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Thursday, 17 November 2011

GLOBAL TREND

The Characteristics and Impacts of Globalization Trends


A. The Trend of Globalization


B. The Characteristics of Globalization


C. The Impacts of Globalization


 


History of Globalization


Species once spread across the earth very slowly, blocked by deep oceans and varying climates on land. Human beings took more than one million years to move from Africa to all the other continents. Human trade and communication over great distance dates back more than 2,000 years, when products first began to travel between China and Europe along the Silk Road. Within a few centuries, the Silk Road carried Buddhism from India to China. It was the desire to trade that drove European nations to develop great sailing ships at the end of the fifteenth century, breaking the Venetian monopoly on trade with Asia and causing the European discovery of the Americas in 1492. These ships became the technology that allowed large numbers of plants, animals, people, and viruses to be transported from one continent to another.


During the European colonial period, traders, invaders, settlers, and slaves were transported via ocean-going ships from one continent to another. These colonists brought new diseases and exotic species with them that ravaged human populations and ecosystems in Asia, Africa, the Americas, and Australia. The modes of transportation, and the speed at which items have been transported, have increased exponentially over time. As these capabilities have developed, new communications technologies were introduced that have enabled corporations, governments, and militaries to significantly increase the transportation of goods, services, and information from continent to continent.


Increases in the frequency of these intercontinental contacts are known as the process of globalization. American political scientists  and ., define globalism as “a state of the world involving networks of interdependence at multi-continental distances” ( and  2000).Globalism has generally been increasing throughout modern history and the process of increasing globalism is called globalization.


Various dimensions or aspects of globalization have been identified. The most important of which are economic, political, and cultural. Economic globalization generally refers to expansion and intensification of international trade and investment; political globalization to the organization of transnational governmental and regulatory institutions and the diffusion of liberal political ideology and institutional forms; and cultural globalization, often but not always, to the spread of Western ideas and cultural practices, as the environment knows no political borders. Global governance structures would be a crucial aspect of the globalization process.


In the modern era, globalization saw an earlier flowering towards the end of the 19th century, mainly among this generation’s developed countries. For many of these countries, trade and capital market flows relative to GDP were close to or higher than in recent years. That earlier peak of globalization was reversed in the first half of the 20th century, a time of growing protectionism, in a context of bitter national and great-power strife, world wars, revolutions, rising authoritarian ideologies, and massive economic and political instability.


In the last 50 years, the tide has flown towards greater globalization once more. International relations have been more tranquil (at least compared to the previous half century), supported by the creation and consolidation of the United Nations system as a means of peacefully resolving political differences between states, and of institutions like the GATT (today the WTO), which provide a framework of rules for countries to manage their commercial policies. The end of colonialism brought scores of independent new actors onto the world scene, while also removing a shameful stain associated with the earlier 19th century episode of globalization. The 1994 Uruguay Round of the GATT saw developing countries become engaged on a wide range of multilateral international trade issues for the first time.


International Trade


A growing share of spending on goods and services is devoted to imports from other countries. This growing share produce from different countries is sold to foreigners as exports. The share of international trade among developed countries rose from 27 to 39 percent between 1987 and 1997 in total output (exports plus imports of goods relative to GDP). On the other hand, the total output of developing countries rose from 10 to 17 percent ( 2000).


Foreign Direct Investment (FDI)


Firms based in a particular country increasingly make investments to establish and run business operations in other countries. US firms invested US3 billion abroad in 1998, while foreign firms invested US3 billion in the US. Overall world FDI flows more than tripled between 1988 and 1998, from US2 billion to US0 billion, with the share of FDI to GDP generally rising in both developed and developing countries. Developing countries received about a quarter of world FDI inflows in 1988-98 on average, though the share fluctuated quite a bit from year to year. Thus, this flow of investment is now the largest form of private capital inflow to developing countries.


