World Economic Systems and Globalization - Report Example

World Economic Systems and Globalization 23 May World Economic Systems and Globalization “Globalization is 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 Global economic systems have undergone revolutionary changes after the introduction of globalization. Earlier, countries were keen on acquiring self-sufficiency in development. Globalization has shown a shortcut for economic development of countries. The major argument of globalization is that a country can mobilize its internal resources properly with the help of other countries. In other words, globalization has proved that individual growth is difficult whereas collective growth is easy. Even though this principle was indigestible to many of the countries at the time of introduction of globalization, such countries have realized the mistakes in their calculations soon after the introduction of globalization. For example, communist China was the number one critic of globalization earlier. They argued that western countries have some hidden agenda in introducing globalization. They educated the developing world that the developed world is trying to loot the resources of developing world with the help of globalization. All these arguments were proved to be wrong and China is the number one exploiter of globalization at present. Globalization has introduced radical changes not only in world economic systems but also in communication and transportation. “Advances in communication and transportation technology, combined with free-market ideology, have given goods, services, and capital unprecedented mobility. Northern countries want to open world markets to their goods and take advantage of abundant, cheap labor in the South”.2 It should be noted that the southern countries such as China and India are the most heavily populated countries in the world whereas northern countries such as America and European countries are the most developed nations in the world. In other words, southern countries have abundant manpower resources whereas northern countries have shortage of manpower resources. Globalization helped southern and northern countries equally well. It helped southern countries to utilize their manpower resources for economic progress whereas northern countries were able to exploit these cheap manpower resources properly to produce more goods and services. In short, globalization helped the North and the South to exploit their resources properly. Thus, both the South and the North were able to develop properly because of globalization. The rapid development of communication and IT technologies helped globalization immensely in bringing significant changes in world economic systems. For example, outsourcing and offshoring like business concepts can be considered as the bi products of globalization. These bi products would have never developed properly, if the communication and IT technologies were underdeveloped. Same way, globalization helped communication and IT technologies to develop properly. Globalization forced the countries to share their knowledge and technological knowhow for mutual benefits. For example, India and America are currently co-operating each other in space exploration. Moreover, Russia is providing cryogenic engines necessary for nuclear power exploitation, to India. Such technology related co-operations were the outcomes of globalization. This paper analyses the world economic systems and globalization in general and the impact that globalization has on communications & IT technology and the impact that communications & IT technology has on globalization in particular. Impact that globalization has on communications & IT technology Globalization has significant impact on the development of communication channels and IT technology. In fact IT technology and communication channels can be considered as the major driving forces of globalization. “Globalization accelerates the change of technology. Every day it seems that a new technological innovation is being created. The pace of change occurs so rapidly many people are always playing catch up, trying to purchase or update their new devices”.3 The advancements in IT technology and communication channels took place because of the excessive demand for these things in the global market, created by the globalization. For example, before the introduction of globalization, Indian or Chinese people were satisfied with the domestically made products or services. The introduction of globalization helped them to get access to even foreign market. The services of communication channels and IT technologies became inevitable under the above circumstances. It should be noted that product and services from one country is made available in another country with the help of ecommerce. Communication channels and IT technologies are necessary to the development of ecommerce transactions. Thus, globalization has contributed heavily to the development of IT technologies and communication channels. The pace at which technological advancements happen in this world has been almost doubled after the introduction of the globalization in the 1980s. Last 20 years have seen rapid growth in the technological field. The following examples will give a rough idea about how technology has developed rapidly in the last 20 years’ time period. 