GLOBALIZATION

Globalization is a process of interaction and integration among the people, companies, and
governments of different nations, a process driven by international trade and investment and aided
by information technology. This process has effects on the environment, on culture, on political
systems, on economic development and prosperity, and on human physical well-being in societies
around the world.

Globalization is not new, though. For thousands of years, people—and, later, corporations—have
been buying from and selling to each other in lands at great distances, such as through the famed
Silk Road across Central Asia that connected China and Europe during the Middle Ages. Likewise, for
centuries, people and corporations have invested in enterprises in other countries. In fact, many of
the features of the current wave of globalization are similar to those prevailing before the outbreak
of the First World War in 1914.

But policy and technological developments of the past few decades have spurred increases in cross-
border trade, investment, and migration so large that many observers believe the world has entered
a qualitatively new phase in its economic development. Since 1950, for example, the volume of
world trade has increased by 20 times, and from just 1997 to 1999 flows of foreign investment
nearly doubled, from $468 billion to $827 billion. Distinguishing this current wave of globalization
from earlier ones, author Thomas Friedman has said that today globalization is “farther, faster,
cheaper, and deeper.”

This current wave of globalization has been driven by policies that have opened economies
domestically and internationally. In the years since the Second World War, and especially during the
past two decades, many governments have adopted free-market economic systems, vastly
increasing their own productive potential and creating myriad new opportunities for international
trade and investment. Governments also have negotiated dramatic reductions in barriers to
commerce and have established international agreements to promote trade in goods, services, and
investment. Taking advantage of new opportunities in foreign markets, corporations have built
foreign factories and established production and marketing arrangements with foreign partners. A
defining feature of globalization, therefore, is an international industrial and financial business
structure.

Technology has been the other principal driver of globalization. Advances in information technology,
in particular, have dramatically transformed economic life. Information technologies have given all
sorts of individual economic actors—consumers, investors, businesses—valuable new tools for
identifying and pursuing economic opportunities, including faster and more informed analyses of
economic trends around the world, easy transfers of assets, and collaboration with far-flung
partners.

Globalization is deeply controversial, however. Proponents of globalization argue that it allows poor
countries and their citizens to develop economically and raise their standards of living, while
opponents of globalization claim that the creation of an unfettered international free market has
benefited multinational corporations in the Western world at the expense of local enterprises, local
cultures, and common people. Resistance to globalization has therefore taken shape both at a

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popular and at a governmental level as people and governments try to manage the flow of capital,
labour, goods, and ideas that constitute the current wave of globalization.

To find the right balance between benefits and costs associated with globalization, citizens of all
nations need to understand how globalization works and the policy choices facing them and their
societies.

The pace of globalisation has increased for a number of reasons:

Developments in ICT, transport and communications have accelerated the pace of globalisation over
the past 30 years. The internet has enabled fast and 24/7 global communication, and the use of
containerisation has enabled vast quantities of goods and commodities to be shipped across the
world at extremely low cost.

Increasing capital mobility has also acted as a stimulus to globalisation. When capital can move
freely from country to country, it is relatively straightforward for firms to locate and invest abroad,
and repatriate profits.

The development of complex financial products, such as derivatives, has enabled global credit
markets to grow rapidly.

Trade has become increasingly free, following the collapse of communism, which has opened up
many former communist countries to inward investment and global trade. Over the last 30 years,
trade openness, which is defined as the ratio of exports and imports to national income, has risen
from 25% to around 40% for industrialised economies, and from 15% to 60% for emerging
economies.

The growth of multinational companies (MNCs) and the rise in the significance of global brands like
Microsoft, Sony, and McDonalds, has been central to the emergence of globalisation.

POSITIVE ASPECTS OF GLOBALIZATION

Peaceful Relations

Most of the countries have resorted to trade relations with each other in order to boost their
economy, leaving behind any bitter past experiences if any. Nations now try to raise capital and
fortify their stand in international trade, rather than hosting a war. Thus, globalization has induced
international peace and security in a big way.

Free Trade

Free trade is a policy in which a country does not levy taxes, duties, subsidies or quota on the
import/export of goods or services from other countries. There are countries which have resolved to
free trade in specific regions. This allows consumers to buy goods and services, comparatively at a
lower cost.

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Global Connectivity

Globalization has promoted international connectivity. With the use of the Internet, the world has
definitely become a smaller place. There has been exchange of thoughts and ideas which has morally
boosted and interlinked the mindset of people all round the world.

New Markets

The opportunities for new markets has increased dramatically. Numerous companies have started
investing in different countries and luring customers for their brands. These ever-expanding markets
have helped countries to raise capital in terms of foreign domestic investments, thus improving the
economy of the country.

Employment Opportunities

One of the most advantageous factors of globalization is that it fosters the generation of
employment. This happens due to the emergence of new companies and new markets, where lots of
skilled and unskilled labor is required. Immigration between countries also increases, providing
better opportunities for people all round the world. By providing employment, globalization helps in
increasing the standard of living of the people, and also reduces poverty.

