Globalization.

Definitions.
Globalization is the word used to describe the growing interdependence of the world’s
economies, cultures, and populations, brought about by cross-border trade in goods and
services, technology, and flows of investment, people, and information.

Countries have built economic partnerships to facilitate these movements over many
centuries.

“We live in an age of globalization,” Harvard Professor Reinhardt says in Global Business.
“That is, national economies are ever more tightly connected with one another than ever
before.”

Historical Background.
 Ancient humans sought distant places for settlement, production, and trade.
 The first wave of globalization emerged in the 19th century.
 Technological advancements like steamships, railroads, and the telegraph drove the
first wave.
 European colonization and trade activity played a significant role in the first wave.
 World War I, post-war protectionism, the Great Depression, and World War II halted
the first wave.
 The United States led efforts to revive international trade and investment after
World War II.
 This marked the beginning of the ongoing second wave of globalization.
 The second wave has faced periodic downturns and increasing political scrutiny.
 Globalization has facilitated the global exchange of goods, services, and ideas.
 It has had a profound impact on the global economy.

Causes of Globalization.

Technological advancements: Advances in transportation, such as steamships, airplanes,

and railways, have reduced travel time and costs, making it easier to transport goods and
people across long distances. Similarly, developments in communication technology, such as
the internet and telecommunication networks, have facilitated instant global
communication and information sharing.

Trade liberalization: The reduction of trade barriers, including tariffs and quotas, through
international agreements and negotiations has promoted the expansion of international
trade. Organizations like the World Trade Organization (WTO) have played a crucial role in
fostering global trade liberalization.

Economic integration: The establishment of regional economic blocs, such as the European
Union (EU) and the North American Free Trade Agreement (NAFTA), has led to closer
economic integration among member countries. This integration has resulted in increased
trade, investment, and movement of capital, goods, and services across borders.
Market-oriented economic policies: Many countries have adopted market-oriented
economic policies, such as deregulation, privatization, and the promotion of free markets,
which have facilitated international trade and attracted foreign investment.

Global financial systems: The development of global financial systems, including

international banks, stock markets, and currency exchange mechanisms, has facilitated the
flow of capital across borders. This has supported international investment and economic
growth.

Labour mobility: Increasing labour mobility, driven by factors like migration, has contributed
to globalization. Movement of people across borders has led to the exchange of skills,
knowledge, and ideas, as well as the integration of diverse cultures and societies.

Multinational corporations (MNCs): The rise of multinational corporations, with operations

spanning multiple countries, has played a significant role in globalization. MNCs establish
global supply chains, invest in foreign markets, and facilitate the transfer of technology and
expertise across borders.

Cultural exchange: Globalization has also been influenced by cultural factors, such as
increased travel, tourism, and the exchange of cultural products like music, films, and
literature. This cultural exchange has contributed to a more interconnected global society.

The correlation between globalization, economic growth and poverty reductions

 The expansion of international trade has coincided with a substantial increase in

average world income over time.
 Global GDP per capita has been growing consistently over the last two centuries,
except for lower growth rates during the interwar years.
 economic growth started accelerating during the first wave of globalization.
 The share of the global population living in extreme poverty has been continuously
decreasing since the 19th century.
 Economic growth has played a significant role in lifting more and more people out of
poverty, even with unprecedented population growth.

 Globalization and economic growth have contributed to this historical achievement

in poverty reduction.
Globalization and economic growth are closely intertwined, as globalization has been a
catalyst for economic expansion in many countries.

China's economic growth over the past few decades is often cited as a prominent example
of the relationship between globalization and economic expansion. China embraced
globalization by opening up its economy to foreign investment, implementing market-
oriented reforms, and participating in international trade. This led to a surge in exports,
foreign direct investment, and industrialization, propelling China to become the world's
second-largest economy.

The economies of Southeast Asian countries, such as Singapore, Malaysia, Thailand, and
South Korea, are often cited as success stories of globalization and economic growth. These
countries adopted export-oriented policies, attracted foreign investment, and focused on
developing industries like manufacturing and electronics. The integration into global supply
chains and access to international markets contributed to their rapid economic expansion.

The formation of the European Union (EU) and the creation of a single market among
member countries have been instrumental in promoting economic growth in Europe. The
EU has facilitated the free movement of goods, services, capital, and people, creating a
larger consumer base, attracting foreign investment, and fostering economic integration.
This has resulted in increased trade, job creation, and overall economic prosperity in the
region.

Pros and Cons of Globalization.

Cons.

1. Inequality: It has made the rich richer while making the non-rich poorer. “It is
wonderful for managers, owners and investors, but hell on workers and nature.”

Mexico.

