- ~

Stud of Global Economics Introduction to Global Economic, .j Stud of GI

1,1,4 Drivers of Globalisation · ·· Jpreference

. .. .. .
On the whole, the presence of globahsat1on suggests that 1t IS dnven by some strong the more . Ir j
environmental
· issue.
· 'The tee hno Iogy revo Iut,on'
· or '.techno globahsm'
. are the terms use dto ! .wear . . Nike
·. ··
refer
d to globalisation.
I
Techno globalism .also refers to the role that technological whlCh IS f
a vancement p ays 1n. bu,'Id'mg. gIobaI mter
. depen dence. Many a times. 1t. 15. d'ff'
1 ICUIt to ma ke ;t most exc
t h th I b I
ou w e er g o aisat1on
. . dnves . technoIog1Ca . I 1nnovat1on
. . orits
. tee.hnoIog,ca,
. ' .mnovat1on. that. , ...
needs ~con
drives globalisation. This makes. the cause-result relationship very vague and uncertain. '' (bl Global
_However, without doubt modern telecommunications systems .aid the establishment of • GIObal
subsidiaries or.the effective interaction connecting alliance business partners - for instance, , of an enti
when mutual access to electronic boo~ng· details facilitates cod~sharing between Qantas · standardis
and British Aiiways. Telecommunicati~ns also solves the time ani space barriers for ' retailers, s
communication that earlier made It very difficult to execute business. For instance, the usage •1 ·econo.~ie~,
of the Internet makes a message available to the receiver the moment the $ender sends it It ' consumer.
has hOlped the world big-time right from a student getting a course done till clients booking • pace of glo
aifline tickets at any time of the day or night irrespective of location. This reality allows (cl Global
people to communicate across vast distances,. at a very low cost, and with dramatically _A_glc>~
reduced time cost. seale in a U
Other drivers that aid globalisation are related to a specific environment in which a Across the
- - .. ---·---
-

business function~ These drivers can be grouped as market drivers, cost drivers,
government and economic drivers, and competitive drivers. These environmental drivers opportuniti
are listed below:
I them-a f~
1) Globalisation market drivers i opened up !
; employme1
Market globalisation drivers are the forces and factors that influence the pace of
I·afast pace..
globalisation of an industry. Market drivers are essential for understanding the customer
demand pattern of Consumption. ·----- If many customers demand similar products, the pace of
--- - -
I (d) Transf
-.. \,_,._,_. _. _ ~.... There is a--
globalisation Transfe
. -. ..is,., accelerated. "convergence'
---~--!__in demand,
-----. -when there
--·---are-. sufficient
--------- be transfer
channels of distribution for supplying products and services to customers globally. For
the marketi
instance, seinfcoriiluciors ·have similar demands across the world. PC manufacturers in
very little.a!
Europe, ~ia, or the United States would seek a common 1-megabyte memory chip. In
Procter &
comparison, the local regulations still governs publishing and has less of a un~orm demand
across different parts of the planet. There are five market globalisation drivers.
(a) Comm, nCustomer N eeds and Tastes
The glo
-~'!!2fl.£\!..~ 'represent the extent to which customers in where inno ,
different countries want th.e same things in the pioduct or service category that defines an of new ro· I
industry·.. Many factors like culture, climate, and infrastructure affect the tastes and By using th ·
1.6
., .· ---
!_toGiobal Economics Stud of Global Economics Introduction to Global Economics

