The Effects of Capitalism and Globalization - Essay Example

Globalization Globalization is the process of interaction across cultures as individuals and countries exchange ideas, products, worldviews, and cultural artifacts. Globalization, in this sense, occurs in of culture and economics. The new age globalization has been facilitated by information revolution such as the internet. In the earlier ages, factors such as colonialism facilitated the exploration of countries for resources thereby initiating trade across countries. Globalization highly intertwines with capitalism as it facilitates the exploitation of comparative advantage to produce goods that attract high revenues from the market. Capitalism and globalization have entrenched serious problems in socio-economic structures of given countries. Maitra Priyatosh argues that globalization of capitalism fosters the domination of other countries. Maitra, however, explains that the domination of countries did not occur in a single stage. Globalization begins from the first stage, which comprises internationalization of production. In the second stage, capitalism involves internationalization of investment. The third stage comprises the globalization of capitalism. The formation of Bretton Woods Institutions such as IMF and the World Bank initiated a stage for advocating free markets (Maitra 23). This is possible through ultimatums on funding and trade pacts that jeopardize the sovereignty of domestic countries. It is essential to highlight that the IMF usually expects member countries to open up their markets for foreign goods. This is disastrous for developing and emerging economies, which rely on natural resources and agriculture for the survival of their economies. In most cases, the developing economies’ markets are opened up for the developed countries’ industrial goods. Agricultural goods and natural resources, however, face uncertain markets and unstable prices that promise low prospects out of exports. The third phase in the globalization of capitalization entailed aggressive foreign direct investment that promotes capitalist production across the countries in the world. It is essential to highlight that foreign MNC’s usually target low production costs, realized from cheap and available labor, and aim at ready markets for their goods. This compels domestic countries to set policies that favor foreign direct investment at the expense of the welfare of domestic economies. In such circumstances, for instance, the immense political power of MNC’s dilutes the power of trade unions. The policies that bodies such as IMF set for developing and struggling economies constrain them from developing policies that favor their own production and trade. This argument is consistent with Jeffrey Sachs’ argument that capitalism has set a pedestal for a large income gap between countries. Sachs concentrates his argument on the disparities of income between developing and developed economies. In the end, the larger industrialized economies achieve more benefits from capitalism than the developing countries. In as much as the theory of unguarded markets has propelled certain economies and individuals to immense wealth and numerous social benefits, it has equally entrenched poverty in vulnerable places. It is essential to highlight that developing countries are more vulnerable to poor trade policies that favor industrialization at the expense of agriculture and SME’s. Sachs highlights the case of Bangladesh as a country that highly participates in garment making but attains minimal benefits from the same. The garment making factories in Bangladesh make products that are sold to internationally branded companies such as Wal-Mart, J.C Penney, and Yves Saint Laurent (Sachs 11). In this case, the Bangladesh factories are the suppliers of the West’s large companies. In spite of the high profits at companies such as Wal-Mart, Bangladesh factory’ workers face terrible working conditions and poor pay that create an endless cycle of poverty and dependence. It is essential to highlight that most vulnerable part of the population, women and children, suffer the fate of this exploitation (Sachs 11). It also manifests that there are poor trade laws that protect workers. Loose working policies favor major Western companies who create the pressure for more work in factories at low costs. Several reports have reported that the production class in Bangladesh is the major beneficiaries of this imbalance as they engage in corruption and exploit workers for larger profits. Such individuals can easily collude with governments and foreign companies in designing arrangements that favor themselves. Sachs, however, offers optimism for this situation. He explains that the movement from agricultural revolution to industrial revolution has disfavored a certain part of the population. This part of the population most likely does not possess the capital to initiate industrial activities and pay workers. Solving this crisis will involve laying the ground for proper integration between workers and capitalists. For instance, Sachs says that aggressive trade unions in developing countries have helped workers and the general population usurps a major share of the industrial profits. Garment factories have also faced significant protests from sensitized individuals in developed countries. These groups raised attention towards the hypocrisy of