Globalization and Its Effect on the World - Essay Example

?“Globalization” In the world today it is seen that globalization exists in almost every field irrespective of the processes involved. Globalization is a concept widely studied by the researchers and theorists. But in the recent times it is still seen that some of concepts relating to globalization have remained unexplored. Many people ask as to if globalization really exist today and if it does why is it being given so much importance these days? A debate is going on between the proponents and opponents of globalization regarding the pros and cons of it. This essay would specifically revolve around sectors which are being affected by globalization. The topic of globalization covers different issues revolving around economics, society, culture and religion. Globalization has been defined by Goldstein as “the worldwide spread of industrial production and new technologies that is promoted by unrestricted mobility of capital and unfettered freedom of trade” (Goldstein p vi). This clearly shows that globalization also affects the issue of investment and economy in this world. On another instance James Rosenau described it as “a label that is presently in vogue to account for peoples, activities, norms, ideas, goods, services, and currencies that are decreasingly confined to a particular geographic space and its local and established practices" (Rosenau 1997 p 360). Previously it was believed that globalization only affected the economical factors of the world but a thorough research on the topic shows that it has an effect on other aspects of the world such as political and social aspects. Globalization not only affects the microenvironment but also affects the macro environment if viewed from an economic perspective. Micro environment here refers to the advancement in technology along with its effect on the organizations and macro environment is the whole situation in which the markets are operating (Oman, 1994). Globalization has its own positive and negative effects on all the aspects of the world. Its advantages revolve around the accessibility of financial resources for the organizations. These financial resources can help the developing countries to develop in the competitive world. The increase in the accessibility of the financial resources can be witnessed in the Direction of Trade Statistics Yearbook and Global Development Finance 1999. It shows that the East Asia Pacific has grown from a GDP of 15.8 in 1980 to 36.3 in the year of 1997. This has also been seen in the region of Europe and Latin America. The lowered accessibility of finance in the 1980s resulted in suppressed growth which led to many problems. It was after this that the new funds designated to states included the aspect of foreign direct investment. This type of investment is encouraged in the developing countries because they can help in increasing the capital of a state through which the state can further develop economically. Globalization is an aspect which not only helps the countries directly but also helps the countries to improve indirectly. It helps in the improvisation of the living and working standards of a country. Foreign Direct Investment is a type of process through which globalization has given a direct advantage to the countries whereas an indirect advantage can be witnessed in the accessibility of these types of investments to different states. The concept of globalization has increased the interest of developed organizations to expand their business in countries where it was previously unknown. As the organizations are expanding it can be seen that their products are widely distributed all over the world. Moreover the distribution channel of the new product helps the countries to increase their understanding about the technological advancements of the world. Foreign investors not only help the country economically but they also help to introduce technologies which were previously not known in the country. The country can benefit from these technologies by using them in an effective manner such that their growth is increased. Democracy is an important perspective of a state which helps in determining its economical success. Maxfield puts forward that capital markets which deal in bonds and stocks can be successful if democracy is prevalent in the society (Maxfield 1999). Democracy can only prevail if the capital markets help in supporting it by abolishing the oligopolistic arrangements prevalent in different nations these days. While globalization has a positive effect on the economical state of the country it also has its negative impacts. The disadvantages of globalization should be kept in mind so that a balance can be kept in between the advantages and disadvantages. The problems that the aspect of globalization poses to the underdeveloped nations can be quite harmful. On the other hand the developed nations have a control over the aspects of globalization because of the excess support, funds and technology that they possess. The underdeveloped nations lack proper resources which may be needed to handle these problems. The developing nations usually face the problem of handling capital and trade flows that hit the economy of these countries. Heterogeneity is one of the problems that is forced upon the developing nations by globalization. It not only affects the state on a regional level but has an effect on the overall economy. This can be witnessed in a group of workers who often find it difficult to cope up with the new processes enforced in the organization. Some of the workers however take advantage of these opportunities and prosper in the right way. This leads to a conflict of interest on the basis of social and political approaches. While the capital flows to the countries have advantages they have also proved to bring about new problems for the governments in managing the economies. These issues can be witnessed in events which took place in the 1990s. It was seen that the inflows resulted in the valuation of the exchange rates. These exchanges further reduced competition in the market along with a foreign exchange crisis. This crisis led to other problems such as banking crisis which were to be handled by the governments. To tackle the problem laid down by the crisis it is important that a financial committee is formed so that the banking crisis can be avoided. To handle the capital flows and foreign exchange it is important that