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Definition and History of Globalization

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Introduction: Defining Globalization

The word globalisation is both used as a description and a prescription. Descriptively, it is used to mean the ‘process of integration into the world economy.’ In its prescriptive way, it is used to indicate ‘strategy of development based on rapid integration with the world economy’ (Nayyar, 2006). So we are either faced with a mechanism or a plan and they are not the same.

Trade, investment, finance, and labour are essential elements of the world economy. Globalization is the expansion of these economic activities across national boundaries. This will include opening their markets for foreign trade, international investment, international finance and labour movements to the nations concerned. This process would result in interdependency and lead to the integration of the economies of the concerned countries with attendant benefits all.

Definition and History of Globalization

From an individual country or a business point of view, globalization is also a matter of strategy in the overall process described above. This strategy is best described as trying to get the most out of a country/business’ natural endowments – be it raw materials, technology, professional workforce, etc. and reach the world markets with higher competitiveness. Viewed from this perspective, the term globalization defines both a threat and an opportunity, a threat if a dominant economy or a business house commands the world markets and an occasion when even a small player can look at the entire world as his potential market exploits.

Thus, defining globalization brings out both the positive and negative aspects of the term. Deepak Nayyar puts it best in his words: “It is, in part, integration of markets (for goods, services, technology, financial assets, and even money) on the demand side, and, in part, integration of production (horizontal and vertical) on the supply side (Nayyar, 2006).

 Globalization in the Late 19th Century

International trade on both land and sea routes has been taking place for almost a thousand years. The exchange items were mainly spices, silks, and precious stones; in other words, only a limited number of highly valued exotic items. Individual traders were conducting this trade.

Great Britain was the dominant political and economic power that virtually ruled the world when the industrial revolution took place during the 19th century. Due to the industrial revolution, there was a dramatic increase in the production capability of a wide variety of manufactured goods. This essential supply of raw materials, on the one hand, and markets for the finished products. Great Britain thus started sourcing its requirement of natural materials like jute, cotton, cane, minerals, etc. from the colonies and exporting its finished items like textiles, sugar, metal products, etc. back to the colonies. To this extent, the late 19th-century globalization heralded a new trend in international trade-the exchange of raw materials for finished products. However, as the supreme imperial power, Great Britain controlled the prices of the raw materials from its colonies and the costs of finished products sold in its territories. To supplement its workforce, it deployed a substantial number of indentured laborers from the Indian subcontinent to places like the South and East Africa, Australia and South East Asia. Thus, labor was also being moved across the nations during globalization in this period.

Economic Benefits of Globalization

           We have defined globalization both as a process and a strategy. Strategically, firms expand their businesses internationally for reasons such as better profitability of the expanded operations (overseas markets may be more profitable), or to exploit new opportunities (particularly if the local markets are already saturated), or for establishing raw material linkages, and of late for reasons of cheap but skilled workforce.

In this process, money, materials, and workforce move freely across national borders, resulting in ever-increasing global economic activity. Trade and industry flourishes; incomes rise; employment opportunities increase, and in general, the standards of lifestyle and prosperity are set to rise. Developed countries reap the benefits of cheap labor and access to markets apart from the significant insights into how business processes can be performed better and more economically as a result of cross-fertilization of ideas. Developing countries gain access to newer technologies and markets and witness stable GDP growth rates.

Naomi Klein’s Views on Globalization

Naomi Klein is an activist against all the neo-colonial and predatory acts of the giant corporations in globalization. She is the author of books such as “No Logo: Taking Aim on the Brand Bullies,” “The Shock Doctrine: The Rise of Disaster Capitalism” and her collection of the articles ‘Fences and Windows: Dispatches from the Globalization Debate Front Lines’ (Faces of Opposition, 2004).

Her movement against global corporations, the World Trade Organization, International Monetary Fund, and the role played by the governments of major economic powers like the USA, contributed to focus attention on the inequity of the globalization, the rising power of corporations to the detriment of local governments, and the exploitative nature of globalization. The privatization of industries, as a philosophy actively promoted by the World Bank and strongly backed by the USA, is a crucial feature of globalization. The objective of this policy is to secure more and more business for US companies. If in the process, it becomes necessary for the USA to destroy another country at war and rebuild that economy using US companies, it would do so, according to Naomi Klein, and she calls it ‘disaster capitalism.’ Globalization benefits only a limited section of the society (apart from the big corporations) – the part that is already well endowed with education, training, or capital – leaving the larger mass of the poor and illiterate population in greater poverty. Income disparities rise, leading to social unrest.

Naomi Klein contributed to the realization of globalization’s limitations and helped to build public opinion against rampant and reckless privatization.

Conclusion

Globalization as a process and a strategy has been gaining ground. Unlike the late 19th century phenomenon, in the current phase, the labor movement is a significant part. Benefits of globalization are in the increased economic activity globally; drawbacks are in the inequity and rising income disparities, as brought home by Naomi Klein.

References
  • Nayyar, D. (2006), ‘Globalisation, History, and development: A tale of two centuries,’ Cambridge Journal of Economics, 2006, 30, pp.137-159, Oxford University Press.
  • Unknown, (2004), “Faces of Resistance: Confronting Corporate Globalization.” Available at: http://www.cpinternet.com/mbayly/facesofresistance2e.htm [Retrieved on 2 Dec 2007].

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