Capital Market Flows


In many developed countries, savers increasingly diversify their portfolios to include foreign financial assets, such as foreign bonds, equities, and loans, while borrowers increasingly turn to foreign sources of funds, along with domestic ones. Similar flows to developing countries also rose sharply in the 1990s, as they have been much more volatile, compared to either trade or FDI flows. In addition, they have also been restricted to a narrower range of ‘emerging market’ countries.


 


A. The Trend of Globalization


There are many aspects in globalization trend such as economy, culture, education and information technology. The globalization of culture has a long history, and this includes the formation and expansion of the great world religions, which are profound examples of the capacity of ideas and beliefs to cross great distances with decisive social impacts ( 2005). With this long history, the concepts of globalization and culture has become intertwined. It has been reported that globalization maintains the huge transformative processes of our time, and cannot be entirely described and properly understood until it is grasped through the conceptual vocabulary of culture ( 1999). In terms of economy, globalization is now regarded as new economic, as well as political and cultural order, where countries and peoples live in a borderless world. This means that nation states are no longer significant actors or meaningful economic unites, and consumer tastes and cultures are now homogenized and satisfied through the provision of standardized global products generated by global corporations with no allegiance to place or community ( 2003). This emphasizes the importance of world economy, where all other countries, both developed and developing rely on. Following such changes in culture, economy, and politics are the changes in education, which play an essential role in the improvement of society. In this regard, this era of globalization brings urgency to the need for a new world order in which nation states can develop policies and regulations that will contribute to and sustain forms of international governance, including education policies ( 2004). The update and changes in culture, economy, politics and technology of different societies also alter and improve education. Lastly, changes in technology can also be observed with the changes in the society, as brought about by globalization. Technology can be transferred from one country to another through patents, licenses and contracts, and flows from developed countries to developing ones. It has been reported that the dynamics of technology flows, comparative advantage, and prosperity will then largely depend on the rate at which an undeveloped country can absorb new technologies ( and  1988). As such, transfer of technologies provide faster globalization.  


World Population


The future population growth of developing countries will continue to rise despite control measure. Thus, by the middle of this century, more than 80% of the world’s population will be concentrated in the developing world. In addition, if the current demographic trends continue, the world’s population will almost double to about 11 billion in the latter part of the twenty-first century, shifting the geographic distribution of the world’s population and decreasing the share of people living in developed countries (cited in  2005).


Technology


Technological change will be the hallmark of this century as rapid developments continue in the field of electronics, microelectronics, lasers, computers, and many other gadgets.. The use of these technologies around the world will facilitate better and more effective communication and business worldwide, and its integration into all aspects of communication and business will mark the development of telecommunications. Companies that create technological breakthroughs in the field of agriculture will be the major gainers in the future world with increased population pressures, along with countries and firms, which who would be spending more on R& D and technology in general.


Free Market Economies


The process of development of free market economies will be accelerated and will determine the future of the world’s economic systems. Large economic blocs such as India and China are likely to develop more rapidly with free market economies. It has been reported that a free market economy, by its nature, enable countries to become open to foreign institutions, require a completely different structure, bear in mind international specialization, and have much more significant share of imports. Thus, restructuring of its industry requires rapid growth of investment outlays destined for advanced technology ( 2006). Free market economies then plays significant roles in the changing of trends brought about by globalization.


Global Alliances and Global Tie-ups


Global alliances are more common among multi-nation enterprises. Global tie-ups are motivated by the fact that firms need to gain easy access to new markets, to share costs of expansion, and to increase skills without having to develop them in-house. All of which can take place through a relationship with collaborating partners. In making global alliances, the lead time for setting up one’s own operations can be considerable, the expenses that can be incurred in the process, the level of risks taken, and the various forms of partnerships that provide a viable and frequently exercised option, particularly when one is seeking to establish a new business or develop an already existing business within a new territory. In relation to this is the need for global tie-ups, which are accelerated by rapid changes taking place in global markets where consumer tastes and preferences are becoming universal on account of ever-increasing exposure to global media.


