The Benefits of Globalizing Processes - Coursework Example

Globalization Globalization is a process by which barriers are removed between countries to promote free transfer of goods and services as well as cultural and political ideas. International trade has brought revolutionary changes in global economic and financial structures, and has provided substantial benefits to both developed and developing nations across the world. However, the current ongoing financial downfall has stunted the growth of globalization, with reverse flow of capital and international trade shrinking. Globalization The definition of globalization is often vague and inconsistent. The concept is oversimplified and exaggerated (Scholte, 1). This is because the term globalization has diverse concepts of which five can be distinguished. As the first one, globalization can be defined from the internationalization perspective. It indicates economic and trade relations between different countries. It refers to flow of capital investments as well as movement of people and ideas between countries. The second concept of globalization which is liberalization refers to removal of trade and border restrictions in order to promote free trade among countries. With this concept, amalgamation of international trade relations is generated. This kind of globalization can be actually seen in reduction and in many cases abolition of trade obstructions, visas and capital controls. Then there is the third concept that relates globalization with universalization. It can be defined as spreading of ideas and cultural experiences to people in every country to promote a common perspective of culture in global humanism. This concept is becoming more common with globalization of automobiles, Chinese restaurants, cattle rearing and so on. The fourth concept of globalization is modernization; it is a radical concept that spreads the notions of modernism like capitalism, industrialism, individualism all over the world. This process essentially destroys the prevalent cultures and regional concepts. This concept of globalization is evident in the imperialism of McDonalds, Hollywood and CNN. A fifth approach that has defined globalization is respatialization. It includes restructure of social borders with a growing transplanetary relation with people. Under the fifth concept, social space can no longer by defined by territorial borders and distances (Scholte, 16-17). Benefits The benefit of globalization is very often a debatable issue wherein the major concern is the conditions of the developing third world countries. With the advent of globalization, some argue that richer nations get more opportunities to exploit the poorer nations. But, it is unfair to compare the economies of developed and developing countries as values differ in each country. In reality, globalization can be advantageous for developing countries, considering these countries remain open to international trade with minimum or no import and export restrictions. The countries also have to adopt strategic ways to gain the most from international trade, and the better a country will absorb itself into international trade, it will grow both economically and socially. To make profits in international trade, it is necessary that every country must have some comparative advantages which means the ability to products goods at lower costs than other countries producing the same goods. Research conducted all over the world has proved that globalization has paved the way for higher income or GDP in all globalized countries. Research conducted to calculate national incomes around the world in 1990 showed that developed globalized countries have annual growth rate of national income by 2%. The research also proved that annual growth rate of national income of globalized developing countries is more than that of less globalized developing countries. In fact, the results showed that globalized developing countries have an annual growth of national income by 5% and less globalized developing countries have an annual decline of national income by 1%. A more prominent example can be China, a country that has experienced significant growth of national income in the past few decades due to globalization. China has adopted its own strategy to participate in international trade, which is quite different from the western countries. By selling its products to the international market, China has funded its modernization. Another most incredible fact is that China’s life expectancy has increased from 36 years in 1960 to 70 years of age in 1999. Thus, China has proved that by adopting strategies that is compatible to its own economy, globalization can be utilized successfully (Thong). There are many other economic benefits from international open trade, and like any trade there are winners and losers. However, it has been seen that gains are more than losses in the international market. Among the many economic benefits of international trade, one is “increased variety of goods”. Every country make goods according to its own specialty, for instance, quality of German Beer is different from American Beer. With the advent of free trade, consumers all over the world can have access to products according to their choice. The second economic benefit is “lower costs through economies of sale”. Economically, it is viable for any firm to produce its products in large quantities to make optimum profit. In smaller countries, the firms cannot achieve this in absence of free international market, because only local markets cannot produce buyers for such large quantities. This phenomenon is termed as economies of scale. The third economic benefit is “increased competition”. A company which is not globalized cannot take the benefits of the international market, and can have market power that will give it opportunity to increase prices over the competitive price. This is a kind of market failure. The fourth economic benefit of globalization is “enhanced flow of ideas”. With flow of goods between countries, it is possible to share technologies that advance production of goods. For instance, an agricultural nation can comprehend computer technologies by buying computers from developed countries instead of attempting to make computers domestically (Mankiw, 180-182). Furthermore, benefits of international trade are felt by all individuals and cannot be restricted by borders. International borders are for political reasons and not economic reasons. Another fact is that individuals gain both from national and international trades. If trade is viable between citizens of different states of same nation, then it is also viable between people of different colors, languages and countries. Religious thinkers who debate the racial and nationalist aspects of international trade, must know that trade can be an “enriching exercise” for all participants (Baker & Lawson). Effects on globalization Globalization has managed to integrate transactions between countries based on information communication technology and knowledge-based economy. Today, every country is dependent on other countries with a magnitude and complexity that has threatened to create globalization backlash. The approach of globalization tends to tip the favourable balance more towards the urban industrial sectors than the rural agricultural sectors. It has resulted in “creative destruction of industries and jobs” that has reduced the employment opportunities for major sections of population