Advantages and Disadvantages of Globalization - Literature review Example

Globalization Globalization is a term used to mean the opening of nationalistic and local perspectives (social, political, cultural and economic) to a broader stance of an interdependent and interconnected nations with free transfer of commodities and capital across national frontiers. Various scholars have tried to examine the meaning of the word globalization, looking it from different angles (Haugen & Mach, 2010). A business definition of globalization is the process of enabling investment and financial markets to operate internationally following improved communications and deregulation. David, et al, (1999) identified the simplest sense of globalization encompasses speeding, widening and deepening up of global interconnectedness of national aspects. McMicheal (2000), suggest that the term globalization refers to the integration of a project pursuing market rule on a global scale. Anthony Giddens in his philosophy ‘The Consequences of Modernity’ defined globalization as the intensification of international social relations which shorten distant localities in such a way that events occurring locally are shaped by events occurring miles away. Other scholars such as Roland Robertson, a professor of sociology, defined globalization as “the compression of the world and the intensification of the consciousness of the world as a whole” (Bartmess & Cerny, 2007). In this perspective, there is no universally accepted definition of globalization, but the acceptability depends on the context at which the term is used. However, globalization can be well be understood by determining factors and aspects that make up the term. In 2000, International Monetary Fund (IMF) developed four basic aspects of globalization; transaction and trade, investment and capital movement, movement of people and migration and dissemination of knowledge (International Monetary Fund, 2000). In terms of transaction and trade, low-income countries increased their share of world trade from 18.6% in 1971 to 28% in 1999. Private capital flows to low-income and middle-income countries replaced by ‘development assistance’ and ‘aid.' Foreign direct investment became the investment of concern by larger companies in developing countries, which led the introduction of multinational companies (Asmussen, 2011). Advantages of globalization David, et al, (2005) identified that globalization developed international trade and companies. Due to increased interaction among nationalities, countries traded with one another with goods and services they have a comparative advantage (David, et al, 2005). In this perspective, a country sell commodities it have comparative advantage and import commodities it has comparative disadvantage. This led to the growth of home and foreign industries propelled by availability of vital inputs, which are cost effective, and increase in market for the companies’ products. Domestic and foreign corporations have greater flexibility to operate across borders. Bartmess & Cerny (2007) propose that globalization has many benefits to developing countries. They identified that it increased liquidity of capital, allowing investors in high-income nations to invest in developing countries (Bartmess & Cerny, 2007). Asmussen (2011) pointed out that globalization led to the creation of a global village characterized with increased flow of communication. This aspect allows significant information to be shared between individuals and corporation around the world (Asmussen, 2011). Among other infrastructural benefits of globalization is greater speed and ease of transportation for people and goods. Asmussen (2011) also identified that it led to the spread of democratic ideals to developed nations and increased interdependence of nation-states. As a result, economic integration such as custom unions, free trade and political and economic unions emerged. It further enhanced strong links among member nations and more interdependence. Haugen & Mach (2010) propose the national and cultural effects of globalization. They reported that interconnectedness reduced cultural barriers, thereby increasing global village effect. A new culture is eschewed within the traditional culture, which is commonly shared internationally. Haugen & Mach made a paramount contribution to the study of globalization (Haugen & Mach, 2010). According to them, globalization has the tendency of reducing the likelihood of war between developed nations and increases environmental protection in both developed and undeveloped nations. Bartmess & Cerny (2007) supported the findings made by Haugen & Mach and suggested that interrelation among nations led to rise of political philosophies, based on the assumption that free markets are consistent with a natural trajectory toward capitalistic and democratic philosophies (Bartmess & Cerny, 2007). Globalization is suggested to have tremendous effects on the environmental conditions of nations. In fact, it led to increase in environmental protection in developed countries. Another pro-globalization sentiment involves how, based on per capita GDP growth rate, a developing country becomes wealthier. Gersbach, et al, (2005) pointed out that non-globalized economies in 1960 only grew at an annual rate of 1.4%, while globalized economies grew at 4.7% (Gersbach, et al, 2005). The relationship between annual growth and globalization demonstrates benefits of international trade, standard of living and economic development. Gersbach identifies that globalization led to widespread of availability of global commodities and ideologies, which positively influenced the lifestyle of citizens. This argument was echoed by David (2005) who suggested that globalization, increased the opportunities for citizens to work abroad due to liberal foreign worker programs and immigrant laws. The increased interconnectedness of local and national perspectives means an opportunity to take advantage of scale, to benefit from geographical advantage, and to exploit from synergistic benefits. The theory of the economies of scale recognizes that the average cost per unit diminishes as the amount of commodities offered in the market increases (Bartmess & Cerny, 2007). Growth of business and expansion abroad is main strengths in getting the benefits of scale thereby achieving significant cost reduction. In this perspective, globalization