Globalization

GlobalisationGlobalization

Globalization could involve all these things!

Globalization
The term globalization refers to the process of global integration of the economies of nations by allowing the unrestricted flow of goods, services, investments and currencies between countries. Nation states pursued globalization in the hope that this would lead to prosperity. They believed that globalization would bring them agricultural modernization, industrialization, urbanization, and hyper-consumerism resulting in increases of per capita gross domestic product (GDP). Unfortunately, such developments have often been accompanied by increasing social and environmental destruction throughout the world. The process of globalization is having unprecedented impacts, both positive and negative, on life at the individual, village, town, city and national levels.

 It is a worldwide integration and deepening of economic activities. Trend towards greater economic, cultural, political and technological interdependence among national institutions and economies A borderless world as goods, services, cultural products and ideas travel across borders with relative ease.

Globalization Involving Us All

Nearly 23 trillion dollars accounts for the total value of imports/exports that cross national borders each year. Your Everyday Life: Wake up to a GE alarm clock made in China Slip on Adidas sandals made in Indonesia Put your American Eagle clothes on from Mexico Unplug your Nokia phone made in the U.S. and Taiwan Hop into your Toyota made in Kentucky Listen to Coldplay from England Grap a Starbucks coffee with beans harvested in Columbia

 Globalization is reflected in three major policies which many governments have adopted :

Liberalization
The reduction and eventual removal of barriers to the flow of goods, services and capital from one country to another. Example is the reduction or removal of tariffs or taxes on imported agricultural products such as beef, rice, or corn.

Privatization
The total or partial sale of government-owned or controlled corporations or institutions to the private sector. Example is the sale of formerly government owned and managed water and electric companies to private businesses.

Deregulation
The removal of government intervention in settling or regulating the prices of goods and services regardless of whether this benefits the consumers or not.

Example is the deregulation of the oil industry.

Globalization
Two Characteristics:

Two Forces:
Falling Barriers to Trade/ Investment
GATT WTO

Denationalization- national boundaries becoming less relevant.

Internationalization- entities cooperating across national borders.

Technological Innovation
Internet Communication Transportation

World Trade Organization (WTO)

The World Trade Organization is the third, among IMF and World Bank, of the big three international institutions which determine the economic , financial trade policies of our countries. It is the only international organization dealing with the rules of trade between nations. The goal is to help producers of goods and services, exporters, and importers conduct their business. Its main objective is to open up trade among its member countries by reducing tariffs and quotas on traded products.

Two Components : The globalization of markets - that the expansion and access of businesses to all over the world to reach the needs of the customers internationally.

The globalization of production - refers to the sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production to lower their overall cost structure and/or improve the quality or functionality of their product.

Globalization of Production
Vizio flat panel TV is designed in a small office in California assembled in Mexico From panels made in South Korea electronic components made in China microprocessors made in the U.S.

Not just manufacturing Globalization of production has historically been about manufacturing Increasingly companies are using modern communications to outsource service activities to low-cost nations

Globalization of markets

In the past, each country had its own companies in many industries and its own products

Today everyone knows Nintendo Starbucks Coca-Cola McDonalds Samsung

Multinational Corporation(MNCS)

Multinational corporations are companies that manufacture and market the products or services in several countries.

2 types of Globalization
Globalization of consumption: The nation in which a product was made becomes independent of the nationality of the consumer. Globalization of production/ownership: The nationality of the owner and controller of productive assets is independent of the nation housing them. For example, Canada's assets are owned by foreigners at the same proportion as foreigners own all world assets. Consequently, only about 3% of Canadian assets would be owned by Canadians. Similarly, Canadian based firms would have roughly 97% of their total assets overseas.

Four Main Economic Flows

Goods and services, e.g., exports plus imports as a proportion of national income or per capita of population Labor/people, e.g., net migration rates; inward or outward migration flows, weighted by population Capital, e.g., inward or outward direct investment as a proportion of national income or per head of population Technology, e.g., international research & development flows; proportion of populations

EFFECTS
Globalization has various aspects which affect the world in several different ways:

Industrial
Emergence of worldwide production markets and broader access to a range of foreign products for consumers and companies, particularly movement of material and goods between and within national boundaries. International trade in manufactured goods has increased more than 100 times (from $95 billion to $12 trillion) since 1955. China's trade with Africa rose sevenfold during 200007 alone.

