The Impact of Globalization on the World Economy - Essay Example

Running Head: Globalization Globalization Name Course Instructor May, 1 2012 Introduction Globalization is a strong real aspect in the modern world system, and is one of the significant forces defining the future course of the globe. Globalization has various dimensions including social, political, cultural, health, security and of more importance, economic. The concept of globalization has different interpretations and as a result has lead to varying views to globalization. Some scholars, policy makers, and activists perceive globalization as a driving force of the world economy, improvement of environmental management, betterment of social living, health improvement and development in all sectors of life. Nevertheless others have a completely negative perception; opposite from these views (Intriligator, 2003). However in this essay, a more broader and inclusive definition as proposed by Byrnea and Gloverb (2002) which defines globalization as “the erosion of the barriers of time and space that constrain human activity across the earth and the increasing social awareness of these changes” p.8. Globalization entails the increase of trade, culture, services and products, technology across the physical borders. This essay seeks to support the idea that globalization has a positive impact on the world economy as well as help in environmental conservation measures, putting into consideration the role of trade unions, certification, government regulations and policies. Globalization has entailed greater openness in the world economy, an assimilation of markets internationally, and a shift towards a borderless, society which has enhanced global flows (Intriligator, 2003). Various sources of globalization have emerged over the past years. One such source is the development in technological arena that have significantly minimized the costs of communication and transportation and hence reduced the cost of information processing, data storage and retrieval. This has been enabled by development in electronics particularly in the revolution of microchip computer. This has been manifested through the internet, electronic mail/email, and the World Wide Web (Intriligator, 2003). The issues of globalization and sustainable development have come into view as principle communications to asses social and environmental panoramas. The two discourses are not opposing each other, but rather have a common view on development and efficiency as agents of sustainability (Byrnea and Gloverb, 2002). It is evident that, technological and economic changes have developed greatly over the last decade and the classical industrial geography from the past century is fading (Byrnea and Gloverb, 2002). These changes are not discretely controlled or regulated at local or community levels but at global level. Most analysts such as Ohmae (1990) believe that globalization is for the good course. Others such as (Bryan and Farrell, 1996; Thurow, 1999) affirms that globalization help in spreading economic development. It also improves living standards in form of greater access to emerging technologies and healthcare and promotes cultural exchange. Brown 2001; World Bank, 2000; Flavin and Lenssen 1994 as cited in Byrnea and Gloverb (2003) propose that the natural environment will greatly benefit from globalization as sophisticated technology is able to flow throughout the globe, substituting or “leapfrogging” the polluting technologies characteristic to industrial period. Despite environmental status not being the main focus of globalization, there is a succinct believe that world markets, information and technology can significantly influence the wellness of ecosystem (Byrnea and Gloverb, 2003). New technologies and markets as perceived by proponents of globalization, new technologies and emerging markets if appropriately positioned and managed, can be exploited to revert the current trend towards an unsustainable future (Byrnea and Gloverb, 2003). Consequently, while globalization may not be its center of interest, sustainable development’s course has at least some supporters who perceive ecological viability and the flow of global social economic processes as companionable. Researchers and modern environmentalists believe that improvements of environment will largely rely on globalization (Byrnea and Gloverb, 2003). Sustainable development was coined by the World Commission on Environment and Development (WCED) through consultations with various experts, governments, industries from various countries in the world. WCED provided the basic concept that, “Humanity has the ability to make development sustainable—to ensure that it meets the needs of the present without compromising the ability of the future generations to meet their own needs.” (WCED, 1987, p.8). The commission sought to for corporation between states and organizations and advocated for use of technology to deal with the pressing issue of balancing social and economic needs with the needs of a healthy environment. It anticipated a new era of economic growth if economic and technological innovations would become less resource intensive (Byrnea and Gloverb, 2003). Similarly, WCED emphasized on global legal and planning systems which would ensure efficient global management of socio-ecological relationships. Following this path would help humanity revert the antagonism existing between economic growth and the environment, eradicate poverty, and satisfy the interests of both North and South. Another aspect of globalization is seen in offshore sourcing. This is a practice where by activities entailed in the making of a particular product is carried out abroad. In General Motors and Boeing among other companies are involved in this globalization activity of offshore sourcing which led to strike by employees of the companies protesting this move. The reason for protest was the believe that, offshore sourcing will lead to decreased wages as well as loss of jobs. However, Arndt (1997) argues contrary to this