several benefits for the European economy. The EU has been a main recipient and provider of Foreign Direct Investments (FDI) since 1990 which has enabled the European countries to establish strong linkages with the other nations of the world. Currently, Europe account for more than 59% of the global investment flows from 2006-2011. Portfolio Flows The cross border flow of capital has created immense benefits for the stakeholders in Europe. The capital markets in the European Union have become much more globally competitive due to the increased attractiveness and recognition of Euro as a currency for world reserve. This has created a competitive financial segment in the European countries and the availability of low interest capital for investment and consumer spending in the region (Csaba, 2007, pp.16-18). Labour mobility Globalization has created two major sources of labour mobility in the European countries. The first source roots to the commitment of the European Union to ensure the free flow of labour resources in the intra-regional areas (Chayes, 2005, pp.314-315). The second factor encompasses the inflow of high skilled and low skilled labour in the European countries from the other nations of the world. The region has become one of the most preferred destinations of foreign labour. Before the advent of globalization, the European Union was established as an exporter of labour resources. After the advent of globalization, the region has emerged as one of the main importers of foreign labour resources. The region now hosts more than 60 million migrants which are more than the number of migrants in the United States. But the Union is facing issues related to the inflow of foreign labour because of the inflow of many low skilled and poorly educated immigrants in the area. Inflation The inflation level in Europe has been reduced to a much lower level than it would have been in case globalization did not exist. This is because globalization has increased the competition and lowered the import costs. The low inflation rate has benefitted all the stakeholders in the European countries, especially because the price levels and inflation rate have been multiplied in other nations due to the high demand for commodities like energy. Interest Rates Since the effects of globalization have been deflationary in nature, this has helped to reduce the interest rates prevailing in the economy (Cohen, 2006, p.14). The costs of borrowing for the government and the public have been reduced thereby boosting the growth of the economy through increased capital spending of the European companies. Employment level The direct positive effects of globalization in the European Union have been increase in transnational trading activities and cross border investments (Bourdieu, 2003, p.119). These factors, in turn, have accelerated the growth of the economy, thereby creating more employment opportunities and improving the income levels of the domestic workers. The unemployment rate in the region has decreased on both structural and cyclical basis in the last 10 years. Globalization can be identified as the major factor driving the growth of employment opportunities in the region. The economy has created more competitive job opportunities for every job lost due to economic downturn or changes in the last decade (Aronica and Ramdo, 2006, p.194). Though there have been some job losses due to the increased level of global competition, the number of such job losses is negligible compared to the overall rate of growth of the job opportunities in the European Union. The cause of these job losses were not off-shoring activities and inflow of foreign labour which are aspects of globalization but other factors in the economy like technological changes, corporate bankruptcies, government policies , internal restructuring etc. Income level The income levels in the European Union have increased considerably which has increased the purchasing power and the disposable income levels of the consumers, increase in the range of goods and services to choose from and decrease in the import costs. The European commission identified that one fifth of the total income gains of the European Union in the last decade can be attributed to the advent of globalization (Appel, 2004, pp.78-80). Also, the European Commission has forecasted that if the nation taps in the opportunities created by the current phase of globalization, then every household in the region would be able to gain more than 5,000 Euros per year for the next three years. Wages The low inflation rate and high competition level have caused a modest increase in the real wages prevailing in the region. Though the wages are considerable varying in different industries, but the net wage gains in Europe have increased causing benefit for the European workers (Burgoon, 2011, pp.509-510). On the other hand, the attraction of foreign labour has created a pool of skilled as well as unskilled labours available for the domestic companies which have created much downwards pressure on the bargaining power of the worker unions and on the wage levels. GDP growth The GDP growth in the European Union has been exemplary in the past decade. Globalization has been a boon to the economy, especially the export sector which has helped to driven the performance of other growth elements. The European Union is growing at a lower rate than the developing economies but is one of the fastest growing economies among the developed countries. The growth of the developing countries would act as a positive factor for the European economy because a significant portion of the export activities of the European Union is shifted to the developing countries (Berger, 2005, pp.90-96). Therefore, growth in these economies would influence growth in the economy of the European countries. GDP growth in EU from 2005-2009 (Source: Marginean and Orastean, 2011, p.215) Technological diffusion The dispersion of technology in the region has accelerated the trade services in the Union. Also, it has enabled the corporate sectors of the European countries to gain access to the technological capabilities of different nations across the globe. Europe is a medium level technology exporter but the major research and development outsourcing by the domestic companies are done in the intra-regional level. The technological capabilities of the region are difficult to compare with other nations because of the extreme variability (Rumford, 2000, pp.183-197). The countries like Netherlands, Sweden, Finland and Denmark are leaders in technological aspects whereas the countries like Romania, Bulgaria and Greece are lagging behind. But due to the deepening integration in the region, it would be important for all the countries to improve their technological capabilities which can be driven by globalization to a large extent (Dreher, Gaston and Martens, 2008, p.114). Conclusion The effects of globalization on the European Union are diverse. But the future growth and sustainability of the EU is dependent on globalization. The reforms influenced by globalization in the European countries not only make the Union more transparent and effective but also help the European Union to establish itself as a strong global actor. The challenges faced in the global including the European Union like economic integration, economic migration, humanitarian crises, failing states, energy security, climate change, terrorism etc. are interdependent. The European Union identifies the importance of globalization and the impacts of the phenomenon on the various aspects of the economy. Therefore, it should focus on effective management of the globalization process in order to meet the arising challenges and prevent any backlash from the phenomenon. The effective management of globalization and its rules would help the European Union to act as global actor in the true sense. The internal policies and the association with the international organizations can help the Union in managing the process of globalization in the region and control its effects and impacts to a large extent. References Alvarez, J. 2006. International organizations as law-makers. Oxford: Oxford University Press. Appel, H. 2004. A new capitalist order: privatization & ideology in Russia & Eastern Europe. Pittsburgh: University of Pittsburgh Press. Aronica, R. & Ramdoo, M. 2006. The world is flat? Tampa: Meghan-Kiffer Press. Bach, D. & Newman, A. 2007. The European regulatory state and global public policy. European Journal of Public Policy. Vol. 16(4), p.90. Berger, H. & Moutos, T. 2004. 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