Financial
Emergence of worldwide financial markets and better access to external financing for borrowers. By the early part of the 21st century more than $1.5 trillion in national currencies were traded daily to support the expanded levels of trade and investment. As of 20052007, the Port of Shanghai holds the title as the World's busiest port

Political

The development of globalization has wide-ranging impacts on political developments, which particularly go along with the decrease of the importance of the state. Through the creation of sub-state and supra-state institutions such as the EU, the WTO, the G8 or the International Criminal Court, the state loses power of policy making and thus sovereignty. However, many see the relative decline in US power as being based in globalization, particularly due to its high trade imbalance. The consequence of this is a global power shift towards Asian states, particularly China, that has seem tremendous growth rates. In fact, current estimates claim that China's economy will overtake that of the United States by 2025.

Economic
Realization of a global common market, based on the freedom of exchange of goods and capital. Almost all notable worldwide IT companies have a presence in India. Four Indians were among the world's top 10 richest in 2008, worth a combined $160 billion. In 2007, China had 415,000 millionaires and India 123,000. Further, in the job market, employees compete indirectly in a global job market. In the past, the economic fate of workers was tied to the fate of national economies. With the advent of the information age and improvements in communication, this is no longer the case. Because workers compete in a global market, wages are less dependent on the success or failure of individual economies. This has had a major effect on wages and income distribution. Survival in the new global business market calls for improved productivity and increased competition. Due to the market becoming worldwide, companies in various industries have to upgrade their products and use technology skillfully in order to face increased competition.

Cultural
Growth of cross-cultural contacts; advent of new categories of consciousness and identities which embodies cultural diffusion, the desire to increase one's standard of living and enjoy foreign products and ideas, adopt new technology and practices, and participate in a "world culture". Some bemoan the resulting consumerism and loss of languages. Also see Transformation of culture. This might also affect the spreading of multiculturalism, and better individual access to cultural diversity (e.g. through the export of Hollywood). Some consider such "imported" culture a danger, since it may supplant the local culture, causing reduction in diversity or even assimilation. Others consider multiculturalism to promote peace and understanding between people. A third position that gained popularity is the notion that multiculturalism to a new form of monoculture in which no distinctions exist and everyone shifts between various lifestyles in terms of music, cloth and other aspects once more firmly attached to a single culture. Thus not mere cultural assimilation as mentioned above but the obliteration of culture as we know it today. Greater international travel and tourism. WHO estimates that up to 500,000 people are on planes at any one time. In 2008, there were over 922 million international tourist arrivals, with a growth of 1.9% as compared to 2007.

Technical
Central aspect of globalization has been the development of a Global Information System, and greater trans border data flow, using such technologies as the Internet, communication satellites, submarine fiber optic cable, and wireless telephones, which increased the number of standards applied globally (e.g., copyright laws, patents and world trade agreements) but also affects Legal/Ethical norms such as the creation of the international criminal court and international justice movements, crime importation and raising awareness of global crime-fighting efforts and cooperation, the emergence of Global

Negative Effects
Developed nations have outsourced manufacturing and white collar jobs. That means less jobs for their people. This has happened because manufacturing work is outsourced to developing nations like China where the cost of manufacturing goods and wages are lower. Programmers, editors, scientists and accountants have lost their jobs due to outsourcing to cheaper locations like India. Globalization has led to exploitation of labor. Prisoners and child workers are used to work in inhumane conditions. Safety standards are ignored to produce cheap goods. Job insecurity. Earlier people had stable, permanent jobs. Now people live in constant dread of losing their jobs to competition. Increased job competition has led to reduction in wages and consequently lower standards of living. Terrorists have access to sophisticated weapons enhancing their ability to inflict damage. Terrorists use the Internet for communicating among themselves.

