The Arguments For And Against Globalization Economics Essay

Globalization is a modern phenomenon, which can be analyzed from various points of view. Roughly, we might say that globalization is integration of regional economies, societies and cultures in a globe-spanning network of communication and trade. This term is part of a historical process of capitalism which is a new international order in the context of a single world.

Globalization is sometimes used to refer specifically to economic globalization. This topic will be developed along the essay. However, as once was expressed by the ex-secretary of the United Nations Brutos Gali, “there is no only one globalization, there are many globalizations such us technological, sociocultural, political, biological…

An example of that not only the economic globalization exists is the creation of the International Penal Court, since the human rights are starting feeling the effects of the globalization and it is necessary uniform and universalize the recognition of the fundamental rights of the citizenship.

Globalization also refers to a process of interaction between societies and local cultures in a global culture to what we would call sociocultural globalization.

Different definitions

The word “globalization” is defined by different authors, official institutions and dictionaries according to their point of view. Therefore, there is not only one precise meaning of this term universally accepted by everybody.

On the one hand, United Nations (UN) [1] has defined it as an event, “unavoidable in our history”. It makes one world through the exchange of goods, products, information, knowledge and culture. This is a result of the step forward in the field of communications, transport, technology and industry.

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According to the World Bank Group (WBG) [2] , “the most utilized meaning” for globalization is an intercontinental economic activity, which has increased sharply. In this activity they include Foreign Direct Investment (FDI), International Commerce and Capital Flow.

However, the International Monetary Fund (IMF) [3] has combined both the United Nations’ and the World Bank Group’s definition. It also talks about globalization in terms of FDI, Capital Flow, International Commerce and the surprising evolution of communication and technology. Furthermore, IMF specifies that sometimes globalization makes it necessary for the workforce and knowledge to have to move to another country.

But, these kinds of institutions are not the only ones who want to give their own definition of globalization. A wide range of authors have given their opinion on the topic.

For example, David Dollar [4] , in an interview published in the World Bank Group Web, said that the economic globalization, or as he would rather use, “the economic integration takes place when a country reduces or eliminates the commercial barriers such as custom duty, and they accept investments and trade from the rest of the world”.

However, Leslie Sklair [5] thinks that “it should be seen as a new phase of capitalism, one that transcends the unit of the nation-state”. His college, Anthony Giddens [6] , does not think in the same way as him. In this case, he talks about globalization as a transformation in the global market, the evolution in the communication and “trade between nation-states in physical commodities, information and currency”.

Evolution from two different points of view

Theodore Levitt [7] was the creator of the word “globalization”. He used it for first time in his book called “The Globalization of Markets” to describe the transformation of the international economy which had been taking place since 1960.

However, its evolution is not clear enough. Some people say that it started in 1980’s and others are in favour of 1870’s. But in either case, “the bases of globalization are three specific ideas”, according to the Washington Consensus: “a severe fiscal system, privatization and the relaxation of the restrictions on economy” [8] .

The World Bank Group talks about four steps in Globalization’s evolution. Whereas, Leandro Sánchez Zepeda, in his doctoral thesis, explains that there are five different stages. I do not have enough knowledge to decide which is more appropriate, so in the following paragraph I am going to give details about the development of both thoughts.

According to the WGB [9] , these are the steps:

From 1870 to 1914: this period was characterized by the step forward in transport and the elimination of commercial barriers. The amount of exports augmented almost 8% and 10% of the total population moved to another country.

From 1914 to 1950: the situation was as before 1870, marked by protectionism.

From 1950 to 1980: during those years, the process evolved to an economic integration between rich countries. Moreover, Europe, North America and Japan opened their markets.

From 1980 until 2009: in this time, manufacturing increased to 80% worldwide. Some countries, such as Brazil, India and Vietnam, improved their international commerce and the globalization made developing countries improve.

On the other hand, Leandro Sánchez Zepeda [10] has put forward a different opinion in his doctoral thesis:

From 1870 to 1913: this period was marked by a peak in commerce due to an increase in capital and labour force.

From 1913 to 1950: due to the Great Depression, the First and the Second World War international commerce decreased.

From 1950 to 1973: thanks to the Bretton Woods’ system, global integration was strengthened.

From 1973 to 1990: during these years the amount of public companies which became private increased, the financial system started to be more open to the world, communication and transport advanced and it became international.

From 1991 until today: there are more free-trade areas, such as ALADI, NAFTA and ASEAN, and the economic integration has become stronger. In contrast to previous periods, the workforce moves less and capital and information are crossing borders.