·{ preferences of consumers. The higher the level of commonalities among consumer groups,
~n by some strong the more likely that product will be accepted by them. Today, teen~ers all over the world
' the terms used to w_!ar Nike athlet~s. ~~9~tind L~v.l'.sJe.tfl.t As compared to thirty ye;~; ·;g~,'"'b~ttl;d...;;;;
that technological which is now consumed around the world is no longer a luxury item confined to only the
I
s difficult to make most exclusive cafes in Paris. The pace of globalisation becomes much faster with consumer
cal innovation that ·,~eds co~~2.i.'!2.~~me m9re common. . -- -
e and uncertain. (b) Global Customers _ ·
establishment of Global customers are generally companies that purchase certain items in bulk on behalf
I
rs ~.for instance, of an e~tire organisation and _distribu~~ __t~~l!'-~to--~~~~~id~~~!~i-~rh~y--c~~;~·;·_ d~mand of
b_etw~en Qantas standardised products for large batches. For example when .,~JJMaJt~~i!JK~. the furniture
ce b'arriers for retailers, source items they purchase in bulk. By doing so, they are also able to secure cost
ance, the usage .. ~onomie~, which can leverage into low prices. This reflects Wal-Mart's role ~s global
nder sends it. It consumer. The presence of such global ~onsumers in an industry tends to accelerate the
clients booking pace of globalisation.
reality allows (c) Global Channels
' dramatically I' ~-glo~al channel indicates the distribution of a particular type of products on a large
. .. ~cal~__i~~-~ni_v~rs~~ '!".~¥: This less~ns the cost of managing various distribution requirements.
t in wh,cn a Across the world, ~!y chai~~ have been cautiously crafted to benefit the sourcing
ost drivers, l
opportunities and to open up means of distribution. IKEA found channels to be closed to
ental drivers . f them-a .form of retaliation from the traditional furniture retailers. These channels were
I
opened up to enable it to become the world's leading, low-cost furniture retailer. With the
; employment and development of global channels, the industrial globalisation flourishes with
e pace of · afast pace.
e customer 2
{a) iransferrable Marketing
he pace of j Transferable means the ~d~pWi.on that has ~o b.e ma~e for br~nds that are t~
sufficient be transferred for international trading. The pace of globahsat,on will be easier and faster'. 1f
bally. ·For
cturers in
I the marketing schemes, models or stra_t~gi~s can_be transferred from country to country with
very little adjustment. A good example is the leading world supplier of laundry detergents,
Procter 61. G~mble (P&G) is able to Jse marketing developed in Europe in its Asian markets,
.chip. In
thus .-~ducing the cost of redesigning them for promotional and advertising schemes..
demand
(e) Lead Countries
The globalisation of industry goes down with the nfrequency of trade.~£2!,!'1!ries are_
where innovation is concentrated in a few countries, which ultimately leads the developme_nt
mers in
of new products. Non-lead country customers tend to look at lead countries for latest trends. .
fines an
By.using their ~putation in lead countries, the existence of lead countries permits companies
es and
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I
 Study of Global Economics Introduction to Global Econ' ,

to endorse a product in other countries. ~epopularity of the United States products refleq!
tts lead-c?unt,y status in many industries, notably financial services, entertainrnell\
i~fon11ation technology, biotechnology, and nanotechnology. Japan's strengths lie in optic
design and11-. materials management, while Korea's Samsung is beginning to excel in photo-
'Jl")

plasma technology. As more lead countries emerge and as more firms participate in these ·
' '
lead countries to lie exposed to _sources of innovation, the faster would be the pace of.
.i industrial.glqbalisation
'.,L ··:-
..
(ij Lead companies (MNCs).
\',

· MNC~ (Multi Natior,al·torporations) form a very importan·t constituent of ,increasing

globalisation in tod_ay's world. The MNCs't,y to increase their footpri~i throughout 'ihe ~orld !
and io te ._process,~ase !h..~. ~E>.P.~_~n~.J'!lP.~~J of the countrie,s. These MNCs are l
predominantly from USA and other western countries ·but in recent times, developing • j
countries like Mexico, China, India, etc are fast catching up. Some of these companies are so
large that their turnover is larger than the GDP of many countries. · f
2) Cost Globalisation Drivers ·
\
. . I
· Cost globalisati~n drivers are the cost factors and forces that can transform the pace of
globalisation. The pace of globalisation enhances when costs are reduced to the point that
Et9qucts become afford;bi;·Th~ ~iin ~d;~~t~ge of globai strategy is cost reduction which
results from sca.ie.ancr scope economies. Cost globalisation drivers are medium that helps
cost reduction. As their cost of production has sharply decreased, semiconductors and VCRs
have become global industries. However, the pace of globalisation is relatively slower with
I
I

the high process and differing standards for HDTV. There are basically seven cost ·
I; globalisation drivers.
II
(a) Globai Scale Economies
1 EconQ.LDics of scale.{cost efficiencies that are realised when the volume of.an a~ivity is
-
· increased) are essential for cost reduction. .Global strategy demands economies of scale at
the global level to attain cost benefits that value global strategies. This takes place when a
single market is not big enough for competitors to o~timise economies of scale In some
cases, e_cpn2.._IT]j~5-~~~-~~?.Pe (~ost e~j~~~n£~.LtPltar~ L~aj_ i~~~-bY. _spr.~.ad!ng activities acro~s
different p~og,l!c,tJin~.t~n~ multiple P.!~,Q.t~), which .'Jermits a firm to trade multiple products
·i~-~·~itipi~ ~ountries, b~c~me··~ part of a· globa~ strategy which aims at reducing costs.
Chemicals, steel, petroleum, and automobile industries with large fixed costs tend to utilise
expansion strategies in which economies of scale and scope can be realised. In fact, steel and
consumer electronics world markets have resulted from cost reductions emanating from
. scale. In case of automobiles, multinational firms have gained from efficiencies in scope
arising from several plants and locations.

