Read this essay to learn about globalization. After reading this essay to learn about:- 1. Introduction to Globalization 2. Areas of Globalization 3. Defining “Globalization” 4. Going Global and Globalization.
Introduction to Globalization:
The new millennium has just begun its roll and is generating heat at the national and international levels. This century is going to be dominated by technology, information and communication. The people of the world are going to be connected to each other crossing the national and continental boundaries.
The coming years are going to witness tremendous development and drastic changes in the ways of doing things. The areas going to be affected by this change would be, communication, information, education, governmental controls over industry and finance, investment, humanology, space, politics, transport, terrorism, and environment.
These changes would not come smoothly. The world which is already divided between the developing and developed economies, the rich and poor are moving apart at alarming rate, will witness intense fight for domination and control over the means of production, distribution, and finance which may at one time give reasons for rethinking for the whole process of unification of the world and may put a question mark on the process of globalization itself.
The main problem facing the world is not the rich and poor or developed and developing regimes, but the division of the world between point of availability of the resources and point of utilization of resources.
This divide has been natural and cemented by time. This has also been the major cause of global movement for domination by force. The memories of such turmoil have not yet faded in the people of those regions.
The resistance that they put-up for the coming changes in the world order is borne out of that fear this fear is what must be uprooted from the consciousness of the population affected through the centuries.
Unless wisdom prevails and the process of unification is conducted in an orderly way leading to mutual understanding of the ground realities and major part of the global population which resides in the developing and under developing countries is made part of the larger movement, the process will continue to generate more heat and resistance making it more and more difficult to bring unification and uniformity in the world order.
Areas of Globalization:
The discussion on globalization is a common place in the developed and developing countries, so much so that it is one of the important topic in World Bank and WTO discussion forums. The most important issue that we must keep in our mind is that globalization must not affect the basic human needs, the needs that are fulfilled by nature like air, water, and soil.
Any control over these three items may lead to disturbances and be the cause of mass movement against globalization. The best world bodies can do is to make sure these basic needs are perpetually available to mankind, if at all globalization has to be carried out in these sectors than it must be for better utilization through rigorous resources management. But at first let us understand what we want to discuss?
There are numerous topics that can be covered under globalization like;
International Trade (Import/Export):
Management, Finance
Trade laws and administration, (arbitration, litigation, and conciliation) and enforcement
*Poverty:
Agriculture, Sanitation, Pollution, Education. Human rights, Peace, Anti-war-world, Employment
Natural resources, Forests, Oceans, Atmosphere, Sea bed, Outer space, Transport, Minerals and metals, Energy sources. Chemicals and petroleum, Real estate, Monetary system. Research and development
Intellectual property, Medicines, Bio-diversity, Nuclear bomb free world, Consumers and markets
Production and distribution,
*Corruption:
Public sector and private sector, Financial institutions, Government and governance, Labour and management. Investment
* Water:
Communication, Information
Well these are some of the potential topics fit for discussion. In some, discussions are for universal propagation and for some universal condemnation or embargo, some are considered favourable for the developed countries and some for the developing countries. If globalization is to mean universality of opportunities, then it should include all of the above topics.
May be one day in the next millennium this might be possible, but in the current millennium, the discussions are focused on globalization of the Trade and Finance including the numerous auxiliary activities.
Defining “Globalization”:
Diffusion of the trade barriers to open world markets on equal terms covering total business cycle of procurement, production, distribution, finance, and consumption.
Different Perceptions of Globalization:
Its perceptions differ from country to country, from individual to individual and from region to region. It refers to an increasing flow of goods and resources across the national boarders and creation of supportive organizational structure to manage the expanding horizons of the trade and finance.
It gives birth to a new term “Global Economy” where goods and services are exchanged freely without any restrictions imposed by the national governments. In other words the national perspective of economy gives way to global economy in such a way the local policies only supplement the greater cause.