Quality Products

The competition among different companies finds place at an international level. It becomes
important for the companies to focus on quality goods and services, in order to have a strong
foothold in the market. The consumer is benefited in the process, and gets quality products at
cheaper rates. He/she also gets the opportunity to select his goods from a large variety available in
the market.

Environmental Protection

Mutual trade carried out by countries has brought about an understanding for the protection of the
environment from which they benefit so much. It has been accepted by most countries that action
needs to be taken in saving natural resources and wildlife, without thinking about the boundaries
that separate them. Global environmental problems like cross-boundary pollution, over-fishing in
the oceans, climate change, etc., are solved by discussions and conventions.

Good for Developing Nations

It is claimed that globalization increases the economic prosperity of developing nations. Developed
countries invest in such countries with an aim of capturing new markets, which helps them improve

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their infrastructure and technologies to international levels. A lot of capital is invested in such
projects, which in turn proves fruitful to the economy of the developing nation as well.

Equality for All

Globalization has helped in creating international criminal courts, and international justice
movements are also launched to provide justice to people at a global level. Disputes are solved
through global standards such as patents, copyright laws, and world trade agreements. Thus, it has
ensured that people do not get discriminated with regard to country, caste, creed or sex.

Ease of Transportation

With the advent of globalization, there has been an immense increase in the transportation of goods
and services worldwide. Things which took weeks for conveyance, can now easily be availed within a
couple of days. Due to the development of containerization for ocean shipping, transportation costs
are reduced to a great extent, lowering the cost of products in world markets.

Travel and Tourism

Globalization has promoted tourism to great heights. There are many places that have tourism as
their main source of capital generation. International trade among different countries also helps in
increasing the number of tourists that visit different places around the world.

Unity in Diversity

Globalization has helped in bringing about integrity and social understanding everywhere. The
dream for a global village becomes realistic after looking at the impact of globalization. It has helped
in removing some barriers that had kept the world divided on various grounds. There has been
propagation of democratic ideas among countries. Cross-cultural contacts grow and cultural
diffusion takes place, which helps in minimizing differences, and promotes companionship.

External Borrowing

It has often been seen that a poor country is unable to provide adequate financing to its companies,
which proves to an obstacle in the development of the country on the whole. With the help of
globalization, there is opportunity for corporate, national, and sub-national borrowers to have better
access to external finance, with facilities such as external commercial borrowing and syndicated
loans.

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It is a common belief that globalization plays a role just at international levels of trade and
commerce, but the fact is that it has played an important role in making our lives much more
comfortable too. The phones, apparels, gadgets or accessories that we use in our day-to-day life are
be available to us through globalization. Knowingly or unknowingly, we are all under the impact of
globalization, and more importantly it has helped in bringing international peace and justice to
mankind.

THE EVILS OF GLOBALIZATION

Health Issues

Globalization has given rise to more health risks and presents new threats and challenges for
epidemics. A very customary example is the dawn of HIV/AIDS. Having its origin in the wilderness of
Africa, the virus has spread like wildfire throughout the globe in no time. Food items are also
transported to various countries, and this is a matter of concern, especially in case of perishable
items. The safety regulations and the standards of food preparation are different in different
countries, which may pose a great risk to potential health hazards.

Loss of Culture

Conventionally, people of a particular country follow its culture and traditions from time
immemorial. With large number of people moving into and out of a country, the culture takes a
backseat. People may adapt to the culture of the resident country. They tend to follow the foreign
culture more, forgetting their own roots. This can give rise to cultural conflicts.

Uneven Wealth Distribution

It is said that the rich are getting richer while the poor are getting poorer. In the real sense,
globalization has not been able to reduce poverty. Instead it has led to the accumulation of wealth
and power in the hands of a few developed economies. Therefore the gap between the elite and the
underprivileged seems to be a never ending road, eventually leading to inequality.

Environment Degradation

The industrial revolution has changed the outlook of the economy. Industries are using natural
resources by means of mining, drilling, etc. which puts a burden on the environment. Natural
resources are depleting and are on the verge of becoming extinct. Deforestation is practiced owing
to the non-availability of land, thereby drastically reducing the forest cover. This in turn creates an
imbalance in the environment leading to climate change and occurrence of natural calamities.

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Disparity

Though globalization has opened new avenues like wider markets and employment, there still exists
a disparity in the development of the economies. Structural unemployment owes to the disparity
created. Developed countries are moving their factories to foreign countries where labor is cheaply
available. The host country generates less revenues, and a major share of the profits fall into the
hands of the foreign company. They make humongous profits thereby creating a huge income gap
between the developed and the developing countries.

Cut-throat Competition

Opening the doors of international trade has given birth to intense competition. This has affected
the local markets dramatically. In recent times the standard of living has improved. People are
therefore ready to shell out extra money for a product that may be available at a lower price. This is
because of the modern marketing techniques like advertising and branding. The local players
thereby suffer huge losses as they lack the potential to advertise or export their products on a large
scale. Therefore the domestic markets shrink.

Conflicts

Every economy wants to be at the top spot and be the leader. The fast-paced economies, that is the
developed countries are vying to be the supreme power. It has given rise to terrorism and other
forms of violence. Such acts not only cause loss of human life but also huge economic losses.