Globalization Is Not New A Phenomenon Economics Essay

Globalization is not new a phenomenon, for thousands of years people acting on their own and later corporations used to buy and sell products and services (trade) to each other on lands, shores and seas at great distances, great example is the famous Silk Road across Central Asia that connected China and Europe during the Middle Ages.

Under the term of Globalization political scientists promote the process of interaction and integration amongst the people, companies and governments of different nations, a process which is driven by international trade and investment and aided through media and modern technologies. This process influences directly or indirectly the environment, culture, political system, economic development and prosperity of every human nation and every single person in the world.

There are different types of Globalization or combination of these types. To understand better the purposes and procedures that took place in each circumstance, we have to analyze each type separately.

Financial Globalization/Integration

Financial Globalization is the process through which financial markets in an economy become more closely integrated (related) with those in other economies or those in the rest of the world through the financial flows.

Types of integration

Integration of the public sector based on borrowing. There are two types: the issuance of foreign currency debt, and the issuance of the local currency debt

Integration based on foreign direct investment, which is direct investment into the production or business in one country by a company from another country

Integration of the corporate sector where the investors buy or sell the stocks and bonds of other countries firm in domestic asset market

The integration of the Banking sector through the interbank market, banks can borrow or lend temporarily

Economic Globalization

International economy improved due to the effect of globalization. Many countries remove their borders or create trade agreements in order to increase the inflow of trade as the consequence markets become more efficient, productive, competitive and cooperative. Examples of economic globalization are: NAFTA, EU and MNC’s.

Technological Globalization

New and advanced technologies take part in making globalization possible, using airplanes, satellites, telephones, televisions and computers it is possible to transfer information from one place to another, with greater efficiency and effectiveness which characterizes the modern world. In this way not only technologies are being transferred, but at the same time people are able obtain information, knowledge and skills.

Political Globalization

Economical and cultural globalization has as a consequence countries to become more interconnected politically. Regular movement of people, money and information creates a lot of fortunes but also misfortunes, such as crime, for that reason in 2002 the International Criminal Court was established to fight those sorts of problems. Other political issues that have been discussed on global bases are that of global climate change, the terrorism, drug traffic etc.

Cultural Globalization

Today the ease of expansion of traditional customs has brought Globalization of cultures, where people from different parts of the world can get closer to each other much easier. The symbol of the cultural globalization is the well known American fast food chain McDonald’s, it has more than 31,000 restaurants in 118 countries. Some menu products, such as the Big Mac, are the same all over the world. Other menu products may be specific to a particular region. McDonalds in Japan features a green-tea flavored milkshake. At McDonald’s in Uruguay, a “McHuevo” is a burger topped with a fried egg. Globalization has brought McDonald’s billions of customers-consumers worldwide. Other cultural trends that someone can find common in many countries are the music, clothes, film industries etc.

Ecological Globalization

Ecological Globalization refers to the collective impact that the diverse processes of Globalization have on the health of the natural systems. Due to Globalization people, money, ideas and pollution travel at high speeds and rates in every corner of the world. To address these issues, from Stockholm Declaration 1972-till date, lots of discussions have taken place of the needs and strategies for the protection of ecology and environment on a Global level. The UN Conferences from Stockholm proclaimed certain fundamental principles of international environmental law, such as Polluter Pays Principle, Precautionary Principle, Sustainable Development, Intergenerational Equity and responsibility, Common but differentiated responsibilities, Rights of individuals, equality of access to procedures and non-discrimination in environmental matters etc. These principles have been proclaimed after extensive investigations done by experts in their fields.

Sociological Globalization

The term social globalization refers to the impact of the globalization on the life and work of people, their families and their societies. Important issues like employment, working conditions, income and social protection are often raised and connected with this part of globalization.

PRO ET CONTRA

So far, we examined the types of global integrated nations, it means that every union (included two or more nations) may follow some of these specific patterns separately, or may include all the assortment of Globalization’s types, it all depends on the contracts between the members. From now on, we will examine the advantages and disadvantages that union members enjoy during the process of Globalization.

2.1 Advantages

Free Trade: is a way of easier exchange of goods and services. The basis of the trade agreement is the elimination of import and export borders, through the reduction of any levies, duties, taxes, subsidies and quotas. The absence or reduction of some or all of those factors, usually leads to a significant increase of exchange of goods and services between the member states.