companies such as Wal-Mart in attaining supplies from factories that exploit their workers. By using the large companies to exercise pressure on developing countries’ garment industries, the related factories would improve their working conditions. In this sense, he emphasizes that there are watchdogs of globalized capitalism that offer insight into the destructive nature of free trade. It is essential to highlight that there are numerous benefits of globalized capitalism. Capitalism, in its pure sense, demands opening up of borders for full benefits. This is unlike mercantilism that emphasized on exports against imports. In its intended state, free trade espouses that a country trades in a product that it possesses comparative advantage in its production. In this sense, each country has a share in international profits as it exchanges one good for the other, with another country. In the end, trade does not become a zero-sum game as each country benefits from a good in which it relatively spends the least cost in it production. Capitalism also promotes private ownership of property for private benefits. Since each individual has a fair capacity to participate in the market, in perfect conditions, the world caters for the interests of everyone. Capitalism inspires creativity and entrepreneurship, as individuals possess the incentive to produce for themselves rather than for their own country. Capitalism, hence, has influenced improvement in the quality of life for individuals in several parts of the world since business activities directly benefit the individual. This, however, is a superficial perception of capitalism and its globalized form. Capitalism, in spite of the fact that it denounces government intervention, relies on governments to form pacts that favor the transmission of a country’s products across borders. In this capacity, the government engineers the marketing and negotiation processes that allow its citizens and companies to conduct businesses in other countries. In the end, powerful countries with better bargaining powers end up exploiting other countries (Barber 115). Such persuasions normally entail the bargain of providing funds and loans for developing countries. This occurs as MNC’s amass profits and, maybe, flout labor rules. In close relation to this, MNC’s having robust support from their governments may manipulate such a privilege to attain a larger share of bargain in production and marketing. Bodies such as the IMF, although helpful, have facilitated a process that contributes towards income inequality. The bodies were formed by the developed countries. These countries dominate the voting processes of IMF since they possess higher GDP’s. Since IMF is usually crucial in crises, it may sometimes form policies that do not reflect the economic reality of domestic countries. These policies may highly likely lack social welfare elements that favor long-term integration and economic success of countries. IMF has attained the criticism for opening domestic markets for cheap industrial goods that facilitate the death of domestic firms. In essence, this is a consequence of globalized capitalism, as cheap foreign goods kill emerging firms that have low economies of scale. Globalized capitalism, however, can be harnessed to produce benefits for all countries. This, first, occur from the recognition of the entitlements that each country possesses in international trade. Bodies such as the IMF and the stakeholders should form stringent policies that ensure each country attains fair benefits from free trade. Such policies lay the framework for fair competition and trade. In addition, there needs to be a clear emphasis on corporate responsibility. In the new age of trade, businesses realize that their participation in society extends beyond making profits. For instance, businesses realize that the respect of other people’s cultures is essential in long-term integration and harmonious business activities. More essentially, businesses realize that the today’s exploitation of resources should ensure a sustainable future for other generations. Indeed, globalization is responsible for various socio-economic problems in various countries. Maitra argues that globalization leads towards the loss of sovereignty of other countries. This is destructive for eventual growth, as domestic countries form policies that favor FDI at the expense of their own welfare. Sachs echoes similar arguments by stating that capitalism is dual-sided. This manifests in the case of MNC’s that amass large profits while developing countries continue facing extreme poverty. Sachs mention the case of garment factories that mostly entail poor working conditions, yet such entities export their products to companies such as Wal-Mart. Globalized capitalism manifests as an element that favors the countries with better bargaining powers while it stifles developing economies. Although capitalism has provided notable benefits to the world, it needs guidance through an ethics system that watches its poisonous aspect. Works cited Barber, Benjamin. Jihad vs McWorld. New York, NY: Ballantine books. Print. Priyatosh, Maitra. “Globalization of capitalism, agriculture and the negation of nation states,” International Journal of Social Economics 24.1(1997): 237-254. Print. Sachs, Jeffrey. The end of poverty: economic possibilities of our time. New York, NY: Penguin books. Print. Read More