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of Global Economics Introduction to Global Economics

)ducts reflects (bl Steep Experience Effects r, 1 r, , , \. . ,-' ; t · ~,

~nte_rta_inment, . ~1-_~vely p.erfO!f!l!~_g an --~ti~.i~y an exp~E~::- (learning) curve rep~ting cost
hs he moptic I efficiency is gained. In a chain of studies conducted by the BCG ·(Boston Consultin~oup)
xcel in photo- ;;~~~~~-~;:~;;·~y"
1
products including bottle caps, refrigerators, and long-distance calls, ·
1
:ipate in these_· observed a remarkable regularity in which costs were lessened with ~umulative production.
~-the pace of ·t Doubling of cumulative production typically reduced unit costs by 20 to 30 percent (defined
_ -.now, as _80 percent and 70 percent experience curves, respectfully). The greater th_e! reduction

of
Il in unit cos~ increased production, the steeper the experience curve. In case of global
strategy, this means that experience effects should be relevant to many location~ and that
,out the world experience effects achieved from one place can be applied and utilised in other locations to

I
!Se MNCs are I boost the overall global-level effects. For instance, in case of semiconductors, the cost per
is, developing unit over reduces by 30 percent every time experience is doubled.
panies are so (c) Global Sourcing Efficiencies .
I This is related to economies of scale from the suppiy side. In order to attain global

II sourcing efficiencies, a firm should be capable enough to ~b~in inputs on a large s.cale and
the pace of . at a low cost through well-esta_blished coordination a~ong -suppliers g'lobally_- wiMart
e point that -serves as a be;t example of it which excels in worldwide sourcing efficienci~,-particuiarly in
uction which China. McDonald's wliich specifically uses local supplies for its. basic food ingredients, also
that helps benefits from its global sourcing. . ·
rs anci VCRs
slower with I
i
(d) Favourable Logistics
-. ,. . . .
This refers to the economies in transporting products against the value of the products.
seven cost • ; . . . . .
i The usage of standardised products across multiple co_nsumer groups_1s_d,1~~o~ragee1t when
ii -- . .

f _an ~-~ivity is
1
Iproducts are low in value bu!_have high transportation costs. Afavourable situation takes
place when cost benefits and logistical convenience are available in many countries globally.
Cisco,'with a ramped-up supply chain can move quickly around the world in search-of its best
1ies of scale at
i place when a ··sour~e of ~\.lpplie_s. The ~~pacity of Starbucks to secure vital partnerships with suppliers in
scale. In some Latin America and Africa has helped its global str,,tegy.
1ctivities across (e) Differences in Count,)' Costs
iltiple pr~d~cts Glob~! firms, .~e~erally tend to approach the lowest-cost suppliers, design_ers or skill_~~
·educing costs. _l~bou~'. In order 1'')r. the global strategy to be successtu'1iyap'~];[different cost levels in
nd
te to utilise " different countries should exist. There will be minimal or no cost benefits if there are
st
fact, eel and · insignificant or no differences. Due to their lower labour cost, Vietnam, India, and China have
1

nanating from
become desirable. A lot of North American publishers have started to produce software in
ncies in scope
India where they are able to pay programmers a much lower wage along with comparable
quality in the produ::ts.

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 Study of Global,~E~co~n~om:.:.-.:..::ics:___ _ _ _ _ _ _ _ _ __ ~ I • ~

·(f) High Product Development Costs

High product development cosfs virtual to the size._of the national market can be a dr;,,~
of globalisation, but two considerati9ns · apply. F.rrstly, V,h_en the CQ.s(s . _o_f ~rOduq
deVelopment are high, to (educe. total ca.stsJimi.i~.fil_ed .lo../lm_mQt.L ~OduQ,
il1 various markets so as to reduce the averag_e cost of development P!'~ u~! SecondlY.l,igh
ProducidOVei~;;;;;.n; c~sis discOurage SOme less resourceful firms to contribute in the
competition. Semiconductor costs are signlfiC:arit, w~h a new plant cOsting over $1.5 billion
This has led to various consortia, SEMAJEQ:1 being one example, which share,
developmental costs across ~ompetitors.
(g) Fast-Changing Technology ' . , 'i

For Products that depend on rapidly-changing technology, firms have to spread out the
cost of the product through multiple, large markets before the Product becomes outdated or
imitated. Thus, industries characterised by. fast-changing technologies (for example, ·
semiconductors) t_end to have a greater globalisation potential and a faster pace of
globalisation. As new semiconductor plants are costly and have a three-to-five-year lifespan,
Samsung and Hyundai rely on large markets to meet their returns on investment which in
turn, accelerates the pace of semiconductor globalisation.
r
I
3) Government Globalisation Drivers
'
i Government globalisation drivers are policies that can enhance or impair the pace of
globalisation. Globalisation is enhanced when policies favour free trade and relatively open

I access. The paceiifglobaliiation is much sl~wer if the policies deter market enby._These
policies' existence depends On the overall friendly or unfriendly environment that the
drivers.
government makes available for business: There are generally frve government globalisation
(a} Favourable Trade Policies
f
f,
4'.

