The Three Main Aspects Of Globalisation Economics Essay

Assignment questions ‘The current global downturn, the worst since the Great Depression 70 years ago, pounded the last nail into the coffin of globalization. … I believe … that deglobalization is an opportunity.’

Walden Bello, ‘The virtues of deglobalization’, 3 September 2009, at

http://www.fpif.org/articles/the_virtues_of_deglobalization.

In a year when the Doha round of trade negotiations is ‘technically doable’, according to World Trade Organisation Director-General Pascal Lamy, discuss the issues raised by Walden Bello.

Table of Contents

Introduction

WTO was born in 1995, with the main objectives of establishing the rules and encouraging the trades among nations (World Trade Organisation 2010). Institution’s goal could be traced back to Bretton Woods system, set up to stabilizing world monetary system. To promote cooperation, Ministerial Conference has been set up once every two years as a stage for brainstorming of the ideas and concerns. At 2001 meeting in Doha, Doha Development Agenda, known as Doha round, was initiated. Though initially focused on disassembling impediment to trade for poor countries, its emphasis has been further to include globalisation and facilitation of world trade because it is perceived as an engine of growth and sharing of prosperity; it transfers capital, expands export, introduces new technology, promotes women as labour forces, and maximises wealth to trade (Fergusson 2008). Pascal Lamy, WTO chief, stated in 2010 that “Doha round would ensure greater predictability and security, the value of which has been proven in the recent crisis.” Though it is difficult to overcome trade impediment and negotiation issues, in November 2011 the roadmap for globalisation cooperation is agreed to be “Technically Doable” (Trade law centre for southern Africa 2010).

Though globalisation sounds very promising, there also have been many critiques on the idea. First, globalisation has been argued to be a greedy tool of developed nations to colonize developing countries through economic control; Globalisation drives out local competitors, increases imports, drains profits out of countries, allows developed nations to exploit natural resources of developing countries, and exhausts non-renewable resources. Moreover, with the 2008 global financial crisis, globalisation was seen as a conveyance of economic depression rather than a driver of prosperity. Every country has adopted a more protectionism attitude towards foreign investment. Bello, one of the leading critics of globalisation, suggested his idea of the deglobalisation paradigm, looking at nationalization as an opportunity and a more stabilized alternative to growth. He has, instead, asked the states to emphasise trade in national rather than global level, protect local economy, upgrade quality of life, and support regional more than global institutions (Bello 2009).

Figure 1 The globalisation or deglobalisation

So is globalisation really beneficial or disadvantage to the participants? Is Doha Round belief correct that globalisation is a way to increase trade cooperation? Is Walden Bello right about his deglobalisation paradigm? Attempting to scrutinize this dilemma, this report will try to examine from both aspects – with arguments from those who support as well as critique of globalisation, explore the costs and benefits of globalisation and, ultimately, seek the answer to the question: “how the nations could maximize the benefits and minimize and limits the costs of globalisations?”

Supporter of Globalisation

Globalisation has three main aspects which are economic, political and socio-cultural (University of Leicester 2009). Economic aspect focuses on the integration of global economies as well as flow of trade and capital across nation borders. Socio-cultural aspect emphasises on the exchanging of social and culture. Social aspect includes lifestyle, perception, and communication. Culture includes value, belief, tradition, and norm. The political aspect targets on interchange of political contact among countries (Held & McGrew 2005). The pros of globalisation would be explored through these mentioned aspects.

Figure 2 three main aspects of globalisation

Economic aspect

Globalisation has encouraged more trades and increased the flow of capital among nations; For instance, businesses can seek their funding from foreign banks that offer the most competitive interest rate (Bhagwati 2004). MNEs have more flexibility to operate as well as locate their operations in any countries that offer advantages (e.g. cheaper labour cost or closer proximity with the customers); For example, many US corporations moved their labour intensive productions to China because Chinese workers have lower wage than the American counterpart. As a result, the world consumers can purchase goods and services at a lower price. Moreover, economic opportunity has been expanded, from domestic to regional and global consumers, as technology such as internet or cheaper transportation make possible for people to seek out new business connections (e.g. franchise). With more players selling the same goods to target customers, competition is increased; consumers will get the benefit of cheaper price. There are many institutions among countries to encourage economic collaboration such as WTO, OPEC, APEC, ASEAN, EU and UNCTAD.

Socio-cultural aspect

Nowadays, the communication, information exchange, and mass media have been raised. This helps reduce the communication barrier so that people from different culture, life style, and society have more understanding of each other (Tomlinson 1999); For example, internet helps people to communicate easier and to find the information (such as news, fashion trend, education). Moreover, many US and UK universities open the opportunity by offering distant learning program with granted degree for foreign students who cannot afford high cost of living in the countries. This could help those people to improve their quality of life. Some problems such as poverty, health care, gender equality, child labour, and global warming are difficult or impossible to solve by individual nation. Globalisation has made such issues global awareness and concerns. It encourages harmony and willing from every country to help combat the problems (e.g. the global warming meeting held in Denmark). There are many international organizations that help promote collaborations and tackle socio-cultural issues such as UNICEF, UNEP, UNESCO, and WHO.

