International Business Analysis: Globalization - Essay Example

International business paper exam Theories of globalization Globalization - the growing integration of economies and societies around the world - has been one of the most hotly-debated topics in international economics over the past few years. I would like to describe three basic theories of globalization: world-system theory, world cultrure theory and world polity theory. The modern world-system originated around 1500. In parts of western Europe, a long-term crisis of feudalism gave way to technological innovation and the rise of market institutions. In the twentieth century, the world-system reached its geographic limit with the extension of capitalist markets and the state system to all regions. It is a capitalist world-economy because the accumulation of private capital, through exploitation in production and sale for profit in a market, is its driving force; it is "a system that operates on the primacy of the endless accumulation of capital via the eventual commodification of everything" (Wallerstein, 1998). A polity is a "system of creating value through the collective conferral of authority" (Meyer, 1980). Nation-states are, of course, the invention of early modern times, institutions produced by the rise of capitalism. Capitalism required a jettisoning of the feudal regime with its patchwork of autonomous sovereignty. Difference was absorbed into the homogeneity of the nation-state, producing a unified legal code that protected private property and the investment of the capitalist and allowed for the circulation of a single currency. This economic act was, of course, represented as the creation of a harmonious community of people with a common language and a coherent culture and worldview. World culture theory is a label for a particular interpretation of globalization that focuses on the way in which participants in the process become conscious of and give meaning to living in the world as a single place. In this account, globalization "refers both to the compression of the world and the intensification of consciousness of the world as a whole"; in other words, it covers the acceleration in concrete global interdependence and in consciousness of the global whole (Robertson, 1992). From economic point of view globalization theories are devided into two theories: neoclassical and Marxist. Reassessing economic theories of globalization. Attention to the economic processes that shape positionality alters our ideas about the spatial dynamics of globalization. Much of the received wisdom of how markets work, both in neoclassical and Marxist economic theory was developed under the assumption that economies have no spatial extent. This received wisdom can be questioned, however, because the production of positionality challenges some key theoretical claims emanating from economics: the stability of market-based equilibria, the possibility of regional economic equality, the social benefits of free trade or land markets, the likelihood that rational choices lead to expected outcomes, the stability of class alliances, and the theory of value (Harvey 1982; Sheppard and Barnes 1990). It follows that the contrasting grand narratives about globalization associated with these two economic theories, of globalization as modernization and globalization as polarization, respectively, are also questionable. The global capitalist economy is better conceived of as an out- of -equilibrium, complex and contested spatiotemporal system whose long-term outcomes are unknowable. 2. Differences in national business systems Initially differences in national business systems (NBS) could be explained by institutional differences. In order to be effective, business firms would not only have to behave rationally toward the market and be technologically efficient as organizations, they would simultaneously have to behave effectively toward the institutional context in which they operated. Thus, if the different European states constitute different formations of institutions, business firms will in effect organize differently and interact with other firms in distinct ways. Today, NBS research has documented differences in the economic organization and institutional formation of countries (Whitley, 1992). It is obvious that, even if the economic process in this way determines the ordering of society, the sociological issue will not become a simple matter. Even in its pure form, the capitalist process gives rise to a still more complex social patterning of society in which the nature of social groups becomes complicated and the game over their opportunistic and opposing interests becomes the major focus of economic organization. This also holds for the sociological nature of the firm. The rise of the capitalist bureaucracy may in the first instance lend its authority relations from the former charismatic entrepreneur, but, as the hierarchy becomes more complex, it will constantly need new ways of legitimizing the power of its offices. This line of argument gives a very coherent and comprehensive account of the modernization and transition of firms and markets in the Western world, which nobody can help but admire for its clarity. However, it does not offer us much help in understanding why very different forms of business organization in Japan, Italy, and Germany evolved to prove so successful after the first oil crisis of 1972. 