Favourable trade policies consist of trade liberalisation for foreign investment and user-
friendly business policies, which create POsSibilities fo;·gl~bal firms. For instance, .lower tariff gl(
. !.a_l~s for the semiconductor industry have improved its pace of globalisation. In contrast, if is I
tariffs were reduced, the worldwide market for agrarian products would be much more (a)
developed. The lowering of rates aids the globalisation of production.
(b) Compatible technical standards
sta,
Sometimes for the sake of prolecting home markets and cons,;mers, countries adopt tran
different technical standards for products. This makes it difficult to transfer and standardise
glot
Products. Compatible technical standards amonicountries ofter a platform for facilitating ·
(b}(
product transfer and standardisation. For instance,~nconsistent standards prevent HDTV from
being widely adopted. around the globO. In contras(, _iyhen DVD standards were openly
adopted, DVD sales soared to become a universal product.! . .
,', , 1.10
 r
It
: S lobal Economics
tud of Global Economics
Introduction to Global Economics

. l(c) Common Market Regulations

can be a dnver
.

!dift _t~ _of product Common marketing regulati.ons refer to the ~~~to~l!.l~!t,°.f t~e m~rketing _environment in
l ma ll]_ere_products ldifferent countries. f_~e. mo~e uniform they are, the easier it is for standardised products to be
I .Secon~½h~h marketed across multiple consumer groups
Id~ ntnbute
.
in the
- --.
(d) Governme~t-Owned Competitors and Customers
f to~.1ver $1.5 billion. Go~e~nm_~-~~-~~ned competitor~, if they have· the support from their governments, tend
(2
Jforei
which shares to b~Olo,:e_agg~s~ive in!'1.!.~ing f~:rii9n!1'~
-. _ -k h ·
Su~h-fi;~;;;; ~ore ;pable of folfoWiifg
oreign mar ets. In t e case of governmenH>wned -customers, with their preference for
J.bll)i bu~ng from local suppliers, the opposite is true. In such a case, government-owned
I CU~o spread out the . customers become an obstacl~ to globalisation. The preference· on the part of European

I CUsto es outdated or customers 'to source from local suppliers, instead of buying much cheaper semiconductors
With (for example, with comparable quality from Japan, impeded the development of the European PC industry.
INone a5ter pace of Nonetheless, government-owned corporations are not essentially successful in their global
I· acti~· -year lifespan,
ent which in activities. One source of debate is China's hold on its SOEs (state-owned enterprises), which
comp ·
· comprise about 60 percent of China's-GDP. They are encouraged by the Chinese government
in sprr, in spite of their poor performance, as SOEs tend to be the primary source of employment.
{e}H r the pac~ of (e} Host Government Concerns _
So latively open Some aspects of a foreign firm's global strategies cause legal worry that discourages host

l~
gover t entry.. These governments from being open-minded towards it. Some of these issues consist of tax
:Woida _ent that the ~ygida_~~~ .~t1btfi!!!1_,and the _possibility that the firm may regularly relocat_e its subsidia;;
m·t globalisation from nation to nation.
i
I
. . Globa lir~•:""
4) Compet1t1ve .,, ...=,
.......,v .. n.iu,uar:11 .
'

Competitive globalisation drivers are the competitive forces that can modify the pace of
ent and u_ser-
- globalisation. By bringing in different rivals, products and services, the pace of globalisation
bbali .nee, ;lowe! tariff
is encouraged. There are five competitive globalisation drivers.
enco •In contrast, if
(a) High Exports and Imports
1High be ~uch more
.~. -~l9h .Yolu~~ i~_!he _export ~nd ·:mport, 9L~~Jtaiq_9%.,~~.l~. _a_sig_QJ~ tlfil!i.al
standardised products ex.ist. Manufacturing the product~--~e~r _their markets will reduce the
idardi .·
countries adopt transpoft~tjon · cost reduction.: Moreover, trade between countries spurs the pace_ of
sporl~and standardise globalisation.
a/isa for facilitating - (b) Comp.etitors from Different Continents
,0111 vent HDTV from
The competition te~ds to be·more severe, if rivals in a particular industry come from
,e I . ds were openly
C various backgrounds. Hence, it is vital for firms to ..eurs~~ gl~b ~ to fight
15 bi competition. The entry of the Chinese and the Vietnamese into teleco_mmunications signals
•titiGt 1.11
 Introduction to Global E
Study of Global Economics .