Political aspect

Political tension was no longer individual problems between conflicting nations. Poverty in the Caribbean means more drugs on the streets in Washington and London. Conflict in the Balkans causes more refugees in Germany and here in the UK (Stiastny 1999). These problems can only be addressed by international co-operation. Globalisation promotes the circumstance of state interaction. Whether nations like it or not, we are all internationalists. There are a lot of collaborate institution among countries to strengthen the political collaboration UN, EU, and G7. Many conflicts were encouraged to be solved through peaceful approach, such as negotiation. After the end of cold war, globalisation inspires nations to develop friendly relationship, to help nations work together to improve quality of life, and achieve world harmony.

Anti-Globalisation

Globalisation became an unending controversy (Bhagwati 2004). Many critics are against globalisation because they can notice its disadvantages. To analyse how negative of the globalisation, the cons of globalisation would be seen through the same aspects as the benefits has seen through.

Economic aspect

According to the labour flow has distributed from developed countries to developing countries because the corporations always focus on maximising profit and try to find the lowest labour cost. The developing countries obviously have lower labour cost than developed countries. While job is increasing in developing countries, this make developed countries people losing job as well, especially for labour level.

There are also many moments of crisis occur from globalist project such as Asian financial crisis (1997), the collapse of WTO Ministerial conference in Seattle (1999), and the collapse of stock market in Clinton boom (Bello 2004). Moreover, when the depression happens to one country, it will easily spread to other countries. For example, Greece great crisis heavily impact to countries in Europe zone and other countries in the world. This is because the crisis has reduced the investors’ confidence. Then this made Euro currency drop sharply as well. For another example, the root cause of the hamburger crisis may not be directly from globalisation. However, the globalisation stimulates and spread its effect throughout the world.

Socio-cultural aspect

Globalisation made the flow of culture happened, for example, the American and Western culture spread all over the world. The more powerful countries’ cultures have weakened the cultures of the others. The private corporations, which have the capital to invest, will have influence over the countries, in the case of media, society, and individual. Because of wider range of transportation and communication in the world, the decease will be easily spread from one country to another country. For instance, the Swine flu, which started from Mexico, distribute to other countries all over the world. Increase of environmental concerns and sustainability in developing countries because the distribution of factory, especially the polluting making factory, from developed countries to developing countries. Moreover, the war could be happened from competing for the world resources such as oil, coal, and iron.

Political aspect

Cerny (1997:251) states that “the transformation of the nation-state into a ‘competition state’ lies at the heart of political globalization.” The less developed countries maybe at disadvantage and losing of control from developed countries. The illegal trade in drugs, arms, intellectual property, people, and money is booming. Like the war on terrorism, the fight to control these illicit markets pits governments against agile, stateless, and resourceful networks empowered by globalisation. Governments will continue to lose these wars until they adopt new strategies to deal with a larger, unprecedented struggle that now shapes the world as much as confrontations between nation – states once did. (Naim 2003)

How to make it works?

In the previous sections, the benefits and disadvantages of globalisation were discussed. Both aspects seem to have good reasons to support the arguments. To seek the ultimate answer to the question that “is globalisation good or bad?” we may come to the point to accept the fact that globalisation is both. It depends on many interacting and interdependent forces that are the product of the dynamics of conflict and collaboration. Therefore, it is almost impossible to define singlehandedly that whether the globalisation is always good or bad. The emerging and more practical question is that “how could state maximise the benefits and minimise the impact brought about by globalisation?” To answer the question, Dicken (2010) suggested that countries should balance the forces of globalisation and anti-globalisation by sticking to the facts and that they should design and enact essential policies to both exploit the positive consequence and, at the same time, limit negative effect of globalisation. The major policies adopted by the states could be broken down into four main categories which are trade strategies, foreign direct investment (FDI) strategies, industry strategies, and labour market strategies.

Figure 3 Striking balance between benefits and costs by state policies

Political Policy

Globalisation leads to a creation of corporation and discussion space, with the increasing trend towards emergence of international organization such as UN. Government should recognize the benefits of participation and collaboration through such international stage. For example, the suspected development of “Nuclear weapon” and “Submarine” conflict between North Korea and South Korea heighten the political tensions and threatened both countries to engage in war which would not be beneficial to both parties and would not be appreciated by other countries. South Korea developed a strategy to pressure North Korea through international stage by bringing the topic and concern to UN. Under the spotlight of globalisation, North Korea was under pressure to alter its stance and forced to negotiate or threatened sanctioned by other countries. Such example stresses on the political policy that becomes even more important tool of government that can help achieve state’s interest or goal.

