Financial Future Of The Globalization

The globalization is the opening markets between countries worldwide. The central goal of globalization is to increase competition in the labor market. This phenomenon is not new; for example the slavery or spices trade. But now it’s more important than ever. Globalization also affects the culture, the politic, the environment, the technology and a lot more.

These last decades, the globalization was boosted by the technological progress. A major driver of the globalization is the increasing of speed movement (plane, cars, TGV). These faster transports are also cheaper than before. The men were never as mobile. There is an opening of the borders which is managed by the World Trade Organization (WTO) or in Europe by the European Union. In the EU there is also the Schengen which allows free passage between countries. The new communications also have a role to play in the development of globalization. Indeed happen with the internet, email and videoconferencing becomes much easier and cheaper to communicate around the world. This enables business expansion.

However it has some bad and good effects on the world both cultural and economic, in fact it is controverted and creates a polemic between different economists. What is the impact of globalization is good or bad?

Firstly, the globalization has heavy impacts on countries’ culture. Over time there has been a cultural homogenization, some also speak of Americanization. We can see the same car, clothing, food, etc. Having these same things everywhere removes the uniqueness of each country. in all countries of the world. It destroys the cultural diversity and the small traditional business. There are enormously languages through the planet. With globalization some have completely disappeared. And 7,000 languages are in danger of disappearing (BBC [online], 2010). Developed countries tend to look alike. An “occidental” culture is emerging.

Through globalization western populations over consume, sabotage their environment and make others pay for their mistakes. The increase in transport related to the latter does not bring anything good instead. With these exchanges more numerous, the transport of goods is more important than ever, whether maritime, aerial or terrestrial. This affects the environment. It cause a lot of ecologic issues like the black tide or many emission of co2 into the atmosphere. This pollution causes climate change. It also means increasing the consumption of fossil fuel.

Some firms also exploit poor people and children like Nike or more recently Foxconn. Foxconn has admitted it hired teenagers as young as 14 to work in one of its Chinese factories (The Irish Times [online], 2012). There are abuses in the labor code.

Globalization also facilitates organized crime. This is particularly the case of the drug: drug traffickers benefit from globalization to create an empire. The drug-producing countries are almost all southern e.g. Morocco, Afghanistan and Colombia. These are developing countries and they are also unstable state. Drug trafficking is lucrative because the drug is expensive and that its trade is illegal.

Mafias have developed some recent years. They have developed in the sense that they generated more money and therefore power, but also because they are spread over the globe. This extension is due in large part to globalization, and actions organized or not, by governments to stop this development have no major impact. The IMF (International Monetary Fund) estimates laundered money each year amounts ranging from 500 to 1500 billion, or 2-6% of global GDP. For several years, the mafias have slowed their war activities between them. Their main concern today is transparency.

Another type of crime emerged with the rise of the Internet: Cybercrime develop enormously in recent years. Even governments are under attack. The Pentagon has admitted it suffered a major cyber attack in which thousands of files were taken by foreign hackers (BBC [online], 2011). Given the rapid evolution of new technologies that cybercrime will grow more.

Because the borders are open the terrorism is facilitated. The terrorism is now international as shown in the attacks of September 11, 2001. They use the media and internet to pass their message. Governments have been forced to implement anti-terrorist forces. They also undertake armed intervention in other countries such as Afghanistan.

To decrease the production costs the companies offshore their production to developing countries where the labor cost is low. It permits therefore increase revenues but cause a lot of job losing in developed countries and increase the unemployment. With offshoring, developed countries are in the process of de-industrializing.

All of this opens the world to the unequal distribution of wealth. All these links between countries make them interdependent. If a problem happens to a country the other ones will be affected.

The subprime crisis in 2008 in the USA has been caused by the banks that launched unstable financial products with floating rates but the interest rate was high for banks. The market being unstable the interest rates of these products have risen sharply. This put the buyers’ in trouble who cannot repay. This crisis became an international crisis. Nowadays due to this crisis there’s a debt crisis. As we can see the Greece is in difficulty. The Spain encounters some problems too. Problems of these countries affect the entire European continent because of Foreign Direct Investment in this country. Crisis facing all countries in the European Union are in economic recession. To resolve the crisis European countries adopt austerity policies. Because countries are interdependent they must help other countries in economic difficulties. The Greece has received a bailout. Eurozone members and the IMF have agreed a 110bn-euro (£95bn; $146.2bn) three-year bail-out package to rescue Greece’s embattled economy (BBC [online], 2010). But this is not enough one second bailout is planned.

Banks also benefited bailout from countries during the crisis they caused. Banks have become independent and states do not control them. They play with the markets and the stock exchange. We should not forget that banks follow their own interests.

Speculation makes a financial group to influence the course of exchange. This can bankrupt a company. A good example of the speculation is the price of oil which varies greatly. The price of oil affects the entire world.

There are companies which has more capital than a country. For example in 2011, Ireland’s GDP was 221 billion dollars and the BP’s revenue was 386 billion dollars. These companies can have more influence and can intervene in countries’ politic. The countries can’t control the globalization but when it’s necessary they invest money to save company or banks. With the globalization the government power has decreased.

In developed countries innovative companies are used to patents; it protects new technology and permit to enter in new market more safely. It is impossible to develop products or innovate without entering into an escalating patent arms race; one that resembles Cold War-era mutually assured destruction more than protecting intellectual property (The Irish Time, 2012). Companies like Apple and Samsung are now engaged in a war of trials attacking their patents. At the beginning, patents were created to protect inventions but it in derive to become pretext to attack other companies.

Indeed, if growth in developing countries has generally been strong, it has also been very uneven across countries and continents. The globalization increases inequalities between rich and poor both between countries and within countries. If you look back 20 years, the total pay of the typical top American manager has increased from roughly 40 times the average-the level for four decades-to 110 times the average now (The Economist [online], 2007). There is also inequality with the consumption of countries. The richest countries consume much more than poor countries. In this globalization Africa is a bit left out.

Globalization makes countries more dependent on each other. The USA and China are very dependent. Indeed the United States imports more than it exports which aggravates its debts. If the United States imports fewer products, the China can no longer export its products. The USA pay its imports from China with its debt. The USA’s debt is the world biggest debt: $16 trillion and China is the major holder of this debt: $1 trillion (The Guardian [online], 2012).

Cultural impact, pollution, exploitation, criminality, inequality, crisis, recession all of this are the effect of the globalization. Countries, the IMF, the UN and other organizations try to control these effects.

Despite the bad side of the globalization, it has brought to the world a lot of cultural, technological and human exchanges between all countries. There is a connection between all countries; the language barrier is crumbling with the English language that is more learned. The globalization has brought more or less peace to the world.

Globalization has led to the development of the BRIC (Brazil, Russia, India and China) countries. It has improved their living conditions. It helps creating new jobs in these developing countries. The globalization also brings to the entire world the Internet and free access to knowledge.

What is the future of the globalization, will the inequality increase more and more or poverty will considerably decrease? Is that the crisis will stop?