Another important benefit of the trade agreement is the concept of comparative advantage. According to David Ricardo countries increase their economic well-being if and only if they are specialized in the production of goods at which they are best at and after on exchange the surplus of production with other goods of other countries.

Greater Competition: due to the ease of free entrance in any member state, there is a tendency for private organizations from any field to enter free market, of course the purpose behind such action is only to gain more profit, but the whole problem is that to be competitive, companies have to reduce their prices to gain more and new customers since the more companies enjoy being in the market the more competitive and effective they have to be, firstly to be able to stay in the market and make sells and secondly to be able to make profit out of the whole process.

Free movement of labor: free movement of labor force gives an external support to huge industrial entities to reach a higher level of efficiency (at lesser costs), it is not a secret that the biggest industrial companies in developed countries employ many foreign workers who are members of less developed states. In this case both parts are in gain the makers maybe because of deficit of domestic force or may be because of unwillingness of domestic labor to perform the specific tasks and jobs. On the other hand, labor force from less developed countries because of lower quality of life and maybe very high rate of unemployment are more willing to perform heavy or dirty jobs to cover their basic needs. Both of these phenomena show how important the free movement of labor can be.

Increased Economies of Scale: as noted before, free trade leads to a comparative advantage (any country specialized at a particular subject at which it is most efficient). It can be also added that the specialization in one sector can lead to a better working mechanism (human/machinery) and achieve as better efficiency as possible. The result of specialization and better mechanization normally reaches larger productivity with lower costs (economy of scale) because of more effective use of resources.

Investments: One other very important advantage of globalization is the investment. So when we talk about investment from the financial point of view, we mean the process of placing money into something with the expectation of gaining profit after specific or none specific period of time. Some examples of investment may be some sort of foreign equity, property and fixed interest securities. Corporations invest a lot of money into developing countries for personal reasons and very often transfer their production power to those countries. These kinds of actions give a huge incentive to both of the parties to achieve more profit (tax).

2.2 Disadvantages

As we said before, free trade offers some very good advantages but at the same time there is one very important disadvantage of domestic inefficiency. To be clearer nowadays it is very difficult to create and sustain any new organization, even domestically. Huge international corporations simply do not give a chance to any new firm to operate in their fields, they usually produce products and services at much lower prices and bigger ranges than any new firm is able to. Great example of the kind organization is Microsoft, at the present Microsoft is one of the biggest corporations which specializes in anything that has to do with electronics, computers, hardware, software, electronic games and so on. Generally speaking, in some sectors Microsoft has nearly monopolized the world market and it’s very difficult for any new and small corporation to survive in this kind of competition.

Environmental costs: there is another big disadvantage of globalization, the increased use of non renewable resources. Due to better and easier ways of communication between states, there is a tendency for more and cheaper resources. Every year millions of tons of raw material (rock-oil, gas, coal) is excavated from the depths of the ground and introduced for global consumption while nobody can predict what will be the real cost that people will have to pay in near future for such practices.

Also one other problem of globalization is that corporations which transfer their operations to places where environmental standards are less strict. For example, this kind of problem is very common in China where foreign manufacturers that produce and utilize, occasionally follow practices that harm not only the environment but also the health of their employees.

Labor Drain: may be the most important problem for the developing and developed countries. As we said before, one of the benefits of globalization is the movement of labor force. Although at first side it may not affect directly if labor leaves one country and migrates to one another, but if think of it thoroughly someone can see that along this labor force may also be potential or future potential intellects that may alter the world as we know today. As an example, we can mention the U.S.A who spends large amounts of money to attract and keep the most talented scientists from all over the world, it’s no coincidence that they are the biggest military power and invest a lot of money in new technologies.

Less Cultural Diversity: one other problem of globalization is the global centralization of culture based on western ideology from the very young age. Unfortunately this is the reality, people from generation to generation are moving away from their traditional culture. People tend to emulate the behavior, the lifestyle, the way of life of the western civilization. They grow up watching the Simpsons, eating in McDonalds, drinking Coca-Cola, wearing jeans and speaking in English. After few decades, most European citizens will be people with common values, behavior, moral and ideologies.

CONCLUSIONS

From all of the above it can be concluded that globalization can offer many positive trends but at the same time many negatives, in a way it represents the old saying of one coin with two completely different sides. It may promote economies to grow, produce products and services that may have never been available in some parts of the world before, but at the same time it may endorse human exploitation, inequality and environmental unconsciousness.