certain amendments are made on a domestic level. Rodrik identifies these problems in the following words “Openness to the world economy can be the source of many economic benefits…. But these are only potential benefits, to be realized in full only when the complementary policies and institutions are in place domestically" (Rodrik, 1999, p. 1; see also Rodrik, 1997). A question here arises as to if globalization only has an effect on the economics. Studies have been carried out to find out the relationship of globalization and labor market trends and it has been analyzed that both of these have a relationship. A study by Dreher and Gaston showed that the de-unionization of Organization for Economic Cooperation and Development occurred due to globalization. Inequality is an aspect ignored by the researchers when relating globalization. It has been seen that the social integration is not taken into view when analyzing the economics research. An example here can be taken of a state which may resort to subsidies and lowering of tax because of the limitless capital mobility. These reduced taxes can lower the social standards of a nation along with a reduced pay. This can further result in inequality. This can be seen as a negative social impact of globalization. Similarly if one analyzes the political aspects along with globalization it can be seen that several problems can be rooted out (Dreher 2006). Political globalization can help to decrease the inequalities created by the economic globalization. Thus a balance between these two types of globalization can help to root out the problems that the nation is currently facing. Income inequality and globalization has a direct relationship and this has been reviewed in several of the researches. A research carried out by Dreher and Gaston showed that globalization has worsened the overall equality in the payment scales. Their results clearly showed that the income inequality was mostly prevalent in the OECD countries. According to the research the less developed nations had a little impact on the problems of inequality. They believe that income inequality cannot be removed through democracy as it tends to increase the problem. To further analyze this aspect it is necessary that other research methods are carried out to find the policies behind such a process (Dreher & Gaston 2008). Globalization also has an effect on the growth of a nation as has been found by different researches. According to Chanda (2005) capital account openness is a problem through which the developing countries are more prone to the negatives of globalization. However Rodrik (1998) has denied the negatives of capital account openness on the growth. On another instances Dollar & Kray (2001) have analyzed the situation and put forward the fact that Foreign Direct Investment has a role to play in the rate of growth. Greenway et al affirmed the role of foreign direct investment and growth. Edison et al (2002) observed that there is no such relation between growth and globalization. Dreher in 2006 however concluded from all the research done that globalization and growth are indeed related in a positive aspect. According to Dreher globalization is a process through which a country can grow and have great economical benefits (Dreher 2006). The contact between people has improved since the 18th century and this can be witnessed in the different transportation systems. The improved facilities have decreased the expenses of transportation along with a process through which information can be diffused from one place of the world to the other. In other words the distance barriers have been removed in the society through the process of globalization. With the increase in globalization it is seen that immigration, capital flows and foreign direct investments have increased all over. The states are realizing the importance of such a concept and have used it for the betterment of the people. The income distribution and opportunities of employment created are being used by the states to their benefits. It has been seen that people argue regarding the positives and negatives of globalization. The proponents of globalization argue that trade and economical development is necessary for growth and this is directly linked to the aspect of globalization. The opponents of globalization on the other hand argue that globalization has more disadvantages than the advantages. They believe that globalization is creating a gap amongst the society which is increasing the problems for a nation. Income inequality is one of the problems laid down by the opponents along with the handling of capital inflows by the nations. The proponents also argue that globalization has achieved its mark by decreasing world poverty in the last twenty years whereas the opponents put forward the development of China as the main reason of the decrease in poverty. They believe that absolute poverty has increased in the developing nations along with a rise in the relative poverty all over the world. However these arguments do not particularly bring forward a conclusion as a wide research on this topic is still necessary. Globalization is a process which has both positive and negative impacts. Globalization not only affects a single individual but tends to affect the whole economy of a country. Globalization has been used by many nations to improve their economy and political factors whereas the negatives of the concept are also posing threats to these nations. In conclusion the negatives still do not outclass the positives of globalization and both of these aspects should be taken into view by the nation which is implementing the concept. Bibliography: CHANDA, A. (2005). The influence of capital controls on long run growth: Where and how much? Journal of Development Economics. 77, 441. DOLLAR, D. and KRAAY, A. (2001) Trade, growth, and poverty, World Bank Discussion Paper, Washington, DC. DREHER, A. (2006). The influence of globalization on taxes and social policy: An empirical analysis for OECD countries. EUROPEAN JOURNAL OF POLITICAL ECONOMY. 22, 179-201. DREHER, A., & GASTON, N. (2007). Has Globalisation Really had no Effect on Unions? Kyklos. 60, 165-186. DREHER, A., & GASTON, N. (2008). Has Globalization Increased Inequality? REVIEW OF INTERNATIONAL ECONOMICS. 16, 516-536. EDISON, H. J. (2002). International Financial Integration and Economic Growth. MAXFIELD, S., (1999). 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