 Companies have set up industries causing pollution in countries with poor regulation of pollution. Fast food chains like McDonalds and KFC are spreading in the developing world. People are consuming more junk food from these joints which has an adverse impact on their health. The benefits of globalization is not universal. The rich are getting richer and the poor are becoming poorer. Bad apects of foreign cultures are affecting the local cultures through TV and the Internet. Enemy nations can spread propaganda through the Internet. Deadly diseases like HIV/AIDS are being spread by travellers to the remotest corners of the globe. Local industries are being taken over by foreign multinationals. The increase in prices has reduced the governments ability to sustain social welfare schemes in developed countries. There is increase in human trafficking. Multinatonal Companies and corporations which were previously restricted to commercial activities are increasingly influencing political decisions.

Positive Effects
Globalization has created the concept of outsourcing. Work such as software development, customer support, marketing, accounting and insurance is outsourced to developing countries like India. So the company that outsourced the work enjoys the benefit of lower costs because the wages in developing countries is far lower than that of developed countries. The workers in the developing countries get employment. Developing countries get access to the latest technology. Increased competition forces companies to lower prices. This benefits the end consumers. Increased media coverage draws the attention of the world to human right violations. This leads to improvement in human rights.

Drivers of Globalization:
Individual and social needs and aspirations Technological innovation Reduced technological and economic barriers to trade

Effects of Lowering Trade Barriers

Figure 1.1: Volume of World Trade and World Production, 1950-2004
3100 2600

Index 1950=100

2100 1600 1100 600 100

19 50

19 54

19 58

19 62

19 66

19 70

19 74

19 78

19 82

19 86

19 90

19 94

19 98

Total Merchandise Exports

World Production

20 02

 According to data from the World Trade Organization, the volume of world merchandise trade has grown faster than the world economy since 1950 (see figure 1.1). From 1970 to 2004, the volume of world merchandise trade expanded almost 26-fold, outstripping world production, which grew about 7.5 times in real terms. (World merchandise trade includes trade in manufactured goods, agricultural goods and mining products, but not services. World production and trade are measured in real, or inflation-adjusted, dollars.) As suggested by Figure 1.1, due to falling barriers to cross-border trade and investment, the growth in world trade seems to have accelerated since the early 1980s.

The Role of Technology Lowering of trade barriers made globalization possible; technology has made it a transforming movement

Internet Usage Growth

Figure 1.3: Inte rne t Use rs pe r 1000 Pe ople , 19902003
700.00 600.00

Internet Users per 1000 people

500.00 400.00 300.00 200.00 100.00 0.00

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

Japan

United States

E uropean Monetary Union

World

2003

 The rapid growth of the Internet and the associated World Wide Web (which utilizes the Internet to communicate between World Wide Web sites) is the latest expression of communication technology development. In 1990, fewer than 1 million users were connected to the Internet. By 1995 the figure had risen to 50 million. In 2004 it grew to about 945 million. By 2007, forecasts suggest the Internet may have more than 1.47 billion users, or about 25 percent of the worlds population. In July 1993, some 1.8 million host computers were connected to the Internet (host computers host the Web pages of local users). By January 2005, the number of host computers had increased to 317 million, and the number is still growing rapidly. In the United States, where Internet usage is most advanced, almost 60 percent of the population was using the Internet by 2003 (see figure 1.3). Worldwide the figure was 15 percent and growing fast. The Internet and World Wide Web (WWW) promise to develop into the information backbone of the global economy.

Globalization Encompasses:
Internationalization (trade & investment) Liberalization (freeing markets) Universalization (cultural interchange) Westernization (Western cultural dominance) Deterritorialization (compression of time and space)

References :
http://www.buzzle.com/articles/negative-effects-of-globalization.html http://en.wikipedia.org/wiki/Globalization http://www.blurtit.com/q657321.html http://www.marcbowles.com/courses/adv_dip/module11/chapter1/amc1 1_ch1_two2.htm http://www.cadi.ph/globalization.htm http://www.investorwords.com/2182/globalization.html