like the less educated, less skilled, the older and minority groups. It has enhanced the digital divide between the developed and developing countries (Low, 2). No longer can a country keep itself separate from globalization as it has become an inherent phenomenon in the global arena. Free and open trade means that “macroeconomic policies and market-friendly measure” are important for economic growth and decline of poverty, as well as increasing the aspects of private sector. This cannot be only of national level. The effects are increase in domestic savings, ability to learn new technologies and growth of middle income class. All these not only have the full potential to increase the market structure including the demand side, but also stability on the socio-political structure and an all pervasive democracy. But, these economic changes need to be channeled properly as these may reduce the rural poverty and increase the urban poverty (Low, 5) Globalization is often considered as having a negative impact on the developing countries’ economy. From the post-war decade, poverty and economic instability in third world countries have been a global concern. For the first forty years since the war, poor countries like Africa and Latin America followed some policies to reduce poverty. Firstly, these countries kept their borders closed to international trade in order to protect the local production against foreign competition. It was done with the hope that local industry would develop without being crushed by foreign competitors. Secondly, in developing countries, public works were encouraged to facilitate public investments and these were funded by Aid-to-Development with the purpose of breaking the poverty circle. However, countries funded by Aid-to-Development became poorer than before with their governments producing extreme corruption cases. There are some major points based on which critics claim that globalization has negative impact on developing nations. Critics claim that globalization makes the rich richer and the poor poorer, however, it has been seen that free trade can result in dynamic economic growth resulting in reducing poverty. Moreover, closed markets can lead to extreme corruption, and economic benefits would be felt more by the elite class thus enhancing economic disparities. Many critics argue that local industries should be protected from foreign rivals as the former are in infant stage. But, in reality, competition can help the local industries grow as they become compelled to study the international market. Critics also bring to the fore the conditions of labour in third world countries where many international companies are opening factories to engage labour with low wages. However, this creates job opportunities and workers accept these jobs because of poverty and not because of globalization. Critics also claim that globalization destroys the local culture in developing nations. But, when people in developed countries can make choices to adopt global cultures, then the same freedom should also be applied to developing nations. Critics, in general, have ignored the basic reasons behind poverty in third world nations. They have also assumed that developing countries have fully embraced globalization which is not true in all cases. Moreover, developing countries that have opened their borders to international trade have essentially experienced economic growth and social development (Vergnaud, 66-70). International institutions like United Nations (UN), the International Monetary Fund (IMF), the World Bank (WB) and the World Trade Organization (WTO) have an important role on world economy. The UN is almost like world government whose main purpose is to maintain global peace. However, since its formation, it has always connected peace with global economy, and has worked towards development and progress mainly in developing countries. The UN has adopted International Development Strategy to narrow the gap between rich and poor nations by encouraging the North and South to work in cooperation for all round economic and social development. The primary goal of WB and IMF is organized economic system in the global arena, with national governments contributing towards stabilization of both national and international economies. Both the institutions have endorsed reforms which make economies more responsive to market conditions, and also more open to trade and capital flows. The main goal of WTO is to remove barriers to facilitate international trade (Dutt & Mukhopadhyay, 325-327). It has been concluded that “major aspects of globalization following from the activities of international institutions lead to an increase in the inequality across nations.” To achieve success in diminishing the inequality between rich and poor nations, the institutions should adopt strategies other than the globalization that they have been promoting across the world (Dutt & Mukhopadhyay, 332-336). Globalization generates integration of markets across the world. The advent of new technologies and management strategies, as well as removal of barriers in many countries for international trade, has hastened globalization in the past six decades. The impact has been that developing countries are facing sustained economic growth. As developing countries are becoming richer, they are now able to produce high-value-added components that were previously produced by developed nations. Thus, the global supply chain is getting relocated and for this “globalization has been affecting the price of goods, job patterns, and wages almost everywhere.” Globalization is altering the framework of individual economies in ways that affect each group in developing countries differently. In developed nation, globalization is modifying income level and job opportunities (Spence, 28-30). Conclusion Globalization promotes interdependence of countries all over the world through a rapid growth of flow of goods, services, technology and capital between countries. Globalization concentrates on reducing tariffs, taxes and other barriers that suppress international trade. It promotes economic amalgamation between countries thus achieving a single world market. Development in transportation infrastructure is a major driving force for globalization. References Baker, Stephen A. & Robert A. Lawson “The Benefits of Globalization: An Economic Perspective”, Journal of Lutheran Ethics, back issues, August 2002 from: http://www.elca.org/What-We-Believe/Social-Issues/Journal-of-Lutheran-Ethics/Issues/August-2002/The-Benefits-of-Globalization-An-Economic-Perspective.aspx Dutt, Amitava Krishna & Kajal Mukhopadhyay. “International institutions, globalization and the inequality among nations”, Progress in Development Studies, 9.4 (2009) 323-337 Low, Linda. “Globalisation and Poverty Reduction: Can the Rural Poor Benefit from Globalisation?: An Asian Perspective”. UN, October 2001, December 8, 2012 from: http://www.un.org/esa/socdev/social/papers/paper_low.pdf Mankiw, N. Gregory. Principles of Economics, USA: Cengage Learning, 2011 Scholte, Jan Aart. Globalization: A Critical Introduction: ed.II, New York: Palgrave Macmillan, 2005 Spence, Michael. “The Impact of Globalization on Income and Employment”, Foreign Affairs, 90.4 (2011) 28-41 Thong, Melanie. “The Benefits of Globalization”. Radford, n.d., December 8, 2012 from: http://www.radford.edu/~mthong/benefits_of_globalization.htm Vergnaud, Andres Mejia. “Effects of Globalization”, Society, 41.3 (2004) 66-70 Read More