Benefits, Cost, and Challenges Posed by Globalization - Assignment Example

Running Header: Globalization Student’s Name: Instructor’s Name: Course Code & Name: Date of Submission: Table of Contents Running Header: Globalization 1 Table of Contents 1 Globalization 3 Benefits of globalization 4 International trade 4 Financial benefits 5 Migration 6 Cost of Globalization 6 Economy divergence 6 Global instabilities 7 National economies control 8 Unemployment 8 Challenges posed by globalization 9 Fiscal policies 9 National instabilities 10 Conclusion 10 Globalization Globalization refers to the integration of economies globally with the increase in exchange of capital, labour, goods and services. This may have been accelerated by the technological changes e.g. internet and it has been going on for centuries. Globalization is the increase in worldwide exchanges and trade in an increasingly integrated, international, open and borderless economy. The growth of exchanges and trade has been tremendous and it is not only limited to the international trade of services and goods but to the exchanges of technology, movement of people through migration and international travel , movement of capital and currencies and the flow of ideas and information internationally. One of the means which can measure globalization is the transactions of international finances in the currency market of New York per day which is over $1.5 trillion and the stock market having large amount of transactions. Globalization has brought about frankness in the international economy, the worldwide market integration and market moving towards a world which is borderless which has made the global flows to increase tremendously (Moynagh & Worsley, 2008). The globalization has been facilitated by several factors which have made it to effect very smoothly to reach to every corner of the earth. One of the major factors that have made it to spread very fast is the technological advances. It has lowered the cost of communication and transportation significantly. The cost of storage of information and processing of data has also been lowered dramatically and the retrieval of information is from one source. This makes it easy because people can access information in every part of the world without any need to move thus cutting any cost of transportation. The introduction of World Wide Web, Internet and Electronic mail few years ago has made the technology to be very useful and being used by a large group of people. The other source of globalization is economic and trade liberalization which has led to trading system which is liberal and the trade protections has reduced greatly. This liberalization of trade is estimated to have started a century ago but it was interrupted by the great depression and World War I and II. It was started again after the World War II was over and it became to what is known as World Trade Organization (WTO). The other types of liberalization have led to easy and faster movement of the factors of production i.e. labour and capital (Held & McGrew, 2007). The other source of globalization consisted of changes in institutions where they can reach the global due to changes in the technology and they use the advanced means of communication. This has led to industries and institutions not only to rely on the local market but to extend their services and sell their product all over the world to become international or multinational. This has led to industries increasing their productivity hence increasing their profitability. The major organisations which have benefited from the globalisation are the Non Governmental Organisations (NGO) because they provide their services all over the world and to all cultures. They are able to import labour and capital all over the world with ease. Benefits of globalization International trade International trade is one of the benefits of globalization. The countries are linked together by the exchange of services and goods through exports and imports. Countries have to rely on imports and exports to get the goods they do not have via exchange of what they produce in excess. Globalization has led to division of labour and specialization (Dicken, 2007). This has led to a large increase in production which does not involve a nation but the world as a whole. Multinational companies are most beneficiaries of the globalization because they can trade anywhere in the world. Most these Multinational companies have subsidiaries in the other countries e.g. a company like Ford manufactures gearboxes in Bordeaux and it exports them to their assembly plant in the other countries. A country like china it relies heavily on the imports and exports. Financial benefits The first one is the foreign indirect investment. The globalization helps the country to benefit from this kind of investment. This is carried out when funds are used to buy in other country financial assets. These financial assets could consist of bonds issued by companies or government, foreign stocks or currency e.g. financial institutions in UK can buy shares for a company in the New York Stock Exchange (NSE). The other financial benefit is the foreign direct investment. This occurs when a company increases, acquires or establishes production facilities in another country. Multinational companies are the one that are responsible for the foreign direct investment because they are one that controls the firms (Bauman, 2000). The major benefits of the foreign direct investment are the developed countries because their markets are affluent and large. The Eastern Europe and the developing countries have less lucrative and smaller markets hence most of the Multinational companies do not invest in them. Foreign direct