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Does Globalization Always Make Economic Sense?

Table of Contents

  • Executive Summary
  • Introduction
  • The Globalization Process
  • Expansion of Free Market Policies
  • Big Fish Eat Small Fish
  • The World Economy
  • Global Brands
  • Global Competition
  • Conclusion
  • References

 Executive Summary

With the ill effects of globalization acutely felt in certain parts of the world, it could be questioned why any organization, nation or individual would consider encouraging its spread.

Introduction

With the advent of the internet and large computing systems that are nevertheless small in physical scale, the world is becoming an ever-shrinking globe. National boundaries are becoming blurred as people in India begin working for companies in the United States and cultural groups are starting to lose their sense of uniqueness as with the advent of full-scale capitalism, the civilizations of the world are becoming increasingly Westernized. This globalization, or inter-nationalization, the process has been a hotly debated topic in the media, political and social circles for the past several years.

Does Globalization Always Make Economic Sense?

The Globalization Process

The concept of a “shrinking world,” a world in which travel, trade and communication between countries are becoming easily accessible to everyone, is attracting more and more companies to the world market thanks to significant advances in transportation, communication and a recognition of the success of libertarian marketing systems.

“The globalization of markets has certainly accelerated through almost universal acceptance of the democratic free enterprise model and new communication technologies, including satellites and the Internet” (Cateora 2005).

Globalization is described by the International Monetary Fund as “a historic phenomenon” involving “the convergence of economies around the world, in particular through trade and financial flows” (International Monetary Staff 2002). It is typically viewed as a necessary and unavoidable key to future world economic development. Others have denounced the process as it seems to increase the current inequalities that exist within and between nations, threatens the employment and living standards of individuals in all countries as talent is pulled from each. Low-paying jobs are farmed out to others and prevent the natural social progress with which each of these countries has been involved.

Changes in the way companies do business were rapid and widespread, as the idea of globalization was implemented.

It is the inherent nature of the marketplace to increase efficiency within the workplace by continually striving to produce the most products with the least expenditure of resources. It is this concept that has driven many corporations to join in the globalization process, frequently outsourcing many of their activities and production processes to less developed countries in which this process is less expensive and requires fewer restrictions, licensing, and controls. “Global markets offer greater opportunity for people to tap into more and larger markets around the world. It means they will have access to more capital flows, technology, cheaper imports and wider export markets “(IMF Staff 2002).

Expansion of Free Market Policies

While the idea of globalization sounds like an ideal situation for increased worldwide flow of goods and currencies, as well as a possible solution for redistribution of wealth into some of the world’s most impoverished countries, “in practice, this has meant that the governments of the advanced capitalist countries, along with the I.M.F., the World Bank, and the W.T.O., have increasingly sought to force other nations to adopt market economies, privatize public companies and resources, abandon labour and environmental regulations, reduce social services, and embrace ‘free trade’ and the free movement of transnational capital” (Smith 2002). It is noted that much of the globalization effort is being organized and encouraged by the Western capitalist countries and the big businesses that have ever-increasing power in the political circles, forcing their ideas, agendas and policies upon developing nations desperate for some help. The policies of a free market system in a globalized economy is envied, emulated and remains the ‘gold standard’ of national economic policy accepted by economists, businessmen, politicians and academics worldwide (Brace, 2001). The reduction of trade restrictions along with the opening of monetary incentives to foreign investments over the last two decades has combined with stimulating economic development. The expansion of free-market policies is the financial tool, one already in place and expanding, which is affecting technological advancements and wealth (Burns, 2006).   

Big Fish Eat Small Fish

Because of the increased ability for these more giant corporations to move into smaller markets, bringing in their more significant resources, higher capital and more exceptional talent to undercut their competitors, smaller businesses are finding it more and more challenging to survive the globalized marketplace

Rather than leading to an increased diversification in the market, as well as the associated opportunities for employment and competitive salaries, globalization is beginning to decrease the ability of the local citizenry to find adequate support outside of the multi-national corporation and opportunities for entrepreneurship dwindle. “As we all search for the best deal for our consumer dollars, local superstores and on-line shopping drive our Mom and Pop shops, local manufacturing, and local service companies out of business. As local businesses close their doors, the number and diversity of local jobs decrease” (Salmons & Babitsky 2002 p. 4).

The World Economy

Despite the apparent threat to local businesses, developing nations are eager to accept the influx of big business as the international corporation operating in the right third world country can substantially increase the G.N.P. This interaction among nations leading to the overall economic growth of those countries has been historically demonstrated. Globalization offers extensive opportunities for genuinely global development. Because companies expand into new markets based on how well that market can meet their own needs, this process sees some countries becoming integrated into the worldwide economy much faster than others. 