different strategies that will only intensify competition and increase th e pace of globalisati I al Economics ·
. . . on. stud·
Reflecting on the entry strategies used by Japanese firms it ,s not unusual for ne • •
• . w1 lobahsat1on,
competitors from different countries to initiate new strategies, thereby changing the rules 01 al for new
competition. the rules of
(c) Interdependence of Countries
Interdependence among foreign subsidiaries permits firms to reimbur~e for one
subsidiary's weaknesses . by sharing resources among all subsidiaries. It also · spurs e for on
'l"f l .

I .. also spurs. '

competitors to pursue like strategies to o~set rivals. Firms· can subsidise attacks on
·attacks on
: co~petitors in other countries along with ihterdependent countries_. ·Komatsu's success
u's success
against Caterpillar in the United States stemmed in part from Komatsu's success in Eastern sin Eastern
Europe, which allowed the company to driye down cost th(ough experience. K~matsu was
matsu
able to prepare itself when it· battled Cat~rpillar in _the United States without having to t having to '
wasl
compete openly with Caterpillar in Eastern Europe.
(d) Globalised Competition
The competitive factor is transformed and other firms are pressured to b~,!:;Qme g,l9bal
. ~ ,c;,,--,..._ ... ...-..u-,..- ._
., ........ ...-.- • . ..
om_e global
wh~~-~lo~ali~e~d. c.ompeti~-9:,~j ~ ivel~ engage in global acfutities. Consequently, more firms more firms
turn global and the industry itself transforms into being global. Citi_bank, which found hich found
competition in Asia to be quite intense with·the established presence of Chase Manhattan,
J. P. Morgan and HSBC, become more multinational in their operations. 11
(e) Transferable Competitive Advantage
-·
If a firm's competitive advantage can be transferred from market to market, then it is 91 '
. . j
t then 1t 1s ,
" COUntry.
Th
e
I
encouraged to keep going abroad and to duplicate its success from country to country. The , , ; ch· .11
. 9 d maw,
successful application of its Direct System by Dell Computers in London and China will m same holds
certainly leverage its entry into new markets that are receptive to this system. The same holds
for Starbucks, which has successfully made a w_ay into Latin America, Asia and parts of Europe
using its strategy of creating a superior coffee experience for targeted consumers. an indus.try,
In short, all four globalisation drivers dictate the globalisation potential of an ir:.~~stry,·, elops global
that is, its pace of globalisation. If the pace of globalisation is high, it quic.kly develops global onal market
strategies. There is growing pressure for companies to develop an international° market ess, having a
globl d~antage. Its
presence if the globalisation of the competitive landscape intensifies. Nevertheless, having a
ev · ies becomes
global presence does not guarantee that a firm will sustain its competitive advantage. Its -
is ha t -- - -
ability to learn quickly from experiences and develop dynamic capabilities becomes offe<
important considerations in forging a successful endgame. made
--'-------:.:.:::...:.:.:...:.::.:..2::..:i:!...:...:.::.::.:.::'.:::.::.:...::~::.:::....-------
1.12
-
ilobal Economics ·
• - ~'1-~of_G_lo_ba_l_Ec_on_o_m_ic_
s__________
Introduction to Global Economics
)f globalisation. Competitive Factors
,usual for new' • High Exports and Imports
1ing the rules off • Competitors from different countries
• Interdependence of countries
.... -- • Globalised competition . ..
• Transferable Competitive Adv~ntage· ' · ..Cost Factors
Governmental Factors
1burse for on e • Favourable Trade Policies \·',Global
. Economies of scale
• ·Steep experience efforts
It also spurs • Compatible standards
• Global sourcing efficiencies
, Common market Industry Globalization .
lise··attacks on --+ Potential ·.... • .Fa~ourable logistics · .
, •' • Regulations
natsu's success • Government-owned • Significant differences in
country costs
:cess in Eastern competitors and customers