Some examples of global alliances are equally relevant in service as in manufacturing sectors. Thus, airlines around the world are seeking closer ties with each other to gain economies of scale. For instance, Lufthansa has made moves to form a new entity incorporating the erstwhile East Germany’s Influg Airline and has also made moves in developing closer ties with Air France. Similarly, Singapore Airlines is forming a joint venture with Sabena of Belgium, and Alitalia is establishing commercial arrangements with Iberia of Spain and US Air. These are all signs of increasing global alliances to improve efficiency and better preparation for competition.


Global Man-Management and Cultures


One of the greatest challenges facing global firms is the need to develop human resources capable of handling global operations. This is a major challenge as global forms operate in multiple cultural environments whereas individuals tend to be brought up in single environments. The policy of employing nationals from home countries and sending them out to run foreign operations has been the standard practice of traditional global forms. Attractive hardship allowances and improved prospects in return are among the incentives provided. Some factors that expatriates consider in overseas postings are whether they will be able to afford the same lifestyle in terms of modern living, and if they will be able to establish a social circle, whether good schooling is available for children, chances of advancement when they return to their own country, language difficulties, concern about safety and medical care. The common Western practice is an extension of the same approach. However, with world that is rapidly shrinking and with comfort and security levels improving in many parts of the world, expatriates in some countries of Asia and Africa, having tasted the benefits and having tasted the benefits and having adapted to a new country, are often reluctant to return home. If opportunities for growth are lacking within one area, expatriates often switch jobs and continue to live in thee societies for decades, sometimes even marrying locally. This results to social issues, such as the concept of “brain drain” in some countries, where professionals immigrate to more developed countries due to increase in compensation, monetary gratification, and work satisfaction, rather than staying in their home country, which would only provide them less in terms of compensation and benefits.


In this regard, the trend in this generation is increasingly towards finding global managers in the mould of the American Apple Corporation and Compaq’s chief operating officers, who are both German nationals. This type of manager can skip easily across frontiers, from function to function and industry to industry, though they are most often wanted for special, rather than general talents. Another example is when the UK-based advertising giant Saatchi & Saatchi was looking for the global answer, its CEO selected a Frenchman, with no advertising background and who had made his mark running a medical market-research firm in the US. This resulted to effective management, as the language skills of such managers are most often impeccable and their knowledge of management and management practice outstanding. Their flexibility probably is greatest displayed by managers at any time in business history, and with some having more than a couple of important international jobs before the age of 40, an age where their ambitions, like their experiences, know no frontiers.


 


B. The Characteristics of Globalization


Most nations encourages global trade and have cooperated in constructing an international framework that helps transfer goods and services across borders while still allowing for the imposition of restrictions and controls by their respective governments. While various common agreements exists, the development of a globally uniform regulatory framework has been a slow process due to differences in levels of development, ideologies and perceptions of priority of different issues by different nations. Further, there is generally a long delay between the time when the need for an agreement is identical and when the agreement is finally negotiated globally.


World Trade Organization (WTO)


The World Trade Organization has to take into account such issues as social policies, workers’ rights, minimum wages, and even competition policies. This must be so, as there remains a scope for more liberalization and tariffs in newly covered sectors, which are still too high. Because trade policies are regarded as major tools for pushing globalization, groups in societies and countries that oppose globalization are also resisting further liberalization of world trade. Instead, such groups are demanding a democtratization of trade policies as well as a democratic WTO, being the major agent of free trade ( and  2001). In this regard, the role of the WTO must be given significance, through the different existing treaties and agreements that would benefit all countries involved. Finally, major new economics, such as those of Russia and China will come into the WTO fold, and talks more than before.


