Exploring The Dark Side Of Globalisation

Propose reasons why some believe that the current form of globalisation has brought poverty and hardship to millions of workers.

Globalization and types:

According to Joseph Stiglitz, Globalization “is the closer integration of the countries and peoples of the world …brought about by the enormous reduction of costs of transportation and communication, and the breaking down of artificial barriers to the flows of goods, services, capital, knowledge, and people across borders.” Furthermore, globalization has been explained in the following ways. “Economic globalization means the greater global connectedness of economic activities, through transnational trade, capital flows and migration. Environmental globalization could include the increasingly global effects of human activity on the environment. Cultural globalization may highlight the connections among languages, ways of living, and fears of global homogeneity through the spread of North American and European languages and culture. Political globalization may include wider acceptance of global political standards such as human rights, democracy, labor standards, environmental standards, as well as the greater coordination of actions by governments and other institutions across the globe.” Hence it is understood that globalization has been seen classified into the four categories as economic globalization, environmental globalization, cultural globalization and political globalization. [1]

Causes for globalization:

Most of the businesses tend to transfer their business to other countries and follow one of the many approaches (reactive, defensive, proactive, etc.) so as to sustain in the competition. Hence they make their business global. Some of the reasons for this globalization have been identified to be

Trade barriers

Meeting client demands

Globalization of competitors

Regulations and restrictions

Companies mostly run their business local to their customers so that they are free from the many difficulties of facing expensive exports, shipping costs, labor cost, reliability issues, tax and others. Also, the clients (from abroad) highly demand their suppliers to stay local so that the production flow is strengthened. Hence the suppliers, who do not want to miss out on their good business deals, agree to their clients in making their business local to their clients. Next, the companies know that if their business flourish for long in the foreign countries without any challenge then their contribution to the business in the world market would be too tough to beat them and hence they act quickly. Also, the companies would be interested in investing the profits gained from their business to be used for further growth and enhancement of their business. But not all the business’ home-government let their business to carry on easily without imposing the severe rules and regulations which eventually results in slowing down the growth of the business, invading the profits of the business and making their costs highly unmanageable (by levying high tax). Hence the companies tend to move abroad and flourish there where they would be liable to fewer restrictions and barriers than in their home country. [2] Hence globalization has been achieved greatly due to the above mentioned reasons and other real good factors such as enhanced technology, quick and easy communication, convenient ways of sharing information, easy shipment and travel, attractive incentives by foreign governments, etc. [3]

Impact of globalization:

So far the reasons for globalization were discussed and now the effects of globalization are being explored. Globalization has resulted in both positive and negative effects, some of which are listed below.

Pros of globalization:

Globalization has increased the competition level and has put the domestic companies into the tough competition to produce high quality products and excellent customer service so as to fight against the international markets and stay in the competition. Hence people are benefitted by the good quality of products.

Globalization has left a positive impact of foreign trade on an economy. Earlier people had to perform uncivilized activities to get what they wanted, whereas now the scenario has been changed and dealt with in a humane way.

Definitely globalization has hugely resulted in the spread of the culture. Today most people are happy to receive people from all around the globe and enjoy the diverse culture, be it cooking, language, costumes, etc.

Globalization has resulted in the sharing of technology and information across the globe amongst all people. The technology that was invented at one place doesn’t stay just there and people around the world get to benefit from it as a result of globalization.

Also globalization has resulted in the spread of knowledge and education. Today people move abroad to specialize in a particular field which is because of globalization.

Many nations help each other in sorting out the problems caused to environment and nature (such as climate control, preserving wildlife, etc.) through globalization.

People can enjoy the easy availability of products from a different country in their own land and also there is a steady income to all the developing countries. [4]

Some of the cons of globalization:

People in their own country are more unemployed as the manufacturing jobs are being outsourced to the developing nations and countries where the labour is comparatively cheap. Even the employed are suffering job insecurity due to the heavy competition and experience a lower standard of living. Hence millions of workers are facing hardships due to globalizations.

Globalization seems to compromise in the safety standards of people through the exploitation of labour to produce cheap goods.

Terrorists are likely to have easy access for the sophisticated weapons and technology and easy communication amongst each other.

Serious diseases have been believed to spread due to travellers coming from various parts of the world thereby risking the health of local people.

Finally, one of the most serious effects of globalization is that it has resulted in poverty which could be related to the unemployment and the reduction in the standard of living as discussed previously.

Poverty and hardships faced by workers due to globalization:

The effects of globalization have been discussed. Clearly, the negative effects of globalization have stated that globalization has resulted in poverty and also hardships faced by the workers. Now we look more into detail how globalization has led to such an impact.

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Though globalization had promised to connect the world closer, there are many policies and practices and decisions behind the scene which are totally under control by the rich (multinationals, institutions, and powerful people) only. As a result the governments of the poor nations are being overpowered by these global people and hence they continue to struggle in their poverty whilst the rich continue becoming richer. [6]

It has been described in the positive effects of globalization that the domestic companies are facing tough competition in order to survive, which clearly is a negative impact too. Also, the many multinational companies who are quickly emerging in many developing countries due to many reasons discussed under the causes for globalization manage their businesses with assets, managers, important research and development activities all located in their own home countries only. So this kicks out the local companies out of the business and results in poverty.

The money spent on welfare services is very limited. The government does not have much money to spend on welfare services and the local organizations and businesses have the control in their hands. Also globalization has encouraged economic policies which pressurize the developing nations to restrict the amount being spent by the government on welfare services. Thus this limited spending on welfare services further heightens poverty.

