Purported challenge or problem of Globalization, Foreign Direct Investment (FDI), or Multinational Corporations (MNCs) - Essay Example

Purported Challenges of Globalization Introduction Theoretically, globalization is the expansion of trade and relevant economic activities across national and regional borders. Primarily, globalization materializes through the movement of economic and financial factors of production across geographical boundaries. In the past, movement of economic assets across regional boundaries was restricted by social, political or technological barriers. In modern times, advancement in technology coupled with evolution of political ideologies has led to liberalization of economic environments across the globe.

Admittedly, increased globalization comes with both benefits and setbacks. Among the benefits of globalization include but not limited to enhanced economic growth, increased economic competition which triggers reduction in prices of goods and services, and poverty reduction through expansion of labor markets. Contrarily, globalization present problems like weakening of labor standards, and compromise on environmental standards1. In literature, examples of elaborated criticism on the challenges of globalization are contained within chapters 9 and 12 of Samuel Cohn’s book Employment and Development under Globalization.

Challenge 1: Income Inequality Theoretically, economic inequality feature as one of the challenges of globalization that has been overblown by critics in Cohn’s book. Allegedly, increased globalization is directly proportional to increased economic inequality. In this context, globalization is responsible for the widening gap between rich and poor members of the society. From Cohn’s perspective, critics argue that the world is currently experiencing the highest levels of economic inequality in the last two centuries.

In addition, critics explicitly blame globalization, particularly the influence of Foreign Direct Investment and Multi National Corporations as the main perpetrators of economic inequality within global economic platforms. Among the parameters used to gauge economic inequality include household income disparities, changes in tax rates, and socio-political impacts. Critics against globalization stresses that economic inequality is a monster born and bred by the capitalistic approaches of Multi National Corporations.

In substantiating their facts, critical analysts highlighted on World Bank statistics showing that the average household income prevalent within the richest 20 nations is approximately 37 times higher compared to average household income in bottom 20 poorest nations in the world.2 Statistically, household income disparities between rich and poor nations have double in just four decades. In this case, it seems globalization is opening the economic gap between rich and poor people at an accelerating rate.

Objectively, I think the problem of economic inequality in globalized markets is overblown by critics. First, critics against globalization in Cohn’s book relied on statistical findings from World Bank research. Periodical World Bank researches compile average income levels of all nations across the world. Methods used to conduct these researches places developed nations and underdeveloped nations within a single chart.3 For example, income levels for households in poor African nations like Congo are placed together with income levels of households residing in wealthy nations like Germany and the United States.

Technically, households in Germany and those in Congo belong to distinct societies. Therefore, comparing household incomes in distinct societies do not objectively reflect the actual level of income inequalities. True levels of inequality would emerge if household income enjoyed by wealthy members of one society were compared to household income of poor members within the same society. In this case, household income inequality is a relative parameter which inaccurately portrays the effects of globalization.

Arguably, those against globalization emphasized that economic inequalities are magnified by the influential role of Multi National Corporations on governments of host nations. Critics alleged that host nations are forced to provide incentives to Multi National Corporations because lack of incentives is perceived by MNC’s as barriers to Foreign Direct Investments.4 Since host nations seek to attract FDI, governments often find themselves in weak bargaining positions before MNC’s panels. Practically, one of the typical incentives that attract FDI is cheap labor.

In this case, critics argue that governments of host nations disband or muzzle labor unions as a means of promoting cheap labor for Multi National Corporations. Consequently, disbandment of trade unions results in exploitation of workers, thus worsening income inequality. However, the influential role of Multi National Corporations to host governments is often overblown by critics. Most host nations have independent institutions like parliaments and senates tasked with legislation of policies for foreign investors.

Since these legislative institutions are independent, labor laws and minimum wages are legally determined and protected by courts.5 Therefore, governments can offer limited incentives to Multi National Corporations. In this case, the influential role of MNC’s on governments cannot be precisely associated with increasing income inequalities. Challenge 2: Environmental Degradation During criticism, analysts seem to frequently overestimate certain challenges of globalization that are otherwise insignificant, while underestimating others that are significant.

With respect to perspectives developed by Cohn in chapters 9 and 12 of his book, one challenge that is underestimated is the environmental effects of globalization. Undeniably, pollution and other forms of environmental degradation have significantly increased with respect to increase in globalization. Critics who underestimate the environmental effects of globalization argue that economic growth resulting from liberalized economic platforms yields increased taxes and revenues that are subsequently used in improving declined environmental standards.

6 In addition critics perceive environmental effects as short-term challenges that will be addressed with improved technologies in future. Allegedly, globalization spurs the growth and advancement of science and technology. Through competition, scientists and engineers will in the near future invariably develop effective technologies to be used for environmental improvements. In this regard, environmental problems associated with globalization are rarely overblown by critics because they are perceived as short-term effects that will naturally fade out with improvement in technology.

Practically, I think environmental impacts of globalization are not only significant but also urgent. One direct effect of globalization is increased production and consumption. For example, globalization allows Multi National Corporations to export knowledge and technologies to developing nations through Foreign Direct Investment. These knowledge and technologies are used to exploit natural resources like minerals and forests; hence leading to surplus in production. Technically, most production processes release pollutants like green house gasses to the atmosphere.

In this case, increased production means increased release of green house gasses. In addition, depleting natural sinks of green house gasses like forests comes as another heavy blow to the already damaged global environmental standards. Undeniably, betting on science and technology to remedy the environmental situation in future is a long shot with high probabilities of a miss. Unfortunately, MNC’s are too focused at profit maximization to acknowledge the detrimental consequences of environmental degradation.

7 On the other hand, critics are busy overestimating the element of economic inequalities at the expense of potentially catastrophic effects of a degraded environment. Therefore, urgent focus on global environmental standards is necessary. In conclusion, it emerged that most arguments presented by critics against globalization are often shallow and subjective in nature. Undeniably, findings regarding the parameter of income inequalities are skewed. Household income levels are relative, and economic disparity can be ascertained only from a customized reference point.

In addition, the role of MNC’s in formulation and implementation of policies is mistakenly overblown. Contrarily, more urgent challenges like environmental pollution are either overlooked or scarcely mentioned in theoretical criticisms similar to those presented by Cohn in the chapters. As a recommendation, criticism on globalization challenges should be based on objective facts and rational priorities, rather than mere speculation and inaccurate research findings. Bibliography “Globalization and Inequality.

” World Economic Outlook. 2009, http://www.imf.org/external/pubs/ft/weo/2007/02/ Bhagwati on MNCs. Thinking Out Loud: A Place to Discuss International Relations and International Political Economy. February 25, 2014 Schweickart, David. Economic Democracy: A Worthy Socialism that would really Work. Cambridge: Cangridge University Press. 2003. Cohn Samuel. Employment and Development under Globalization: Chapter 12 – Current Trends in Globalization. Pittsburg: Palgrave Macmillan, 2012. Cohn Samuel.

Employment and Development under Globalization: Chapter 9 – Multinational Corporations and Global Production. Pittsburg: Palgrave Macmillan, 2012. IMF Staff. “Globalization: A Brief Overview.” Accessed February 24, 2015, http://www.imf.org/external/np/exr/ib/2008/053008.htm