International Air Transport Association (IATA)


IATA came into being in 1919 at The Hague between one Dutch, one German and three Scandinavian airlines. It was only in 1938 that Pan American and non-European became involved. Regular conferences based on geographic zones are now held and rates and frequencies between global ports modulated. Rates are recommended by the conferences and the stability of air costs is largely due to conception of IATA.


The United Nations Conference on Trade and Development (UNCTAD)


There are several other conventions and conferences held to simplify and standardize trade globally. These include the United Nations Conference on Trade and Development (UNCTAD), held in 1964, during which the developing countries pressurized industrialized nations for preference in exports. Several industrial countries have complied and several special agreements have been developed to allocate production and to raise the export earnings of markets in the developing world.


Regional Economic and Trade Forums


Nations in various regions have come together to form their own economic communities or groups for improved economic and trade integration within their regions. These include the European Economic Community (EEC), the European Free Trade Association (EFTA), the Latin American Free Trade Association (LAFTA), the Council for Mutual Economic Assistance (COMECON), the Arab Common Market (ACM), the Asian Free Trade Area (AFTA), the West Asian Nations (ASEAN) and Asia-Pacific Economic Cooperation (APEC). This economic integration hopes to achieve regional competitive advantage in global markets, by aiming at the following:


-         Free trade areas, where tariffs are abolished between members;


-         Common external tariff to non-members;


-         Access to common markets;


-         Common or harmonious national economic policies; and


-         Complete economic integration


 


C. The Impacts of Globalization


Contemporary globalization represents a real revolution in human affairs. It is a massive change in the way that civilization is organized. One of problems and issues associated with rapid globalization is an increase in the risks of spreading economic maladies.


Economic insecurity
Contagion. With all key economies closely connected in a globalization process, countries now have become mutually vulnerable. This means that various forms of economic diseases can spread rapidly from one country to another.


Vulnerability. Vulnerability refers to the rapid capital movements and the associated destabilizations of currencies. Predators can make a lot of money speculating on currencies, but risking heavy costs at the expense of the countries being attacked.


Dislocation. Globalization is accompanied by a related human tragedy in displaced workforces. This includes the wandering heavy industries that move frequently from one country to another. The tennis shoe industry in Asia moved every few years from one country to the next, leaving behind displaced workers while jobs are created in other countries.


Exploitation. Exploitation of labor and natural resources has been taking place since the beginning of the Industrial Revolution. However, the exploitation of cheap labor has increased greatly, as did the devastation of natural resources in poorer countries. This can be described as “an old wine in new bottles”.


The Economics of Globalization: A Labor View
Globalization is a process that has profound impacts in the lives of workers everywhere, as it brings problems as well as benefits. It is changing the very structure of our economy, thus, establishing patterns of incentives that can have long-term negative societal effects in the future. Globalization is not a natural process over which we have no control. Instead, it is being driven by the choices of business, governments, and international policymakers.


The creation of a unified national economy in the second half of the 19th century, through the fusing together of the different regional economies, involved the same processes. Just as national economic integration produced benefits, so too can global economic integration. However, national economic integration also brought problems, and such problems have been addressed through the creation of modern governments. Addressing the problems raised by global economic integration is more difficult because of the deeper political problems, and because of the lack of proper structures of international economic governance. At the beginning of the 19th century, production took place on the factory floor while management sat above in overlooking offices. Today, companies can be headquartered in New York while production takes place thousands of miles away in China.


Globalization is also being driven by economic policies, which have sought to remove barriers to the flow of goods and capitals between countries. As such, it has increased the international integration of national economies.


Globalization brings significant economic benefits. These benefits include increased goods market competition that has contributed to lower prices and improvements in quality. It has also contributed to improvements in production efficiency with domestic firms, which are forced to go head-to-head with their foreign rivals. There have also been improvements in the provision of financing which has helped developing countries acquire the capital necessary for their own development.
But side-by-side, there have been serious negative effects with globalization, creating new forms of wage and workplace competition that have twisted the distribution of income in favor of the most well to do. It has also twisted the economic structure, leading policy-makers to face a pattern of incentives that increasingly compelled them to run economic policies for the benefit of those corporate interests which have been empowered by the globalized economy.