l
• ·:Rising Product Development
• Host Government Concerns •. Fast-changing technology
~- Komatsu wa s
Market Factors
noui having to
• Common cu~tomer ne~ds ~nd Tastes
• Global customers
• Global c~annels
• Transferable marketing
~~~ome global • L.ead countries
tly, more firms • Lead companies
, which found. ·
1se ManhattanI

~ Th~re. are see~ingly c~nflicting reac:idns from the two sides on the ongoing debate on
iarket then it is
r to country. The
il
globahsat1on and mequahty. On one side, the website of a prominent NGO in the anti-
~lobali~ati~n mov_e~ent, the_ Internati~nal Fo~um o.n.Globalisati.on, confidently cl~i~s that
l and China w·
Th 111
r globahsat1on policies ha~e !D_Crea~~~.9~!t~.!!12!14lillL~tbin D.9~S. This stands in
marked contrast to the claims made by those more favourable to globalisation". ·
1· esame holds • that the available
•
It must be accredited data on poverty and inequality are imperfect
u Parts of Europe which neither side of this debate .has paid much attention to. There are alsr potentially
tners. important differences in the types of data used. The "pr~-globalisation" side ha ; tended to
ja\ of an indus.try, prefer "hard" quantitative data while the other sk!e has drawn more eclectically· on various
-~develops global types of evidence, both systematic and anetdota·, or subjective. Differences in the data used .
lernation no doubt account in part for the differing positio1·.s taken.
1

I
erth a rnarket = One reason now such different views persist is that it is difficult to detach effects of
I
tive eadv
ess, havin9a globalisation from the many other factors imposing on how the distribution of income is
labilit' ·antage. Its . evolving in the world. The processes of global economic integration are so persistent that it
ies becornes is hard to say what the world would be like without them,. These complications of attribution
-------- offer ample fuel for debate though they also leave one suspicious of the confi~ent claims

\ mad_e_b_yb_o_th_si_de_s·-------:--::--,:__------ - -
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I Sludy of Global Economics fnlrodudion to G I ~.

Conflicting assessments can also stem from hidden contextual factors. Diverse impacts ofl '
. s~
the same growth-promoting policies on inequality can he expected. Policy .reforms shiftfd.
distribution of income"in different directions in different countries. Yet both sides make
generalisations a~out distributional impacts without specifying the context In a given! •
country setting, there niay well be much less to disagree about . · I
' 1,2,2 Arguments in Favour of Globalisation ·· j7
The proponents of free trade claim that globalisation increases economk prosperity asl .
well as opportiJnity, esP&ially amongst developing na.tions, e~hances civil liberties and leads
to a .more efficient allocation of rewijrces. Economic•th®nes of comparative advantagel
I
suggest thaf free trade leads to a'ITIOre efficien.t allocation of resources, with all countries 8.
involved 1n 1t standing·to benefit. In general, this leads to lower pnces, more employment,
higher output and a higher standard of living for those in developing countries. Research has '
PlllVe(f that.countries. that have accepted globalisation have grown faster than those who
have not. The GDP of the countries and the real income of the people have increased much
I
faster than those countries that have yet not opened their markets to foreign companies.
,1- Proponents of capfialism say that countries that allow higher degrees of political and · 9, I
\
economic freedom in the form of democracy and capitalism in the developed world are ends .
r
in themselves and also produce higher levels ~f material wealth. They see globalisation as the
beneficial spread of liberty and capilalism. The supporte~ of globalisation argue that the ,
anti'l)lobalisation movement uses anecdot~ evidence to support their protectionist view,
whereas worldwide statistics strongly support globalisation.
· The benefits of globalisation are mentioned in the points below. They are as under -
1. .l~f~~~A~<!~,Sr' has almost doubled in the d~veloping world since World War II and is
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In
starting to close the gap between itself and the developed world where the improvement ' m
has been smaller. Even in Sub-Saharan Africa, the least developed region, life expectancy . 20
increased from 30 years before World War IT to about a peak of about 50 years before no
the AIDS pandemic and other diseases started to force it down to the current level of 47 hai
years. Infant mortality has decreased in every developing region of the world. in e
2. Democracy has increased dramaticaliy from there being almost no nations with universal
"suffrage in 1900 to 62.5 percent of all nations.having it in 2000. Feminism has made 1,2,3
advances in areas, such as Bangladesh through providing wo~h jobs and •

i
An~
economic safety.
groups
3. The eropo~i~ .theworld's population IMng in countries wh~re per .capfia food 'the proc