Mexico undertook far-reaching reforms between 1985 and 1994 that opened its economy
to trade and capital flows. Over the same period, the earnings gap between high- and low-
skilled workers began to widen. Nicita (2004) shows that during the 1990s, tariff changes
raised disposable income for all house- holds, with richer households enjoying a 6 per- cent
increase and poorer households enjoying a 2 percent increase.
India.

 Research focusing on district-level analysis shows that trade liberalization has

resulted in increased income inequality, particularly in urban districts.

 In urban areas, the incomes of the richest and those with higher education rose
significantly faster compared to households at the bottom of the income
distribution.

 While the relationship between trade liberalization and inequality in rural areas is
not statistically significant, overall, a decline in tariffs is associated with an increase
in inequality across different measures.

The anti-globalists also claim that globalization is not working for the majority of the world.
“During the most recent period of rapid growth in global trade and investment, 1960 to
1998, inequality worsened both internationally and within countries. The UN Development
Program reports that the richest 20 percent of the world's population consume 86 percent
of the world's resources while the poorest 80 percent consume just 14 percent.

2. VAT: Globalization is supposed to be about free trade where all barriers are
eliminated but there are still many barriers. For instance161 countries have value
added taxes (VATs) on imports which are as high as 21.6% in Europe. The U.S. does
not have VAT.

3. Unemployment: The biggest problem for developed countries is that jobs are lost
and transferred to lower cost countries.” According to conservative estimates by
Robert Scott of the Economic Policy Institute, granting China most favoured nation
status drained away 3.2 million jobs, including 2.4 million manufacturing jobs. He
pegs the net losses due to our trade deficit with Japan ($78.3 billion in 2013) at
896,000 jobs, as well as an additional 682,900 jobs from the Mexico –U.S. trade-
deficit run-up from 1994 through 2010.”

Workers in developed countries like the US face pay-cut demands from employers who
threaten to export jobs. This has created a culture of fear for many middle-class workers
who have little leverage in this global game.

4. Multinationals.
Large multi-national corporations have the ability to exploit tax havens in other countries to
avoid paying taxes.
Multinational corporations are accused of social injustice, unfair working conditions
(including slave labour wages, living and working conditions), as well as lack of concern for
environment, mismanagement of natural resources, and ecological damage.
Multinational corporations, which were previously restricted to commercial activities, are
increasingly influencing political decisions. Many thinks there is a threat of corporations
ruling the world because they are gaining power, due to globalization.
Building products overseas in countries like China puts our technologies at risk of being
copied or stolen, which is in fact happening rapidly.

5. Health Concerns.
Some experts think that globalization is also leading to the incursion of communicable
diseases. Deadly diseases like HIV/AIDS are being spread by travellers to the remotest
corners of the globe.
Corona Virus Spread through globalization.

6. Exploitation of Labour.
Prisoners and child workers are used to work in inhumane conditions. Safety standards are
ignored to produce cheap goods. There is also an increase in human trafficking.
1. China: China has faced scrutiny for its labour practices, particularly in industries such
as manufacturing and textiles. Reports have highlighted issues such as low wages,
long working hours, poor working conditions, and restrictions on workers' rights.
2. Saudi Arabia: Saudi Arabia has been criticized for its treatment of migrant workers,
particularly those employed in the construction and domestic work sectors. Reports
have raised concerns about unpaid wages, confiscation of passports, and abusive
working conditions.
3. Malaysia has faced allegations of forced labour and exploitation in various
industries, including palm oil production, electronics manufacturing, and
construction. Migrant workers from countries like Indonesia, Bangladesh, and
Myanmar have been subjected to exploitative practices.

7. Environmental Concerns:
Increased globalization has been linked to various environmental challenges, many
of which are serious, including:
 Deforestation and loss of biodiversity caused by economic specialization and
infrastructure development
 Greenhouse gas emissions and other forms of pollution caused by increased
transportation of goods
The introduction of potentially invasive species into new environments

Deforestation in the Amazon: Globalization has driven the expansion of industries

such as agriculture, mining, and logging, leading to significant deforestation in the
Amazon rainforest. The demand for commodities like soy, beef, and timber has
contributed to the destruction of vast areas of the Amazon, resulting in biodiversity
loss and the release of carbon dioxide into the atmosphere.

Pollution in China: China's rapid industrialization and integration into the global
economy have resulted in severe environmental pollution. The country has faced
challenges related to air and water pollution, primarily driven by the manufacturing
sector and increased energy consumption. The reliance on coal for energy
 production has contributed to high levels of air pollution, impacting both human
health and the environment.

Pros.
Free trade is supposed to reduce barriers such as tariffs, value added taxes, subsidies, and
other barriers between nations. This is not true. There are still many barriers to free trade.
The Washington Post story says “the problem is that the big G20 countries added more than
1,200 restrictive export and import measures since 2008.