investment takes place in the poor countries to explore natural resources like oil and they also take the advantage of the available cheap labour and also for the penetration of the market. Multinational companies invest in China because there is cheap labour and there is potential market. The Multinational companies will only invest where return on investment is guaranteed like there is a natural resource, the labour is cheap or the market is large for its products (Rugman & Hodgetts, 2002). The host country benefits from the multinational companies because it brings income to the country inform of taxes, the population is employed and the infrastructure is well done. Migration Globalization leads to migration where people move to other countries in search of employment or for a better living. There are a variety of reasons for migration i.e. political, social and economic reasons. People may move for them to reunited with their families which improve the social life of the society, some may migrate to other countries to study e.g. people in Africa go the European countries and US to study because they have better study facilities compared to the ones in Africa, other people may move to earn higher wages i.e. people also migrate to the US to earn a better living because the payment in the US are better compared to Africa while other move to other countries to perform voluntary work may be in NGOs or in churches. Cost of Globalization Economy divergence There are several costs or challenges that are involved with globalisation. These costs have contributed to conflicts of different kinds whether international, national or regional level. There have been several equity challenges in the distribution of benefits from globalization in regions, nations, organisations and individuals (Held, 2000). The major benefits of globalisation mostly benefit the rich individuals and nations thus having inequalities hence this leads to conflicts both internationally and nationally. There have been a suggestion of any likelihood of converging the global income from the observation that the there has been a faster growth of the poor nation compared to the rich nations. The research have shown that the rich countries of East Asia has been growing at a faster rate while the nations of Central and South America, Asia and Africa has been growing at very slow rate. These countries which are growing at a slower rate and are poor are being marginalized. This globalization has led to the divergence in worldwide income making the countries whose economies is growing at very fast rate to join the rich nations and the poor nations to remain behind. This kind of difference between nation leads to international conflicts because the poor nations will try to join the rich nations yet the rich nations will not allow the because of the economy difference thus the distribution of the wealth throughout the world becomes a greater challenge to world economy globalization. Global instabilities This cost affects the economies interdependency. There has been likelihood that economic fluctuations in an economy in a certain country would have a global impact. This was demonstrated in Asia, financial and exchange rate started in Thailand in 1997 and it was distributed to the Southeast Asia countries and South Korea was included. This potential instabilities and linkages create an impression that there is a likelihood of interconnected economies. When there is an occurrence of depression or recession worldwide, it calls the international community to cut off the interdependencies which could have been created via globalization (Ngaire, 2000). The interdependency could result to economic conflict which could lead to economic warfare and also could be escalated to military conflict which would result to war among countries like the one that erupted in the 1930s. National economies control The control of national economies has been seen as diverting to the international organizations, global or multinational firms and nation which are powerful. The globalization then seems as if it give power to some countries because they have better economies and they are powerful which is observed as discrimination. Globalization can create a belief that the powerful nations they are the one that hold the global forces. This could lead to a conflict that the some countries are controlled by others and they might not be comfortable particularly if they have natural resources. Unemployment Unemployment is also considered as one of the cost of globalization in the industrialized economies. It has been argued that there have been low rates of unemployment in the nations with high wages compared to the nations with low wages. The rate of employment is not well distributed despite the presence of globalization. It has been discussed that the technological trends and the national policies are major factor that determine employment rates (Micheal, 2003). Globalization cannot be a clear indication of the rates of employment hence if we say it creates mobility of labour it is with a smaller degree. Some even argue that globalization is threat to the social warfare in some countries although other issues are much important like demographic trends and fiscal policies. The uneconomic factors of globalization are involved with potential costs and do have greater risks and they can be disastrous. Challenges posed by globalization Fiscal policies Despite the fact that there are a lot of benefits that are brought by globalization, there are few challenges that arise from the same. It becomes difficult for countries to differentiate the income from domestic companies and from multinational companies. It is difficult to formulate a policy that would