3. Fair trade and free trade and major problems for firms engaged in fair trade The World Trade Organization, (WTO), is the primary international body to help promote free trade, by drawing up the rules of international trade. It too has been criticized for being very opaque and not allowing enough public participation, while being very welcoming to large corporations. In the past, suggestions that "unfair" goods be taxed, or that standards such as those from the ILO, be required in order for countries to participate in international trade, have led to heavy criticism by advocates of free trade. Although many organisations and individuals involved in fair trade campaigns are still uneasy about unfettered free trade, they are more cautious about arguing for protectionism or coordinated international intervention. Today the emphasis is on the lack of free trade caused by the protectionism (including agricultural subsidies) of the developed world. Without such rich-country protectionism, it is argued poor countries might stand a chance of seriously alleviating poverty. Some Italian consumer organisations proposed in the 1980s that goods that were imported to Italy should be taxed inversely proportionately to the degree to which social and ecological standards of the exporter matched those of Italy - in other words, lower standards meant a higher offsetting tariff. The money so collected would presumably be spent on foreign aid to bring the exporting nation up to Italian standards - thus, all purchasing in Italy would become moral purchasing within the Italian ethical tradition. Fair Trade brings the benefits of trade into the hands of communities that need it most. It sets new social and environmental standards for international companies and demonstrates that trade can indeed be a vehicle for sustainable development. Today, a growing movement of workers, environmentalists, consumers, farmers and social movements worldwide is calling for a different framework for trade. They want a global trading system that promotes workers' rights, protects the environment and sustains the ability of local producers to meet community needs. Together, as consumers, they can make a huge difference by demanding significant changes in the ways goods are produced, and vote with their dollars for a more just and environmentally sound trading system 4. Assessment of the benefits and costs of increasing international trade In order to find the right balance between benefits and costs associated with globalization, citizens of all nations need to understand how globalization works and the policy choices facing them and their societies. Rapid growth and poverty reduction in China, India, and other countries that were poor 20 years ago, has been a positive aspect of globalization. But globalization has also generated significant international opposition over concerns that it has increased inequality and environmental degradation. Globalization is a process of interaction and integration among the people, companies, and governments of different nations, a process driven by international trade and investment and aided by information technology. This process has effects on the environment, on culture, on political systems, on economic development and prosperity, and on human physical well-being in societies around the world. This current wave of globalization has been driven by policies that have opened economies domestically and internationally. In the years since the Second World War, and especially during the past two decades, many governments have adopted free-market economic systems, vastly increasing their own productive potential and creating myriad new opportunities for international trade and investment. 5. Main types of international capital flows and the major determinants of these flows International capital flows are the transfer of financial assets, such as cash, stocks, or bonds, across international borders. Not all capital flows are alike, and there is evidence that the motivation for capital flows and their impact vary by the type of investment. International capital flows are broken down into four categories: portfolio investment, bank capital, other-sector capital, and FDI (foreign direct investment). Shortterm flows are also distinguished by type. Inflows are distinguished based upon whether they are driven by foreign investment in the home economy or the withdrawal of capital from abroad by domestic residents. Outflows are divided into investment made abroad by domestic residents and capital withdrawn from the home economy by foreign investors. Main determinants are that define the policy implication are "that countries needing portfolio investment should focus on tax rate policies and financial instruments. Countries needing bank capital should concentrate on international tax treaties and financial instruments. Countries needing FDI should permit more foreign ownership and provide security to foreign investors via international tax treaties. Countries needing short-term capital should remove exchange controls, and develop new financial instruments and work to advance their telecommunication networks". Finally, global financial markets promote "global efficiency of capital allocation," but they also "undermine global equity of access to international capital." Very large capital inflows, for example, can undermine monetary policies, and, coupled with lax regulatory policies, can stimulate reckless lending and asset bubbles. Volatile capital flows can undermine macroeconomic and exchange rate management, and worsen the liquidity or solvency problems of banks. Bibliography: 1. Axford, B. 2000: "Globalization," in G. Browning, A. Halcli, and F. Webster (eds) Understanding Contemporary Society. London: Sage. 301 UND 2. Axford, B. 1995: The Global System: Economics, Politics and Culture. Cambridge: Polity Press (esp. Chaps 1 and 2) 3. Wallerstein. Utopistics: Or, Historical Choices of the Twenty-First Century. New York: The New Press. 4. Meyer, John W. 1980. "The World Polity and the Authority of the Nation-State." Pp. 109-137 in A. Bergesen (ed.), Studies of the Modern World-System. New York: Academic Press. 5. Nettl, J.P. and Roland Robertson. 1992. Globalization: Social Theory and Global Culture. London: Sage. 6. Whitley, R., ed. European Business Systems. London: Sage, 1992. Read More