supplies ar~ ]~s~.than 2,200 cdlories (9,200 kilojoules) per day decreased frorn 56 percent democr0
in the mid-1960s to below 10 percent by the 1990s.
i I

4. Between 1950 and 1999, .2!£t>~Ji!~my increased from 52 percent to 81 percent of the
internatic
organisal
world. Women made up much of the gap; female literacy as a percentage of male literacy of treeill
'
denoteeit
\
·has increased from 59 percent in 1970 to 80 percent in 2000. . .-
1.14
 Global Economics
,tu . -..
Introduction to Global Economics

'· ~~e~entage of child_ren L~J.~~J~9.~~. fo..~ce h~s} a!l:n from 24 perce-nt in i960 to 10
percent in 2000. -
There are simi_lar increasing trends toward electric power cars radios and t I h.
·.:.:...- . -. . , , , e ep ones per
--CaR ta, as well as a_g!9~!~9•.P.rORQJ:ti.QQ.Q.f th~_popul~tton·with.access to dean water~..
1

' The book 'The Improving State of the World' also finds evidence that these and other
:1~ ~~~ures of human well-being have improved and that globalisation is part of the
explanation. It al~? responds to arguments that environmen-tal -impact will limit the
. -· 1, . 1}
progress. .., - .- -~ ··

I. Although critics o(globalisation complain of westernisation, a 2005 UNESCO report

showed that ___
cultural
._,_,,_, ______
exchange ,. is becoming mutual. In 2002, China was the .third largest ·•·

.exporter of cultural goods, after the UK and US. Between 1994 and 2002, both North
America's and the European Union's shares of cultural exports declined, while Asia's
cultural exports grew to surpass North America.
9. The percentage of people living on less than $2 a day has decreased greatly in areas
affected by globalisation whereas~.,. e.o.~~rty rates.... ...in other areas have remained largely
..._..,_, ~------.~
\ ____ -

stagnant. In East-Asia, including China, the percentage has decreased by 50.1 pe'rcent as
compared to a 2.2 percent increase in Sub-S~haran Africa.
10. Income inequality for the world as a whole is diminishing in the countries that have
'l""'--- · • •'.-- • • • -· -··. .• •

opened up their markets for the world. Due to defini~ional issues and data availability,
there is disagreement with regards to the pace of the decline in ·extreme poverty. As
noted below, there are others disputing this. The economist Xavier Sala-i-Martin in a
2007 analysis argues that this is incorrect, income inequaHty for the world as a whole has
not diminished. Regardless of who is right about the past trend in income inequality, it
has been argued that improving absolute poverty is more important than relative
inequality.
1.2.3 Arguments against Globalisation
Anti-globalisation is a critical term used to describe the political star.Ce of people and
groups who oppose th~ neoliberal version of globalisation. Anti-globalisation may involve
·the process or actions taken by a state in order to demonstrate i_ ts sovereignty and practice
democratic decision-making. Anti-globalisation may occur in order to put brakes on the
international transfer of people, goods and ideology, particular~y those determined by the
-organisations, such as, the IMF or the WTO in imposing the radical deregulation programme
of free market fundamentalism on local governments and populations. Anti-globalism can
denote either a single social movement or an umbrella ter~ _that enc~mpasses a nu~~er of
sepa ra t e soC1a
_,_ • movements, such as, nationalists
_ and soc1ahsts. In either .case, part1c1pants
1
1.1~
 Study of Global Economics . !I
Introduction to Global Economics . Study iii'G 1
~
, (< I r,Ill
stand in opposition to the unregulated political power of large, multi-national corporations, r .ch)I
as the. corporations exercise power through leveraging. trade agreements. which d~mage. in 1• be~l
some instances the democratic rights of citizens, the environment particularly air quality ch (
index and rain forests, as well as national governmentf soyereignty to determine labour l (4) W if9
rights including the right to unionise for better pay, and be~,er,working conditions, or laws as
they may otheiwise infringe on cultural practices and traditions of developing countrres. I
I es,J
Pili

I
The critiques of the current wave of economic gl9~al1s.~tion '.typically look at both the .: his~e
damage to the planet, in terms of the perceived uns·;;tainable harm done _w,sre biosphere, f (5) 1w/
as ,well as the perceived human costs, such as, increased poverty; inequality, ' miscegenatio,n, al
injustice and the erosion of traditional rulture which, the critics contend, all occur a~ a result ·fore' t
1
of the economic transformations related to globalisation.. They point to a multitude of wh\!
interconnected fatal consequences - social disintegration, a breakdown of democracy, more wid\di
rapid and extensive deterioration of the environment, the spread of new diseases, increasing has ~ai
poverty and alienation which they claim are the unintended but very real consequences of factc
globalisation.

The harmful effects of globalisation are mentioned in the points below. They are as under - .
I werei,e
and ~e
(1) ·Poorer countries are sometime5 at a disadvantage. While it is true that globalisation