view. He believes that, offshore sourcing does not lead to reduced wages or job loss, but instead in offshore sourcing on the area of labor-intensive importables manufacturers in capital-abundant states increases wages and employment levels. In such instances, offshore sourcing boosts the ability of the producer to deal with international competition. Institutions such as the World Bank and International Monetary Fund (IMF) have greatly assisted in globalization and have achieved sustainable development. The IMF which has been in operation since 1944, together with the World Bank have helped developing countries in integrating into the world’s economy and revolution of national economies into greater market orientation (Byrnea and Gloverb, 2003). Other institutions such as the World Trade Organization (WTO) and the World Economic Forum (WEF) boost economic globalization via their programs and enhancing legal and regulatory reach (Byrnea and Gloverb, 2003). The development of Meta standards stipulates what to be included in an environmental management system. An example of a metastandard is the International Standards Organization’s ISO 14000 group of environmental management standards. This metastandard is dedicated to environmental issues and has formulated various regulations and standards to be met for sustainable development and environmental management. They are applied globally to all signatories of the ISO 14000 and have assisted greatly in environmental management especially in the developing world. It achieves this through setting standards for production, packaging or manufacturing processes of products. This affects export and imports as products which do not meet such requirements are blocked from circulating in ISO 14000 member countries. International Standardization Organizations (ISO) also plays a greater role in the global economy. The certifications are focused on quality of the products and the services provided by the organizations. Thus organizations strive towards achieving the standards in order to be recognized across the larger global market hence become competitive and increase profitability. Quality certification has become a principle organization practice assisting firms globally establish rationalized production systems. ISO 9000 group of certifications is the most influential and invasive quality system in the world which is supported by ISO in Geneva Switzerland (Guler, Guillen, and Macpherson, 2002). The development of other certifications such as Third Party Certification (TPC) which has shifted the role of regulations from government to the private sectors has also influence globalization in a sustainable development and environmentally friendly approach. Particularly, the agrifood industry is being transformed through the TPC regulations. Food retailers demand that food suppliers provide TPC as enhanced by the government and the private agencies. These third party certificates are public or private organizations obliged to access, evaluate and certify safety and quality issues concerning a certain set of standards and compliance techniques. Certification gives affirmation regarding product to consumers by giving information about the product and its process of production (Hatanaka, Bain, and Busch, 2005). TPC certifiers also appeal to techno scientific values like objectivity, independence, and transparency in an effort to limit liability. TPC is not only a tool for regulating quality, but it also reorganizes, changes, and disciplines individuals and things throughout the supply chain, with varying social economic effects for different participants. Having gone global, TPC has ensured that agrifood quality and safety is paramount and universal. As the global markets become a free market, there is need for both the authorities and the private organizations around the world to increase standardization and regulation of products where TPC comes in handy. Private standard, certification systems and labels are important for providing stakeholders with information allowing them to differentiate producers of agricultural food products by attributes which interest them, such as environmental sustainability, animal welfare and worker welfare (Hatanaka, Bain, and Busch, 2005). Nevertheless, private standards cannot be effective if there is no enforcement system. Hence it is important for authorities to ensure that they offer assistance in enforcing these regulations. Third party certification on the other hand works with other standardization systems globally. For instance, TPC verify supplier compliance of other food safety, food quality, and good agricultural practices, good processing practices as well as good management systems such as the ISO 9000 standards, environmental standards such as ISO 14000 and Rainforest Alliance ECO-OK standards as well as non genetically modified products. This is evidence that certification such as third party certification are significant drivers of sustainable development and enhance environmental sustainability throughout the globe as these standards are globally implemented. This is achieved through international institutions such as the “International Federation of Organic Agricultural Movement (IFOAM)”, International Accreditation Forum, (IAF) and the Euro-Retailer Produce Working Group Good Agricultural Practices (EUREPGAP) (Hatanaka, Bain, and Busch, 2005). This have greatly influenced high standards and quality food supply across the boarders and at the same time imposing pressure on agrifood producers to engage in environmentally friendly food production practices, ethical management systems as well as sustainability. In addition, TPC is more credible than first and second party certification as it entails independence. Globalization is also seen by many as a disadvantage to the environment as they argue that, Multinational Enterprises MNEs take advantage of the differences in regulations of the environment in between the developed and the developed world, by shifting their operations to the developing world where regulations