treat region and international developments separately. It requires that those who are formulating to know the conditions of the world market and also to be scrutinizing the financial market continuously. This potential instabilities and linkages create an impression that there is a likelihood of interconnected economies. When there is an occurrence of depression or recession worldwide, it calls the international community to cut off the interdependencies which could have been created via globalization. The formulation of the policies is challenge of its own kind. The international companies ventures to the developing countries and forces the local industries to close (Mittelman & James, 2000). The reason to the multinational companies to excel in the industries is because they have enough capital to carry out its activities and enough man power and skills. When the local companies tries to compete with the international companies they always fail. It has been considered that for competition to good it does not rely only on the technological or economic factors but also to no economic factors. The countries should have good governance, institutions that are democratic and human rights should be exercised. Some of the multinational companies fail because the rules they are given in the foreign countries cannot be coped with. Some of the companies even create political instability by being biased towards a certain political person and other treats their employees in an inhuman way. The rate of employment is not well distributed despite the presence of globalization. It has been discussed that the technological trends and the national policies are major factor that determine employment rates. Globalization cannot be a clear indication of the rates of employment hence if we say it creates mobility of labour it is with a smaller degree. Some even argue that globalization is threat to the social warfare in some countries although other issues are much important like demographic trends and fiscal policies. National instabilities When the countries are involved in the major activities, some feel threatened by others in process of carrying out their duties. For the developing countries they do not like the developed countries to come and exploit oils in their countries because they believe that all the revenues they go to the mother countries. They can even cause conflict between countries. There has been likelihood that economic fluctuations in an economy in a certain country would have a global collision. This was demonstrated in Asia, financial and exchange rate started in Thailand in 1997 and it was distributed to the Southeast Asia countries and South Korea was included. This potential instabilities and linkages create an impression that there is a likelihood of interconnected economies. When there is an occurrence of depression or recession worldwide, it calls the international community to cut off the interdependencies which could have been created via globalization Conclusion Generally, globalization helps the whole world to the resources it has i.e. labour, technology, capital etc with ease. It allows easy movement of goods and services from one country to the other and from one region to the other. Globalisation is the increase in worldwide exchanges and trade in an increasingly integrated, international, open and borderless economy. The increase of exchanges and trade has been tremendous and it is not only restricted to the international trade of services and goods but to the exchanges of technology, movement of people through migration and international travel , movement of capital and currencies and the flow of ideas and information internationally. This exchange of goods and services it has made the world to develop at a faster rate economically and to distribute its resources everywhere (Moynagh & Worsley, 2008). The introduction of World Wide Web, Internet and Electronic mail few years ago has made the technology to be very useful and being used by a large group of people. The other source of globalisation is economic and trade liberalization which has led to trading system which is liberal and the trade protections has reduced greatly. This has led to industries and institutions not only to rely on the local market but to extend their services and sell their product all over the world to become international or multinational. This has led to industries increasing their productivity hence increasing their profitability. Globalization provides both threats and opportunities to the country. On the other hand it provides bigger markets and cheaper sources of labour, components and raw materials. Globalization is mostly driven by technology, cutting costs, growth of customers globally, regulatory barriers reduction and competition. References Bauman, Z. (2000) Globalization. New York: Columbia University Press Dicken, P. (2007) Mapping the Changing Contours of the World Economy, London: Sage Held, D. & McGrew, A. (2007) Globalization/Anti-Globalization: Beyond the Great Divide, Cambridge: Polity Held, D. (1999) Global Transformations. Stanford: Stanford University Press Moynagh, M. & Worsley, R. (2008) Going Global: Key Questions for the 21st Century. London: A&C Black Micheal, D. (2003) Globalization of the world economy: potential cost and benefits, University of California weekly. 3(6), 4-24. Mittelman, M. & James H. (2000) The Globalization Syndrome: Transformation and Resistance, Princeton: Princeton University Press. Ngaire, W. (2000) The political Economy of Globalization. Basingstoke:Macmillan. Ritzer, G. (2004).The McDonaldization of Society. London: Pine Forge Press Rugman, A. & Hodgetts, R. (2002) International Business. London: Prentice Hall Read More