have1e,
en~ourages free trade a~-o~g ~o~n-trie; on an .international level, there are also
negative consequences because some countries try to save their national markets. middei
r
The main export of poorer coun~ ..~-~s'u~ily~a_gricult~;;I ·goods. It is dftffuit ·for ' (6) The le
.le
these countries to compete with stronger countries that subsidise their own farmers.
I .trans1t1
Because the farmers in the poorer countries cannot coffiJ)Oie, ihey are forced fo·Sell
their crops at a much lower price than what the market is paying.
(2) The t~e .~n~fr-~~rTlent ~f- 1.~ore,r _rnuntries which cannot fight
:.1
often;i
against the might of the larger companies and have to bear with the exploitation or
The critics
risk losing the companies which may go to other countries for their productions and
1

operations. Organisations, like the ~~q,,IMF .etc. have been working . under the mediated acco •
influence of the devel~pe~ W~[,ld,and thus they , re not sympathetic and supportive global institu tl
of the developing c~untries which lead to the developing countries being victims of working classe
unfair practices.
way. The mo
cl
(3) The deterioration protections for weaker nations by stronger indl"strialised powers •
peasant unio
.n

has resulted in the exploitation of·the people in those nations to become cheap .relocalisation
@Q9~ Due to lack of adequate protections, the companies from po.I
capitalism), wh
industrialised nations are able to offer workers enough salary to entice them to
humanesy5!e
-~-~~ur_e e~remely long h9ur~ and Unsafe working c_~~~!!~ns. The abundance of
national indu~
1.16

. .
· nto Global Economici ~udy of Global Eco~o,.!!m~ic:!_S_ _ _ _ _ _ _ _ _ _ __!!ln~t~ro~du~c~tio~
' . 1
ational corporation,
ts which damage i1
rticularly air qualityll
to determine labourl
conditions, o_r laws a~I
ping countries.
lly look at both thei
neto the biosphere.I
ality, miscegenation;!
, all occur as a result
It to a multitude of _
of democracy,
1 morel
v diseases,increasing,
·eal consequences of
hey are as under_
uethat globalisation
evel, there are also
(ir national markets.
?S: It is difficuit for
etheir own farmers.
eyare forced to sell
Which cannot fight
1the exploitation or
~ir productions and
t Working. under the
~ic and supportive
~es be·,ng vrctrms
. . of
·~dust · .
nahsed powers
to be
~: .:~~ I
~bundance nf
~ ,
I
· n~t~o..=G:::lo:.::.ba:::.:.i_Ec_o_n_om_i_cs '
• ... h t ctify the inequality
. cheap Iabour rs grvrng t e countries in power incentive not o re · · 1
0
between nations. If these nations developed into industrialised nations, ~he army. .f
cheap labour would slowly disappear alongside development.
(4) With the world in this·· current state, it is impossible.f9r t~e expl~ited workers ,to · ·
escape poverty. It is true that the workers .a·re free to leave their jobs, but in many
I poorer countries, this wo_uld ·mean starvation for the worker and, possibly ~veri
his/her family. .
(5) The low ~o;t of offshore workers have ,entic-ed corporations to mpve produ~:~.?.-~ _t_
°-
..------·--·· ·---~
foreign countries- The laid-off unJ.ki!!e.d..-W-'lrk.~rs are forced into the service-sector '
. ·- --------- - ·".
where wages and benefits ~re low, but turnover is high. This has contributed to .the
widening economic gap between skilled and unskilled workers. The loss ofthese jobs
has also contributed greatly to the slow decline of the middle class which is a major
factor in the increasing economic inequality in the United States. The families that · ·
ii
were once part of the middle class are forced into lower positions by massive layoffs
I
.· and outsourcing to ,another country. This also means that people in the lower class
have a much harder time climbing out of poverty because 9f the absence of t~e '
middle class as a stepping stone.
I (6) The surplus cheap labour coupled with an ever-growing number of companies in
I transition has <:au~ed a,~~ak~IJJn,9_,2fJ2.Q.Q~L.YDlQQ~. in the United States. The unions
I. lose their effectiveness when their membership begins to decline. As a result, the
unions hold less power over corporations that are able to easiiy replace workers,
I often for lower wages, and have the option to not offer unionised jobs ar:iymore.
! mediated
The critics of globalisation typically emphasise that globalisation is a process that is
according to corporate interest~, a~d typically raise the possibility of alternative
global institutions and policies, which they believe address ·the moral claims d poor and
working classes throughout the globe, as well as environmental concerns in a 11ore ~quitable
way. The movement is very broad, including church groups, national liberation factions
• • I
peasant unionists, ·intellectuals, artists, protectionists, anarchists, those in support of ,
relocalisation and others. Some are reformist (arguing for a more humane form of
capitalism}: while others are· more revolutionary (arguing for what they believe is a more
humane system than capitalism) and others are reactionary, believing globalisation destroys ,
national industry and jobs.
1.17