The world as it is today, is in a transitional phase, it wants to move towards global perspective but is bound by the sense of interdependence. The world seems to be divided into two groups, one group considers it an essential tool for the expansion of global trade, whereas the other group considers it anti-social where rights of the rich will be protected and the poor will be exploited.
They consider it as the dividing wedge driven between the rich and poor in such a way that the poor will always be on the losing side. That is perhaps the reason why the developed countries are fighting to enforce it and the developing countries are fighting to prevent it.
With so much differences in the perception of the most important global issue it would be in everybody’s interest to narrow down the differences as much as possible so that the movement started by WTO for the unification of the world into one homogeneous unit are materialized.
The effort has to begin at the grass-root level with the people who matter and the people who make the matter an important issue. In the following section brief findings of an opinion survey are presented which clearly indicates the hostility people have about globalization.
In a recent e-mail opinion survey (April-May 2000) conducted by World Bank on “Globalization” there was tremendous response from all over the world, there was severe opposition from the developing nations and not so encouraging responses from the developed countries. The respondents included economists, financiers, historians, common man, NGOs, and even World Bank officials.
Each person contributed his/her ideas on globalization (the author was also one of the respondent). In about 4 weeks times there were over 5000 responses out of which about 150 or so were put up on the e-mail of all respondents for interaction.
In the near future all these responses would be made available to the students of International Business for their research work, meantime the general trend was as under:
(i) Globalization is unidirectional flow of goods from north to south.
(ii) Globalization is the death warrant for the small farmers in the developing countries.
(iii) People who live in extreme poverty can never know what is globalization, it will hit the poor hard.
(iv) The poor are the result of political conditions, corruption, illiteracy, and overpopulation. They cannot join globalization bandwagon unless these anomalies are removed.
(v) Globalization will marginalize the poor.
(vi) Globalization will provide essential tools to compete in equality of opportunities.
(vii) Internationalization of capital accumulation in the form of relocation of production and distribution on selective basis has been termed as globalization. This is what the people in the developed countries do. The poor who constitute a very large population of the world, cannot take part in this relocation and will thus be left out to servitude forever.
(viii) The poor will be deprived of their livelihood if globalization takes root.
(ix) Globalization will increase poverty levels in a short run by putting human resources out of employment.
(x) Globalization is leaving perilous instability and rising inequality.
(xi) Poverty under globalization may actually increase since international capital has no religion and is not regulated by any individual government. Pay packets will decrease, environments will get depleted.
(xii) Globalization is impoverishing the world’s poor, enriching the rich, and devastating the environments.
(xiii) Globalization promotes the concept of one-size-for-all.
(xiv) Globalization is a deliberate process led by international capitalist elites for their own benefit.
(xv) Globalization should recognize freedom of people of individual countries.
(xvi) The process of globalization itself has led to the crises of over production.
(xvi) Globalization is an offshoot of liberalization.
(xvii) Economic globalization has resulted in a process of relocation.
(xviii)Globalization marginalizes the poor who end up making goods for the rich that they could not possibly aspire to buy for themselves.
(xix) Profits do not come through production but through selling. The problem with the developing countries is not the production but the marketing. Globalization does not help those countries in this aspect.
(xx) Global poverty cannot be erased by globalization because it focuses on the victim and not the offender.
(xxi) Globalization has brought inequality in the world. In the year 1965 the per capita income of the G7 nations was 20 times that of the least developed countries, in 1995 it was 39 times and the trend is growing. What will be the situation in the new millennium is any body’s guess.
(xxii) Globalization is an indirect approach by the G7 nations to monopolize on the sources of supply, the same way as was done by colonizers, it is nothing but simply colonization of the underdeveloped and developing countries.
(xxiii) Globalization will deprive the poor of their basic needs for survival by controlling the land, air and water.
The message is very clear, majority of the respondents associated globalization with the poverty and the implications on the poor people.
Going Global and Globalization:
At first let us understand the two similar sounding terms “Going Global” and “Globalization”. The first one refers to the efforts of an individual or an organization to spread its international business operations in the prospective world markets.