There is also a tendency to demand leak outs in the national economy, owing to an increased propensity to import goods. This increase in macroeconomic leakiness is true for almost all industrialized countries, with trade (i.e. imports and exports) as a share of GDP having increased by more than 50 percent over the last 30 years.


In addition, there is also a tendency for jobs to leak out of an economy if labor markets are not sufficiently flexible, or if profit taxes are relatively unfavorable compared to conditions elsewhere. Microeconomic leakiness has been promoted very much by technological developments that have lowered costs of transportation and costs of coordinating production. Economic policy has also contributed to increased microeconomic leakiness by bringing down trade barriers and making it cheaper and more economically feasible to shift production between countries. Another form of leakiness is “financial leakiness” whereby money flows between countries. Today, more than .5 trillion is traded in foreign exchange markets every day, whereas the actual value of international trade is less than three percent of this amount. The existing structure is unstable, and gives financial interests too much sway over domestic and international economic policy. In this regard, the globalization of capital markets has brought a new kind of competition among currencies, since international investors will pull their funds out of any currency in which they lose confidence to. This has produced a sustained bias toward tighter fiscal and monetary policies around the world to reassure international investors. Once again, this change has been driven by technological innovations in the form of lowered costs of electronic communication and transacting. It has also been driven by policies, which have removed controls on the international movement of money.


Moreover, macroeconomic leakiness has tended to promote an increased reliance on exports, which means that countries are more exposed to shocks originating overseas. Macroeconomic leakiness means that countries rely more heavily on imports so that demand leaks out of the economy when policy makers try to expand economic activity. On the other hand, microeconomic leakiness poses a different set of problems. In particular, it has increased the bargaining power of business vis-à-vis both labor and government. Thus, a recent study found that after NAFTA was implemented there was a 33 percent increase in business use of threats to relocate production during wage bargaining rounds. Government has also been put under pressure using threats to move and to win tax concessions. If tax conditions are deemed relatively less favorable than elsewhere, business now threatens to invest only in those places where conditions are more favorable.


Furthermore, export-led growth also fosters wage competition, deteriorated work place conditions, degraded environments, and weakened systems of governmental social support. This is because countries and businesses have an incentive to try to gain international competitive advantage by any means possible.
Huge imbalance of power between business and labor.
The global enforcement of core International Labor Organization (ILO) labor standards that give workers the rights of free association and collective bargaining is a key. In a similar vein, there is a need for new rules to prevent international tax competition.


 


Conclusion


The current state of Globalization and regionalization suggests that the international system is unevenly structured. Institutional financial structures both at public and private levels – WTO, World Bank, IMF, and Private Financial Institutions (PFIs) – need to be restructured to ensure human security, sustainable development and non-discriminatory trade regimes. Theories on international trade and finance have not yet produced long-term strategies for a just, fair and balanced global competition in the face of proliferating multinational enterprises. Given this, state-based political decisions and actions in the developing world will continue to play a major role in the social sector despite the fact that developing nations are under severe pressure from the WTO, and developed countries are urging them to introduce faster economic reforms for foreign investment, free trade regimes and capital flow. The developing countries need to convince the rich North that fetterless capitalism and borderless globalization must adjust to the hard boiled realities of poor developing nations.


The shift in power structure will continue to inform the international system. A mix of geo-strategic, geo-economics and geo-cultural factors are likely to propel public decision makers to fashion their countries’ foreign policies and reinvent new diplomatic strategies accordingly to fit in the potential currents of globalization and regionalization. The issues of global governance and environment, global culture and democracy will continue to lure international theorists and policy practitioners into working out new formulations, paradigms and conceptual underpinnings.


 


 


Biography



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