are lenient, thus making them dumping havens. On the contrary, globalization is a greater advocate of environmental sustainability. This is because, lower barriers to foreign direct investment and to trade, motivate organizations to move transfer environmental technologies and management techniques from nations with tighter environmental standards to third world or developing countries, which lack access to environmental knowhow and capabilities. The failure of governments in the developing world to protect the environment might also be eliminated through self control of environmental performance by companies in developing world. Self regulation entails an organization’s adoption of environmental management systems (EMS) or environmental performance standards beyond government’s regulations. Globalization enhances self regulation in three main ways as suggested by Christmann and Taylor (2001). First, it increases Investments of Multinational enterprises in developing world. In these subsidiaries, the MNEs are expected to raise standards of environmental regulations which are even higher than in their domestic companies. They can achieve this through transferring the best technologies and management practices from established from more strict regulations in developed countries to their subsidiaries. Interest groups also pressure MNEs to enhance their global environmental performance. Secondly, globalization may add environmental self regulation of domestic companies in the developing world. MNEs supplementary in developing world may put pressure on home suppliers to self regulate environmental routine. Finally, globalization may also boost exports from developing to developed nations where clients may rely on environmental performance of a firm as a standard which also exert pressure on domestic companies in developing countries to enhance self regulation (Christmann and Taylor, 2001). Consequently, when environmental regulations are achieved by MNEs in the developing countries, there is definitely an increase in demand on their products in the international market as compared to products that are from the domestic manufactures. This means that, these companies are able to make greater profits and can be able to give much to the society in the developing countries through corporate social responsibility. For instance, companies such as the Atlanta based Cocacola have managed to help in various environmental regulations in the countries they operate in especially in developing countries. This involves restoring of environment through programs in such as tree planting, recycling of plastic materials which have greatly influenced the domestic manufacturers to follow suit. Also through globalization, developing countries have been able to self regulate through enacting and engaging in environmental conservation. Various environmental management systems have been developed in several countries in the developing world to assist in conservation of the environment, thanks to the influence of globalization (Christmann and Taylor, 2001). Conclusion Globalization is that has been use since 1980’s but its meaning continues to differ among scholars, experts, government agents as well as religious leaders. Globalization however, entails the free movement of people, information, goods and services regardless of their geographical position or time factor. The effects of globalizations are many with some perceiving globalization as a negative connotation. However, in this paper, the positive effects of globalization have been identified through keenly exploring through solid literature. The paper tries to demonstrate the link between globalization and sustainable development, environmental sustainability, improved quality of products and service among other issues. The role of global monitory institutions such as World Bank, IMF as well as the role of trade organizations such as WTO has been identified as proponents of positive globalization effects. In addition, Certification standards such as ISO 14000 and ISO 9000 have been accredited as playing a main role in enhancing sustainability in environment through globalization. In addition multinational enterprises move to the developed world with fewer regulations on the environment and import with them the best environmental technologies in environmental management systems to help protect developing countries from environmental degradation through traditional pollution practices. In addition, trade organizations set certain standards for goods and services to be traded between member countries which have been enhanced by globalization. Thus, globalization is a tool for sustainable economic development and environmental sustainability. References Arndt, S. W. (1997). Globalization and the Open Economy, North American Journal of Economics & Finance vol.8 No. l, 71-79. Byrnea, John and Gloverb, Leigh, (2002). A Common Future or Towards a Future Commons: Globalization and Sustainable Development since UNCED, International Review for Environmental Strategies, Vol. 3, No. 1, pp. 5 – 25. Christmann, P. and Taylor, G. (2001). Globalization and the environment: Determinants of firm self regulation in China. Journal of International Business Studies, Vol. 32, No.3, 439-458.. Guler, I., Guillen, M.F. and Macpherson, J.M. (2002). Global competition, institutions and the diffusions, of organizational practices: The international spread of ISO 900 quality certificates, Administrative Science Quarterly Vol. 47, No. 2, pp. 207-232. Hatanaka, M., Bain, C., and Busch, L. (2005). Third-party certification in the global agrifood system, Food Policy Vol.30, 354–369. Intriligator, D. M. (2003). Globalization of the World Economy: Potential Benefits and Costs and A Net Assessment, Globalization of the World Economy, No. 33, p.1-21. Ohmae, Kenichi, (1990). The Borderless World: Power and Strategy in the International Economy, New York: HarperBusiness. World Commission on Environment and Development (WCED). (1987). Our common future. New York: Oxford University Press. Read More