The factors that influence such decisions are imperfection in other markets (comparative advantage), and exploitation of opportunities (competitive advantage). In this case the respective governmental machinery in the target markets normally plays defensive and selective role, the success or failure depends on the marketing efforts of the organization entering the global markets.
In both cases the price advantage is the sole reason why organizations tend to go global in operations. If there was no price advantage to be seen nobody would ever think of global operations (Except in situations when due to technological constraints the global markets are ever open like the Carey computers of USA who find global customers as soft targets).
Organizations with technological, financial, communication and managerial advantage to their side as against the target global markets like Tata Sons trying to market their commercial vehicles in African markets, Bangladesh, Sri Lanka etc. or a trading firm opening up new offices in different countries to expand their business operations.
All these efforts filter down to international marketing and development policies covering procurement, processing, delivery, financing etc. Here the efforts are concentrated into a single organization, the industry and the government machinery play a supportive role but not any active role.
The net impact of going global is limited to the specific company and/or the organization. On the other hand globalization is much wider in scope and coverage and national governments take active part in creating conductive environments for trade and commerce to flourish, and its influence is felt at the basic structure of the society and individuals.
Globalization:
It is perhaps the most discussed topic after WTO came into existence. It is the most difficult of questions to answer. It may mean different to different people, it may be interpreted differently in the developing and the developed countries. In the developed countries it means global positioning and marketing.
In the developing countries it means production at global scale. The profits are generated not through production but through marketing or selling. So the different perceptions gives rise to different approach to globalization.
Both these interpretations complement each other. The organizations in the developed countries relocate their production systems in the developing countries to make use of the low salaries, lesser social bindings, lesser health care, and lesser ties with the partners and the partner country.
The host developing country mass produces goods to be marketed by the organizations in the developed countries. Thus major part of the profits lands in the developed countries and marginal profits remain in the developing nations.
Therefore the typical definition that we want for globalization might just elude us due to the said situation in the developed and the developing country. The safest definition could be the one given at the beginning of this section.
Globalization is a process that includes the individuals, the organizations, the governments, the regional trading blocks, the world bodies like World Bank, World Trade Organization, International Chamber of Commerce, and its impact is felt at the national level.
Unification of world markets into single market is globalization, reduction of trade barriers is globalization, cut in subsidies is globalization, free market access is globalization, mutual consultations to promote universal trade and commerce is globalization, uniformity of trade laws is globalization, universal protection against exploitation is globalization, conservation and protection of environment is globalization, universal concern and care for poor is globalization, giving rights to the child for his childhood is globalization.
In nutshell the universal care, concern, and uniformity of system to integrate the individuals and nations through social, cultural, education, finance, science and technology, trade and commerce, is globalization.
Basic purpose of globalization is to let the global consumers get the value for their money, and not to create differentiation, let the value conversion be desired and not imposed unidirectional, creation of the situations conducive for such environments, and let the disparities give way to unification of minds and hands.
Globalization is the cement of the global trade and commerce, of living and togetherness, if applied logically and sensibly it gives better results for universal acceptance. Globalization is connected with international trade and competitiveness in procurement, production, and delivery.
After WTO came into force and trade barriers started diminishing, more and more countries started taking active part in marketing their expertise at the global level. This is a positive attribute for the expansion of trade and industry, still it is associated with lots of changes expected at the government corporate, and the individual level for its popularity and universality.
There was a strong resistance to such changes as were expected under various WTO deliberations, in developing and under-developed countries, but there was least resistance from the developed countries.
The answer to the problem lies here, the connotations of “Globalization” have different orientations in the developed, developing, and the least developed countries. In the developed countries it is viewed as the means for business rationalization, expansion, and maximization of profitability/returns.
In the developing and under-developed countries it is viewed as a threat to their market existence. The root cause of this fear is the basic disparity in the availability of “means” for imparting value addition to the products and services.
These “means” differentiate the net outputs in terms of efficiency (related to zero defect performance in least time cycle), quality (technology related), quantity (related to output for given time and value), and productivity (related to reproducibility in quality, quantity, and efficiency).