18 years ago: Internet commercialized 17 years ago: first mobile phone with Internet connectivity 15 years ago: Google named the search engine of choice by PC magazine 12 years ago: Blackberry launched 9 years ago: Facebook launched 7 years ago: Twitter launched 6 years ago: iPhone, the first of the smart phones, introduced 5 years ago: Groupon introduced 2 years ago: 17 million smart tablets sold — estimated that 100 + million by 2014 1 year ago: Google Glass announced Every 60 seconds (so it seems): new apps, tailored to users’ specific needs created.4 The development of IT technologies and communication channels helped some countries to tackle poverty and unemployment problems up to certain extent. Reduction of poverty and unemployment helped those countries very much in their economic progress. For example, India is a country for which the revenue from outsourcing business is extremely high. “85% of India’s IT exports go to English-speaking countries”.5 America and Europe are some of the major countries to which India is providing Business Process Outsourcing (BPO) services. Many of the Indian cities have IT hubs at present to process the outsourcing jobs received from overseas countries. Thousands youths in India are working in BPO units in India. As a result of that, unemployment problems have been reduced a lot in India at present. Reduction of unemployment and the increased inflow of foreign money through outsourcing business have given momentum to economic growth in India. “According to UN agency, “the Indian economy is likely to expand by 8.1 per cent in 2011, the fastest growth rate in the world after China”.6 I should be noted that India was one among the poorest nations in the world until a couple of decades before. At present, India is one among the most rapidly emerging economies in the world. Globalization was instrumental in contributing to the economic growth of India. The World Bank’s India Development Update of October 2013 says that although the recent turmoil in global markets has amplified Indias macroeconomic vulnerabilities, the countrys growth potential remains high. The report finds that growth has become more effective at reducing poverty. Between 2005 and 2012, India lifted 137 million people out of poverty and reduced the poverty rate to 22%. It notes that a much larger fraction of the decline in poverty is taking place in low-income states, and the poorest 40% are increasingly sharing the benefits of growth.7 It is expected that India will become a major economic superpower in the world in near future itself. According to an IMF report, the recent policy actions have reduced India’s vulnerabilities. Moreover, this report says that India has restored macroeconomic and financial stability now even though the country struggled a bit a couple of years before.8 The contributions of globalization in stimulating economic growth, reducing poverty and unemployment problems in India cannot be underestimated. The case of China is also not an exception. Globalization has caused rapid technological growth in China. It should be noted that China is the major manufacturing destination of global companies now. Many of the American and European companies have manufacturing units in China now. This is because of the fact that the manpower cost in China is extremely low compared to that in other parts of the world. Even, Apple Inc., Microsoft, Sony, Samsung like big technology companies are manufacturing their products in China now. It would be difficult for a foreign made product to compete with a Chinese made product in global market in terms of price. Because of this fact, majority of the global companies have selected China as their manufacturing destination. As in the case of India, globalization helped China to develop rapidly in recent times. According to an IMF forecast, the Chinese economy should grow by 7¾ percent this year9 Moreover, it helped China to solve poverty and unemployment problems up to certain extent. According to a World Bank report, “by 2030, up to 70% of the Chinese population - some one billion - will be living in cities”.10 The total population of China is around 1.3 billion at present11. If China succeeds in reducing the rural population size only to .3 billion by 2013, that will be a great achievement. It should not be forgotten that China is the most heavily populated country in the world and until the arrival of globalization, majority of the Chinese people were living in rural areas. Poverty and unemployment problems were significant in China before the arrival of globalization and new technologies. China and India were successful in proving many of the economic principles wrong. Earlier, economic pundits were of the view that population growth is the major hurdle in front of economic growth in India and China like most heavily populated countries. In fact bigger population was labelled as curse for these countries. However, these countries were able to prove that bigger population is no more a curse but a blessing for them. Majority of the American and European countries are currently importing manpower from these countries at present. Moreover, these countries were unable to compete with India and China in terms of cheap labor. Cheap labor seems to be the biggest asset for countries like India and China now. According to a UN report, about 870 million people in this world are living in poverty. Moreover, more than 100 million children under age five are still undernourished and underweight. Around 384 million workers lived below the $1.25 a day poverty line in 2011.12 Majority of the people living in poverty were in South East Asian countries before the introduction of globalization. However, these countries are developing rapidly after the introduction of globalization. Apart from India and China, many other south East Asian countries such as Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka were able to stimulate economic growth with the help of globalization. According to a World Bank forecast, economic growth in this region would rise to 5.8% in 2015 from 5.2% this year and 4.8% last year. The following statistics will be relevant here. India may see growth rise to 5.7% in fiscal year (FY) 2014 from 4.8% last fiscal year Pakistan’s economic growth could increase to 4% this fiscal year from 3.6% in FY2013 Nepal’s economy should grow by 