Economically deprived countries, not surprisingly, have more massive proportions of poor than industrialized nations. These countries, Cuba for example, cannot afford protectionist practices such as building barriers to free trade if they wish to bring their respective populations out of impoverished conditions (Dollar, Lindert & Williamson, 2001). “On average, those developing countries that lowered tariffs sharply in the 1980s grew more quickly in the 1990s than those that did not” (Dollar, 2001).  

Global Brands

In moving into other countries and other environments, companies need to take into consideration not only their products and services but the resources of materials and workers available in a local market as well as the individual tastes and desires of the consumers in that area that have been formed by a combination of cultural background, national identity and personal preference. In “Why global brands are not always cost-effective,” Lindsay Williams quotes Laurie Young, global head of marketing at PricewaterhouseCoopers as saying “Local culture is a powerful barrier to the success of a global brand. It is time that we recognized the power of cultural differences and their effect on global enterprise” (Williams 2004). Of course, all this change filters down to affect the individual citizens authentically ultimately. No longer sure of their livelihood thanks to increased competition for fewer jobs available, the globalized economy has made it difficult, if not impossible, for the poor to dig their way out of their poverty while increasingly helping the wealthy add to their fortunes. Besides, the jobs that do become available are not always jobs that would be open to residents as they might require skills or knowledge that were not previously necessary.  

Global Competition 

Downsizing by companies moves the bulk of workers into a contract and temporary employment” (Salmons & Babitsky 2002). This increased competition for jobs has led to a Westernized way of living that emphasizes fast lifestyles and constant pressure to keep up with the latest advancements and social opportunities to have a chance at the best jobs. “In this world of intense competition, social networking is everything. 

Who you know and how they can help you is the coin of the realm. The result is that we increasingly isolate ourselves into gated communities and private membership organizations” (Salmons & Babitsky 2002).  

Conclusion

It could be argued that globalization has been in existence ever since the first two countries established communication with each other. 

The only difference now is that the advances in technology and communication have enabled the business to be conducted over longer distances in less time, allowing this kind of interaction to occur regardless of geographic location. There are benefits to be gained through globalization as countries such as Asia see a dramatic improvement in their G.N.P., which is further transferred down into the general populace. Although there is still poverty in these nations, it can be argued that the poor are living better quality lives as a result of the influx of capital and resources. The question, then, is not how to stop globalization, but rather how to make globalization work in such a way that it does not break down the cultural ideals, family structures or provide corporations with unchecked controls over developing nations even while it works to benefit the world economy.

Works Cited
  • Brace, Amanda. “Free Trade History, Theory and Ideology.”  Friends of the Earth International.  (January 24, 2001). November 19, 2007, <https://www.foei.org/trade/activistguide/ideology.htm#push>
  • Burns, Alice. “Free Market Environmentalism.” Digital Freedom Network. (August 8, 2006). November 19, 2007, <https://www.dfn.org/printer_FreeMarketEnvironmentalism.shtml>
  • Cateora, Phillip R. and John Graham.  International Marketing.  Columbus: McGraw-Hill, 2005.
  • Dollar, David. “Globalization, Inequality and Poverty since 1980.” World Bank, 2001.   
  • Dollar, David; Lindert, Peter & Williamson, Jeffrey. “Does Globalization Make the World More Unequal?” NBER Working Paper N. 8228, 2001.
  • International Monetary Fund Staff. “Globalization: Threat or Opportunity.”  International Monetary Fund. 
  • (January 2002). November 19, 2007, <https://www.imf.org/external/np/exr/ib/2000/041200.htm#II>
  • Salmons, Jim & Babitsky, Timlynn. “Shamrocks and Nanocorps: Business Model and Technology Innovation to Bridge the Digital Divide.”  2002 Northern Montana Technology Exposition [keynote presentation]. (March 23, 2003). November 19, 2007 < https://sohodojo.com/mt-tech-expo-scripted.pdf>  
  • Smith, David Michael. “The Growing Revolt Against Globalization.”  Impact Press.  (August / September 2002). November 19, 2007, <https://www.impactpress.com/articles/augsep02/globalization8902.html>
  • Williams, Lindsay, “Why global brands are not always cost-effective,” The Business.  November 19, 2007, <https://df.atalink.co.uk/articles/article-83.phtml>
  • World Bank. “Globalization, Growth and Poverty: Facts, Fears and an Agenda for Action. 

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