The proponents say globalization represents free trade which promotes global economic
growth; creates jobs, makes companies more competitive, and lowers prices for consumers.

Competition between countries is supposed to drive prices down. In many cases this is not
working because countries manipulate their currency to get a price advantage.

Globalization has the potential to provide opportunities for economic development and
contribute to the spread of prosperity, which can create conditions conducive to democracy
and respect for human rights. Here are a few examples where globalization has played a
role in promoting economic development and positive social changes:
1. South Korea experienced significant economic growth and development through
globalization. In the 1960s, it was one of the poorest countries in the world, but
through policies that promoted trade, foreign investment, and technological
advancements, South Korea transformed into a global economic powerhouse.
Globalization enabled the country to attract foreign capital, adopt advanced
technologies, and become a major exporter of electronics, automobiles, and other
manufactured goods.
2. Ghana is an example of a country in Africa that has embraced globalization and
experienced positive economic development. Through trade liberalization, foreign
investment, and access to international markets, Ghana has diversified its economy
and reduced its reliance on traditional sectors such as agriculture. This has
contributed to increased incomes, improved infrastructure, and expanded access to
education and healthcare.

Supporters of globalization argue that it can promote democracy and free

market principles without colonialist intentions.

1. Taiwan: Similar to South Korea, Taiwan's embrace of globalization played a

significant role in its transition to democracy. The government implemented market-
oriented economic reforms, attracted foreign investment, and focused on export-led
growth. The resulting economic prosperity, coupled with the opening up of
communication and information channels with the rest of the world, fostered the
development of civil society and democratic institutions in Taiwan.
2. India: India, as the world's largest democracy, has experienced substantial economic
liberalization and integration into the global economy since the 1990s. Market-
oriented reforms, including the reduction of trade barriers and the attraction of
foreign investment, have contributed to India's economic growth and expansion of
 the middle class. This has also strengthened democratic institutions, enhanced
political competition, and facilitated the spread of democratic values.

The increased influx of information between countries with little in common is facilitated by
globalization and technological advancements.
1. United States and Japan: The cultural exchange between the United States and
Japan has been significant, with a mutual fascination and exchange of information in
areas such as technology, entertainment, and popular culture. Japanese anime,
manga, and video games have gained a massive following in the United States, while
American movies, music, and fashion have had a strong influence on Japanese
society.
2. China and Mexico: The exchange of information and cultural influences between
China and Mexico has grown significantly in recent years. Chinese cuisine,
particularly Chinese noodles and teas, has become popular in Mexico, and Chinese
movies and TV dramas have gained a substantial viewership. The Chinese community
in Mexico has played a role in facilitating this cultural exchange, fostering a better
understanding between the two nations.
3. Sweden and South Korea: South Korean pop culture, known as "K-pop," has gained
international prominence, and Sweden has been one of the countries heavily
influenced by it. Swedish music producers and songwriters have collaborated with K-
pop artists, contributing to the global success of the genre. The exchange of music,
fashion, and entertainment between the two countries highlights the cross-cultural
impact of globalization.

Most people see speedy travel, mass communications and quick dissemination of
information through the Internet as benefits of globalization.

Sharing technology with developing nations will help them progress. True for small
countries but stealing our technologies and IP have become a big problem with our larger
competitors like China.

Labour can move from country to country to market their skills. True, but this can cause
problems with the existing labour and downward pressure on wages.

Way Forward.
1. People-Centred Growth: Prioritizing the well-being of individuals and communities is
crucial. This involves implementing structural policies such as social protection,
active labour market measures, investments in education, skills, innovation, and
infrastructure. It also requires meeting commitments related to the Paris Agreement
on Climate Change and the Sustainable Development Goals (SDGs). Additionally,
adapting to rapid digitalization and technological advancements is essential. Building
a new social contract that promotes gender inclusion, migrant integration, early
childhood education, addresses aging populations, and strengthens connections
between rural and urban areas is also emphasized.
2. Restoring Trust in Global Economies: The negative aspects of globalisation, such as
corruption, tax evasion, and tax avoidance, have eroded trust. Efforts are needed to
combat these issues and promote transparency and integrity. Establishing an
effective and equitable global tax architecture, implementing comprehensive anti-
corruption measures, addressing counterfeiting, regulating lobbying activities, and
promoting responsible business conduct and corporate governance are important
steps.
3. Inclusive Trade and Investment: It is essential to ensure that trade and investment
benefit all stakeholders and resist protectionism. This involves building inclusive
global value chains (GVCs), supporting medium, small, and micro-enterprises
through improved financing and regulatory frameworks, and facilitating access for
Low-Income Developing Countries (LIDCs). Equipping people with the necessary skills
to participate in sophisticated sectors and moving away from relying solely on low
wages as a comparative advantage is also emphasized.