4.5% in FY2014 after 3.6% in FY2013. Sri Lanka would continue to grow at 7.3% this year.13 From the above statistics it is evident that the most heavily populated Asian countries are currently developing rapidly because of globalization. It is often said that global wealth is currently shifting from the less heavily populated American and European countries to the more heavily populated Asian countries. The development of IT technologies and communication channels in South East Asia have been improved a lot in the recent past because of globalization. Improvement of these technologies and communication channels helped these countries to revert the poverty and unemployment problems up to certain extent. The impact of globalization on communication and IT technologies is not limited to American, European and Asian countries alone. In African countries also, globalization has brought huge changes. For example, Kenya has become IT hub in Africa at present. Moreover, Mobile money transfer and mobile banking services are common in most of the African countries at present. Because of the improved communication channels and IT technologies, a lot of international companies have opened their offices in Africa14. It should be noted that South Africa is one among the member countries in the most rapidly emerging group of BRICS (Brazil, Russia, India, China and South Africa) countries. Impact that communications & IT technology has on globalization The advancements in IT technologies and communication channels gave momentum to the globalization process. “While advancements in Internet-based tools over the past five to ten years, such as social networking websites, twitter, and other Web2.0 applications are changing the way people use and share information for personal, political, and commercial purposes. These developments have facilitated efficiency gains in all sectors of the economy”.15 Apart from the reduction of poverty and unemployment problems across the world, democratization of administrations or countries is believed to be one of the major objectives of globalization. According to Boutros Boutros-Ghali the sixth Secretary-General of the United Nations (UN), Democratization is a process which leads to a more open, more participatory, less authoritarian society. Democracy is a system of government which embodies, in a variety of institutions and mechanisms, the ideal of political power based on the will of the people. The support for democratization must be coupled with support for development in order that socio-economic as well as civil and political rights are respected. Although development can take place without democracy, there is no evidence that the breakthrough to development requires an authoritarian regime. There is, however, ample evidence suggesting that, over the long term, democracy is an ingredient for both sustainable development and lasting peace. Moreover, the globalization of economic activity and communications has generated pressures for democratization and human rights. The reality of globalization and the new world environment now require democratization at the international level, so that democratization within States can take root, so that the problems brought on by globalization which affect all States may be more effectively solved and so that that a new, stable and equitable international system can be constructed in place of the bipolar system so recently swept away16. Democracy has more potential than autocracy in stimulating economic progress as per the assumptions of globalization. Autocracy is unacceptable to globalization. It should be noted that China like autocratic countries forced to implement some democratic norms in their administration as part of the introduction of globalization. For example, Chinese administration never welcomed private capital until the introduction of globalization. Deng Xiao Peng was successful in making drastic changes in economic policies which helped China to open its doors widely to foreign direct investments and to implement the concepts of globalization successfully. At the same time, many other autocratic countries are still reluctant in making changes in their economic policies. As a result of that, economic progress is such countries are still below par. Many of the African countries and Middle Eastern countries were ruled by dictators until recent times. Globalization is causing a big challenge to such dictators. The arrival of social networks such as Facebook and Twitter is helping the people in dictator countries to get more awareness about the advantages of democratization. Such increased awareness is helping them to fight against the dictator administrations. Social networks helped Middle Eastern people to open up their life to life to other cultures. The recent revolutions in Egypt and Libya like Middle Easter countries are caused by social networks. The revolutions in these countries are often labelled as Facebook revolution because of the huge influence of social networks in these revolutions. Democratic transitions these countries underline the ability of technology to penetrate the most closed societies17 “According to Jörg Mayer: Technology imports and skill accumulation is a driving force behind economic growth, where the combination of technology imports and level of human capital is modeled as a determinant for total factor productivity”.18. Technological infrastructure development is necessary for the successful implementation of globalization. Majority of the global countries which failed to develop properly are those countries which have inadequate technological infrastructure. For example, Ethiopia and Somalia like African countries are still struggling because of the inabilities of these countries in exploiting the possibilities of globalization properly. In fact, majority of the sub-Saharan countries did not