If globalization has to be popularized for the betterment of the mankind in the long run, than the said disparities have to be addressed jointly by the industry and the government of the interacting nations. The law of the jungle cannot be applied here “survival of the fittest”. Here the question is for the survival of millions of people in the developing and under-developed countries.
If the developed countries turn a blind eye to this problem then situations can take a turn for the worst. On the other hand if they work jointly at macro and micro level, both at the governmental level and the corporate level, the chances are that the expected change can get roots firmly in the system and a strong public awareness can be generated for the mutual benefit.
Globalization is a change which tends to transform the ways of business including the business environments. Generally any change that causes disturbance of the set-system is bound to create distortions and tensions, explicitly or implicitly.
It is nothing but human nature to resist any change, at first, because it causes or puts them in a situation of discomfort, and secondly because humans cannot live under uncomfortable situation for a longer time.
In the case of globalization of industry and commerce, it is a drastic change especially for the developing and under-developed countries since it covers the local changes in attitudes and perception of the people involved. So the changes have to be brought in to the system gradually through proper induction training and counseling at all levels of governance.
Globalization of the trade in general has the positive effect on the world economy though on the surface it appears to benefit the industrialized nations more than developing nations. The case of the least developed countries apparently appears hopeless but in reality this is not the situation. Globalization is a movement.
The industrialized nations will get immediate advantage but the developing countries would benefit in the long run when they adopt and adapt themselves for the transformation. The problem is not with the system but the human nature, which always resists any change. The benefits from the globalization are but time related concepts.
The developed countries took much longer period to reach a stage where they are now and the developing nations will attain that status in much shorter time. Similarly the least developed nations will take still shorter period to become the developing nations.
One argument that is advocated by the under-developed or smaller countries is that the adoption of mass scale production levels for them or the world class levels of productions do not justify the domestic consumption levels. In such cases the only solution left is to diversify into the export markets.
Infact globalization induces the smaller nations to adopt the export intensive industrial base which may indirectly help them to industrialize their economies in harmony with the world standards and requirements.
Globalization does not permit nations to resist the change because those who resist will find themselves in difficulties in the new century, which is knocking at the doors now. The foundation of the current economic system was laid in the late forties, when GATT took birth and matured into WTO on 1st January 1995.
The countries, which followed the transition, find themselves in a better position to face the challenge being imposed by the “change of gears”. What we have seen so far in the name of globalization is but the tip of the iceberg.
The new millennium has just begun to roll, and as we interact under the changed situations new problems are bound to come up and who knows what the situation will be 20 years from hence, may be altogether different from what it was in the era just gone by into the history.
The position of WTO and the Trading Blocks. As far as world trade is concerned WTO is going to play a vital role not only as a moderator but also as the trendsetter for others to follow in the right perspective. At present there is a marked line of divide between WTO and the regional blocks. WTO works towards globalization of the international trade.
Trading blocks works for the regionalization of the trade. WTO works towards trade diversion whereas the trading block works towards trade creation. WTO works towards global approach, the trading blocks work for the region specific.
WTO does not create preferential blocks but the trading blocks do. WTO was formed with the will of the nations to work together, the trading blocks were formed by selected countries to work for the selected group.
WTO has the potential to become the anchor for the world trade and development despite the fact that it has neither the military power nor the financial power behind it. It gets it powers from the members that it holds together.
It can act as a stable operational body that can propel the global trade on exclusive basis whereas the trading blocks always depends upon one or two nations to act as anchor (an anchor country is one which is economically, technologically and militarily solid and sound) to hold the block from falling apart. Like France, Germany and Italy are the anchor of the EU and USA of NAFTA.
The performance of ASEAN so far is not so good just because of the absence of the anchor country. Thus the formation of the trading blocks is a tedious job and making it a vibrant unit still more difficult job. The case of the ASEAN can be mentioned here, even after long history their operational level is nowhere near to what the other more younger blocks have done like EU and NAFTA.