GLOBALIZATION

Globalization itself is a continuous and dynamic process that challenges the laws of the countries in how they regulate the operation of enterprises and economic behaviour of individuals at the international level, who can give employment to workforce unemployed and also benefit from remaining irregularities and weaknesses in a particular country.

It is a complex phenomenon; therefore it should not surprise us that it causes different reactions in different individuals or groups. Some consider that threatens the framework of the “nation state”, national identity and the modern concept of democracy. For some, it promises a new era of riches for all, for others, it is the seduction of a consumerism that will bankrupt morally and economically the majority.

In favour of globalization

Why economic globalization is a good system? Advances in communication and transportation technology, combined with free-market ideology, have given goods, services and capital unprecedented mobility. For example, Northern countries want to open world markets to their goods and take advantage of abundant, cheap labour in the South. To do this, these countries use international financial institutions, such as, the International Monetary Fund and the World Bank Group, and regional trade agreements [11] to compel poor countries to “integrate” by reducing tariffs, privatizing state enterprises and relaxing environmental and labour standards.

Globalization is a phenomenon that is important to the develop of the economy in every country, due to the general opening of markets for goods and capital suggests the end of trading blocs, regional treaties and economic independence of countries but also facilitates the ability to solve economic needs that local players have been unable to satisfy. It makes easy the commerce between different countries and decreases the difference between developed and underdeveloped countries.

Some factors in favour of globalization are:

Global economy and market, which can lead to a better utilization of resources.

Greater ability to maneuver compared to fluctuations in national economies.

New opportunities of develop markets.

Using economies of scale, it can reduce cost.

International cooperation.

Growth and mergers between companies.

Privatization of public companies.

International financial deregulation.

Development of means of communication and transport.

The free movement of capital allows a more efficient allocation of global savings and provides to emerging economies the resources to develop and promote the consolidation of a sustained and balanced growth.

Globalization opens up opportunities for developed economies to improve their efficiency and productivity and allows economies in developing to improve the living standards of its population.

Against of globalization

When globalization was defined, it tried to minimize the impact of negative points and reinforce positive points.

Some factors against globalization are:

Lack of control over markets and multinational enterprises.

Increased economic social and territorial imbalances.

Concentration of richness and increased social inequality.

Non-fulfilment of minimum labour standards. Full employment, a priority until recently, was postponed. The work has to behave as a commodity, subject to the laws of supply and demand and the production needs, without laws that safeguards smooth minimum rights.

Damage to the environment.

Threat to biodiversity and cultural heritage.

Dominance of financial-speculative economy over real economy.

Increase exploitation of child labour

Controversy

The liberalization of international trade means more economic growth and welfare, such as the example of China, where foreign capital has invested heavily and the country has emerged remarkably by the effect of globalization. But if we go to Africa, we can see that its people are sinking ever deeper into poverty and degradation of economic, social and political life. There, no one invests and the one thing that Africa is used by Occident is for the arms business and to recover the debts they owe to developed countries.

It is true that globalization encourages free trade among countries, but there are also negative consequences because some countries try to save their national markets.

Companies are buying goods and services from foreign countries. Workers, who were sacked, are forced to work into the service sector, where wages and benefits are lower. This has contributed to the deterioration of the middle class, who have been relegated to lower positions. People in the lower class have to make more efforts to climbing out of poverty due to the absence of the middle class as a stepping stone.

THE PROBLEMS OF GLOBALIZATION

Globalization is the shortest and most viable way for the developing world to achieve political, social and intellectual modernity. Globalization is said to be the best and most effective means for the developing world to achieve comprehensive development, because it is the sole way to progress for this world economically. Changing the world to the better is through applying globalization.

There are problems in the process of globalization: if other countries produce goods better than other, maybe a lot of citizens from this last country will be sacked; if one state collects less tax, companies could go there to get more profit. The process of globalization entails adjustments in national and international economies, to which countries must adapt.

Income distribution: in many cases goods are produced in a nation through the importation of them is less restricted. The removal of import barriers may cause a substitution of goods produced within the country by others imported. This way, domestic manufacturers are affected. However, the elimination of trade barriers can make a product cheaper, which is an advantage for consumers because they can buy more with the same funds.

On the other hand, globalization promotes the concentration and the emergence of large multinational companies. The possibility of selling its products worldwide and reduce production costs through exploitation of economies of scale, cause that small businesses reducing their sales potential. This can result in the reduction of global competition and that one or a few companies dominate the market.

Evade national law: the possibility of settling in any country encourages companies to look for those where production costs are lower. As the laws of many countries may increase costs for businesses, they seek countries which have less legal regulation. In fact, there are territories in which companies don’t pay taxes for the profit. They prefer to settle there, due to they can pay higher returns to their shareholders.