There has been a rise in wages (in developed nations) for the highly skilled labor whilst the labors those don’t have much education suffer poor wages or unemployment and are in less demand. Another reason is because of these developed nations trading with the developing nations because of which the low skilled labors immigrate to the developed nations and therefore widening the wage gaps. Additionally there are more people who are being underpaid and lead lower standards of life and the highly skilled people who move out of the developing nations due to the lack of education. This in turn widens the wage gaps. [7]

It is very unlikely that the poor people would benefit from the profits made through globalization because of the complementary policies that is being imposed. These complementary policies include investments in human capital and infrastructure, policies that promote credit and technical assistance to farmers and policies to promote macroeconomic stability. [8]

Does Globalisation Help or Benefit the poor:

There is no single answer to the above question as the answer is a two way answer.

The poor may in many countries benefit from:

Increased Jobs

Cheaper consumption

Oppurtunity for education, savings and entrepreneurship

In other scenario:

Workers are displaced by imports and job losses

Poor consumers pay more, not less for what they were asking for.

On average countries that have cuddled globalization which have done better on the whole than compared to those who have not. Within those countries, economic growth has raised incomes at all levels including the poor. Some countries have done an exceptional job in exporting their goods to the rest of the world like South Korea and other Asian countries. And many poor countries chose not to participate in global trade liberalization which one became the factors for the other poor countries to get rid of the poverty. Other countries who participated in the global trade liberalization have earned some good profits by adopting the global trade liberalization and to kill poverty from their countries.

In General Globalisation alone is never enough to cure poverty because other than globalisation there should be some other things which should be there in the world to reduce poverty from the nation. Some of the other things needed are;

Investment in capital and infrastructure

Education to one and all in order to kill the poverty. Education is the most important factor which will be playing a major role to get rid of poverty as if education ratio is good in the world for sure there we can see decrease in the poverty.

Good Governance means there should be a good and strong government put in place to control and run the system.

Below graph shows the average drop in poverty rates in countries such as China, where Globalisation has stronghold where compared to areas unaffected by Globalisation such as Sub-Saharan Africa and rest of the world according to Jeffrey Sachs Globalisation advocate.

C:UsersSameerDesktopglobalisation_clip_image003.gif

Source: http://www.studygroup-bd.org/globalisation.html

Negative effects on businesses due to Globalisation:

1. There was a rise in labor demand and at the same time rise in wages was also seen in almost all businesses across the world.

2. Trade unions powers were weakened over the labor in all technological industries like Mobile Services, Insurance, Internet and Mobile Services and Entertainment.

3. There was lot of competition was seen at the time of Globalisation leading to pressure on raising productivity, improving product quality in order to stand in the market.

4. In many public sector units Voluntary retirement was seen.

5. In order to raise the sales door to door marketing was compulsory, in result businesses appointed sales person in large numbers.

6. Growth of consumerism. 

7. Volatility was in profits because of the choice from the customers as there was too much selection for them.

8. There was a rise in import from other countries particularly in those companies where United Kingdom was very much famous like textiles and clothing. 

9. Problems of dealing with improbability in the international market in terms of demand, supply and prices.

10. Competitive pressures were increased due to globalization on british businesses.

But the truth is there are hardly any real negative effects of globalisation compared with the pre-globalisation period. Notwithstanding the low level of globalization of world economy, the result of globalisation has been very much positive in all most all sectors of economic and social life and almost no negative effect. It is only because of opening of the hitherto closed, govt.-oppressed and controlled economy to the process of globalisation that has helped Indian economy to grow rapidly in the last 10-12 years, World’s economic growth has been high, exports was very much in all neighbouring countries the product they wanted and finally incidence of poverty was reduced, employment was the main concern of many countries, begging by many countries for economic aid has stopped but there was need for some other countries which were in very much need of economic aid than finally the long-term inflation rate was down to earth, insufficiency of goods have disappeared, the superiority of products available have better significantly and overall all the countries has become progressively energetic and internationally competititive.

Effect of globalisation on many industries has been very positive, though some industrial companies with the baggage of high cost, inefficient plants and processes inherited from the past because of closed economy’s government dictated industrial policies and priorities had to face serious problems in the beginning. But soon most of the industries have become more and more efficient, customer alert and improved their international competitiveness in terms of costs, prices, product quality and variety. Industrial growth has been very high and strong during the past decade because of globalisation. Exports have increased tremendously. Industries expanded abroad. Most of the foreign companies increased their investment in many money making industries which lead to many employments for the people leaving in that particular industrial areas who were jobless for the most of the time were getting jobs with some good wages because of the foreign companies investing their money for some good profits both were equally profited. Strikes by the unions have gone down low levels because of the industrial labor was happy what they are getting and the way they were working. Those who cannot be efficient and past their prime age to retrain themselves in modern methods and processes have been retired with very attractive voluntary retirement schemes. The trade unions were finding it difficult to influence industrial labor into protest because labor has started benefiting from the positive benefit of globalisation on the wealth and growth of the industrial sector. Talented labor is commanding premium compensation in the labor market. Several new type of industries were came into action started their small business. Small scale industries which were opened years back started growing fast as the people started to work for small scale industries as they stopped craving for MNC’s because of which these industries have fast grown into medium scale companies. Incidence of industrial sickness has gone done radically.[9]