creates greater markets for manufactured products, thereby increasing economies of scale to manufacturers. In addition, based on the cost components of the cost structure of the manufacturing company, a manufacturing company may shift its operation to developing nations where the cost of fabrication is lower compared to home country. The globalization of markets results in the creation of a strong market positioning. Disadvantages of globalization Gersbach, et al, (2005) identified that although globalization has positive effects on individual nations, there are other demerits, which tends to invalidate the economic, political, socio-cultural advantages of increased interactions. Gersbach proposed that developing countries suffer from globalization since opening of national borders leads to increase in the chances of civil war. Civil war in the developing countries erupts as the developing countries vie for scarce resources (Gersbach, et al, 2005). Although some scholars categorically state that globalization leads to increase environmental protection in the developing countries, the worse happens in developing countries. It, therefore, declines the environmental integrity as polluting corporations take the advantage of weak regulatory rules in developing countries thereby influencing environmental condition in those nations. Globalization led to the interference of the national sovereignty, especially in the developing countries. Bartmess & Cerny (2007) reported that the creation of a global village led to creation of multilateral corporations such as the World Bank, WHO, International monetary fund (IMF) and world trade organization (WTO) among others (Bartmess & Cerny, 2007). These international bodies infringe on individual and national sovereignty since it influences the political and economic functions of the governments. It leads to the negative implication on the traditional culture that defined the nationalities' behaviours, lifestyles and societal norms. Haugen & Mach (2010) suggested that globalization led to the spread of a materialistic attitude and lifestyle that sees consumption as a path to prosperity. In the developing countries, globalization, increased the unemployment macroeconomic problems. Haugen & Mach (2010) proposed that interconnectedness increased the flow of skilled and non-skilled workers from developed to developing countries. It increased the unemployed army in the economy, thereby raising the completion of employment in the labour market while wage decreases. The corporation also ventures in developing country, not to improve the economic potential in these nations, but rather to exploit decreased cost of production presented in these nations (Haugen & Mach, 2010). Workers are, therefore, exploited and underpaid. The introduction of multinational corporations in developing and low-income countries increased political and economic threats to the individual country. Haugen & Mach (2010) suggested that this corporation influenced the nation-state far exceeding the influence of civil society organization or average individuals. Gersbach, et al, (2005) identified that globalization, increased the probability that the economic disruptions in one nation affects all nations. The interaction across nationalities created a greater risk of diseases been transferred unintentionally between nations. Travelers who move to the most remote corners of the globe facilitated to a quick spread of deadly diseases such as HIV/AIDs among others (Gersbach, et al, 2005). In his philosophy, Asmussen (2011) agreed with this perspective developed by Gersbach and cited several financial and bank crisis which affected other non-participating countries (Asmussen, 2011). The benefits of interconnectedness are not universal. In fact, the rich (developed nations and multinational corporations) are getting richer and poor (developing countries and infant domestic countries) becoming poorer. Asmussen (2011) exemplified that globalization led to intensified competition between local and foreign industries. Due to financial constraint and poor management, the local industries suffer a lot from the globalization since it led to collapse of such industries (Asmussen, 2011). It leads to the introduction of commodities, which are offered in the local market at a lower price than the production cost per unit in the home country. There is increasing threat caused by globalization that the control of world media by a few corporations would limit cultural expression. Haugen & Mach (2010) identified that globalization is a threat to cultural beliefs and norms and, therefore, it leads to cultural decay. The consumption expenditure of consumers is influenced by interconnectedness. Fast food chains like KFC and McDonalds are spreading in the developing nations. To this end, people are consuming more junk food, which is adversely affecting consumer’s health. Globalization is characterized by increased interconnectedness of political, economic, cultural and social aspects of world nations, leading to the creation of a ‘global village’. There are several merits of globalization ranging from increased international trade, the flow of communication, speed and ease transportation to the introduction of foreign corporations, reduced cultural barriers, and increased environmental protection in developed countries among others. Demerits of globalization include decreased environmental integrity, increases the chances of civil war, increased flow of skilled and non-skilled workers from developed to developing nations among others. References Asmussen, C. G. (2011). Dynamics of globalization: Location-specific advantages or liabilities of foreignness?. Bingley: Emerald Group. Bartmess, A., & Cerny, K. (2007). Building competitive advantage through a global network. David, Antony McGrew, David Goldblatt, and Jonathan Perraton. (2005). Global Transformations: politics, Economic and Culture. Stanford: Stanford University press. Introduction, pp. 32-86. Gersbach, H., Schmutzler, A., & Centre for Economic Policy Research (Great Britain) (2005). The effects of globalization on Economic aspect of a nation. London: Centre for Economic Policy Research. Haugen, D. M., & Mach, R. (2010). Globalization. Detroit, U.S.A: Greenhaven Press. International Monetary Fund. (2000). "Globalization: Threats or Opportunity." 12th April 2000: IMF Publications   Read More