gain from globalization despite the structural adjustments.19 In a rapidly emerging and heavily globalized world, the importance of communication cannot be neglected. Cross cultural or international business activities are growing day by day because of globalization. Instant communication is necessary for the business world to promote business properly. Computer based technologies are normally used at the current workplaces which helps the organization and its stakeholders to communicate and share information digitally. Word processing software like Microsoft Word and spreadsheets like Microsoft Excel help all the employees in an organization generally and the office staff or administrative staff in particular to communicate each other whereas databases like Oracle, MS Access etc help the accounts department of an organization to manage the financial activities effectively. Presentation software like Microsoft PowerPoint makes business presentations easier for the top executives whereas graphic software like, Adobe Photoshop, Illustrator etc help the designers and advertisers in an organization. In short, most of the organizational functions are heavily dependent on the IT technology at present. Internal and external networks like Local Area network (LAN) and Wide Area Network (WAN) are used specifically by the current organizations to communicate with its employees or customers located across the world. All these developments in communication technologies are helping globalization in one way or another. The development of ecommerce is definitely a contribution of IT technologies and improved communication channels. The evolution of ecommerce helped the people across the world to purchase anything from anywhere in the world with a finger click. “The US Department of Commerce revealed that the figures reporting the e-commerce sales in the first quarter of the year 2005 had been $19.8 billion which is up by 23.8% from the previous year”.20 At the time of introduction of internet, many people thought it just as another medium of communication. But as time progressed, internet and IT technologies have made major changes all the aspects of human life. Without these technologies, it would have been difficult to implement globalization successfully across the world. These technologies helped people from underdeveloped countries to work for companies in developed countries. A lot of Indians, Chinese and Pakistanis are currently working for American and European companies while staying at their home. These technologies and improved communication channels helped them to earn a lot of foreign money which is necessary for the economic progress of their countries. Conclusions Globalization has caused significant changes in global economic systems and principles. Because of globalization, many of the underdeveloped countries became developed or developing countries. China and India like most heavily populated countries were able to exploit the opportunities provided by globalization properly. These countries are the most rapidly emerging economies in the world at present. Until, the introduction of globalization, these countries were struggling. However, the introduction of globalization served as a tonic for these countries. These countries were able to transform their curse (big population size) into a blessing with the help of globalization. Globalization has helped the democratization processes in many Middle Eastern and African countries. Until the introduction of globalization, dictators in these countries faced little problems or challenges to their dictatorship. However, the introduction of globalization and the subsequent improvements in IT technologies and communication channels, helped people in these countries to get in touch with the people in democratic countries. Social networks played a significant role in making the people in autocratic countries to get an idea about the oppressions they faced in their country. The recent revolutions in countries such as Egypt and Libya are the contributions of globalization, IT technologies and the communication channels. The development of Internet related technologies and communication channels helped the implementation of globalization principles in one way or another across the world. IT technologies and modern communication channels helped the people across the world to get in touch with people in overseas countries and to exchange their ideas, views and services each other. Virtually, the distance between different places across the world has been reduced a lot because of the introduction of IT technologies and modern communication channels such as mobile phones and social networks. At the same time, it is logical say that globalization helped the development of IT technologies and communication channels. Because of globalization, the demand for products and services from overseas countries has been grown considerably. As a result of that countries and companies were forced to develop new technologies and communication channels to exploit such demands. In short, globalization has contributed heavily to the rapid development of technology and communication channels. At the same time, the development of technology and communication channels helped the implementation of globalization in one way or another. In other words, globalization, IT technology, and communication channels helping each other in their developments. Bibliography Al- Harbi, Abdulaziz. “Impacts Of Globalization On Africa”, Power point presentation Al-Refai, Abdullah. “Democracy, Poverty & Globalization”. Power point presentation AL-Mutairi, Khalid H. “Theoretical Debates on the Economy of Globalization”. Power point presentation Behbehani, Fatima. Technology, the Media and Globalization. Power point presentation “China Overview”. 2014. 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