Trade Policy

Trade policy includes import and export trading. The objectives of trade policy against imports are controlling import quotas, import licenses, rule of origin, subsidies to domestic producers, and protecting domestic firms from unfair competition. Also, the objectives of this policy against exports are setting export targets, creating free trade zone, and control voluntary export restraint. The example of major trade agreement among countries’ government are EU, NAFTA, AFTA, EFTA, and ASEAN. For example, China and U.S. are the world second and third largest exporter of Textile products (World Trade Organization 2010). U.S. textile industry got impact from low cost textile from China which distress local U.S. producers. U.S. government granted policy to limit import cheap cloth from China and influence export in this industry to China. Moreover, U.S. tries to influence WTO committee to oppose China from WTO because China heavily subsidise its textile industry and manipulate its currency to gain export advantages. U.S. government also granted trade agreements with several countries, such as the U.S. Korean Free Trade Agreement (KORUS), to reduce the U.S. job losses from original text favours Korean textile exporters (National Council of Textile Organization 2011). These policies accent on the trade policy that government enforcing its current trade rules.

Foreign Direct Investment Policy

There are two main categories of FDI polices which are inward investment by foreign firms and outward investment by national firms. Normally, the inward investment by foreign firms has more concerns. For example, Tesco, UK’s largest retailer, firstly enter to Thailand in 1998 (Tesco Plc 2011). From this coming investment, there are both advantages and disadvantages to Thailand’s economy which need government’s hand to maximise benefits and reduce costs. On one hand, for employment aspect, this big investment helps local people, especially who lost jobs from Asian crisis in 1997, had jobs in the stores and offices. Nowadays Tesco Thailand is holding approximately thirty thousand local employees and continuously having plans to develop its human resources. On the other hand, there are many local grocery stores in Thailand which sell goods on average price. When Tesco came with bigger scale of operation, hence higher bargaining power with suppliers, Tesco could sell goods on lower price and wider range of products. Previously, local grocery stores still had more benefit on location because Tesco did not have much stores but nowadays Tesco was distributed to most of cities in Thailand. This made local stores lost customers, lost revenues, and cannot stand. From this concern, government should have foreign direct investment policy to protect its both local stores and people by setting price limit not too high and not too low which will affect each other. This help both parties can live together with no exploit each other and maximise the benefits to country.

Industrial Policy

Industry policy has main objectives to support declining industries, encourages strategic industries, stimulate new industries, develop depressed areas, and encourage entrepreneurship. For example, the industrial policy helps many industries in Europe countries to seize the opportunities in global business environment. EU emphasis on technology and ICT skill to help investors and businesses in any industries engage in sustainable and profitable. EU industry would therefore benefit from the fast-growing world market provided by globalisation. In other words, Europe would see rising industrial output, employment, and incomes over the coming decade. The government should give more attention to this policy.

Cultural Policy

Cultural policy is the government policy which related to national culture and art. The main functions of cultural policy are to promote diversity, accessibility, and heritage of culture. For example, for as long as internet has occurred, China has controlled and monitored its citizens how they use the internet. China government regulates the internet censorship for Chinese internet users via China firewall (James 2009). Although, there are many critiques throughout the world on this censorship, China still blocks and filter some websites that may be sensitive to its society and culture such as democracy topics. China believes that this could prevent its culture to be assimilated from the culture of other countries. For another example, the government from five countries, which are Armenia, Azerbaijan, Georgia, Moldova and Ukraine, create culture exchange program, called “Kyiv Initiative”, which address on the cultural collaboration issues and cultural exchange among five countries. This strategic direction is very much in line with much contemporary thinking in European cultural policy, where there is a similar emphasis on regional and transnational co-operation, e.g. partnerships, networks, artistic mobility, collaboration between cities etc (Council of Europe 2006).

Conclusion

While Bello (2009) stated that deglobalisation is an opportunity, Lamy (Trade law centre for southern Africa 2010) said in completion of Doha Round session that globalisation is technically doable. To find the final answer, we should compound both perspective and let us see is it desirable? How to make it desirable? According to globalisation have benefits, risks, costs, and disadvantages. Then, to extract most advantages of out of globalisation, government should realise the major areas of potential impact from globalisation. If promises of globalisation are a dream, Bello is the wakeup calls for everyone who is enjoying that dream. From the previous sections, the suggestion is that the perspectives that government should adopt is neither globalisation nor deglobalisation but the ultimate decision of government should strike balance between globalisation and deglobalisation, not too extreme to only one side, to get the best way for its own country and the world.

The nation need state intervention through state policy and also need learning process of government to maximize benefits and maintain an impact from globalisation. The corporation among the countries is also crucial. In today world, everyone is talking about gaining competitive advantages. Government is no exception. Usually, gaining competitive advantage means benefits for themselves but on others’ expenses. From previous sections, we can see that globalisation has both costs and benefits. Also, now we know how government could manage to extract those benefits and defence those costs. In my opinion, government should defence their benefits from other countries. In the mean time, government should implement the globalisation as win-win situation. Government should think and realize thoroughly because they can defence the other countries that tries to extract benefit on them. Draw benefit on our expense. Realise that best benefit man not come only for itself but collaboration to maximize well being. Growing and sustainable together. Now it’s the learning time how every country should behalf to get benefit from globalisation.

Nowadays, the internet is one of engine to propel the globalisation. The Internet is a medium that allows people to communicate and interact with one another throughout the world.