HISTORY OF GLOBALIZATION

QUESTION

As you promised to do free assignment for me…I will stop legal proceeding against you until I hear from you in next few days. The below is the assignment.

What do you understand by the term ‘globalisation’? What are the benefits and the costs of globalisation? What are the key challenges posed by globalisation for national governments? How has globalisation impacted on the organisation in which you work or are most familiar?

SOLUTION

GLOBALISATION:

INTRODUCTION:

There was a time in the history of the world where the various national economies were isolated from each other and the trade between them was of negligible or no value. Of course, it is difficult to imagine such a scenario in the world that we live in today but long long ago this state of affairs did exist. Whatever was produced within the geographical boundaries of the nation was expected to be consumed within the national territories itself. No significant exchanges took place between the different countries of the world.

As such there was little or no scope of innovation or competition (Beerkens, 2003).

In the world we live in, the amount of natural resources is limited. There is scarcity of resources. And the productive resources being scarce, there are problems of allocation of those limited resources towards the production of a vast array of goods. The basic problem of the economic studies is that human wants are unlimited but the ends to meet this vast array of wants are scarce. The productive resources are scarce and the wants are infinite, thus the activities are to be prioritized and priority is to be associated to each economic activity. The goods that are indispensable for life are given the top most priority and productive resources are directed towards them and the luxuries are given the least priority because they don’t require urgent production and their production can be postponed to a future date. Thus, the limited productive resources are allocated with deductive logic and after lot of empirical and theoretical investigation. In situations like this there is little or no scope of wastage of resources. It has to be seen that the resources are optimally used and little or no wastage is made. But in circumstances where there is no significant relationship between the various economies of the world, wastage is bound to take place on account of the varying degree of technological advancement in various countries (Bhagwati, 2004). In the developed countries, the technology is more sustainable and results in lesser degree of wastage. In contrast, the underdeveloped countries follow primitive technologies of production and thus there is wastage or resources which are already scarce in nature. Thus if a platform is provided whereby the economies of various countries shoulder the responsibility of technology transfer, there is scope of preventing wastage of resources to a large extent. This would mean that innovation in one country would in turn change the technique of production in another country, there by bringing into effect a series of chain reaction that would ultimately lead to a sustainable development of all the countries, making the world a much more sustainable place to live and prosper in. This platform is provided by globalization.

The comparative cost advantage theory propounded by Ricardo led to a sensational change in the trading pattern. According to this theory a country should produce and export those good over which it has a comparative cost advantage i.e. the goods that can be produced more cheaply in that country with respect to any other country and import those goods over which it has a comparative cost disadvantage i.e. the goods that can be more cheaply imported than produced within the national boundaries (Piero & Ricardo, 1955). Thus the principle of comparative cost advantage provides the scope of division of labor and specialization. These reduce wastages and thus lead to technological advancement. And these form the basis of the concept of globalization.

And this is the scenario of the modern era, where globalization is found from roots to tips in the economy.

GLOBALISATION:

In 1930, the term ‘globalization’ was first used in a publication with the topic ‘Towards New Education’ to signify the holistic experience of education by humankind. Globalization in layman terms means integrating one nation’s economy with the economy of the world. Moja and Cloete defined globalization as a process of restructuring of the government of the nation in the terms of diminution of the regulation of financial controls, widening the scope of the markets, notions of efficiency, and re-establishing the core of business of the government (Hirst & Grhame, 1999). Waters defined globalization as a process of social change whereby the constraints of geography on the social and cultural arrangements are diminishing and people are increasingly aware of the fact that the social and cultural boundaries are receding. All in all globalization is getting in sync with the economies that are spread all over the world. The changes, good or bad, in one economy of the world are sure to affect the other economies of different nations of the world, under the tenure of Globalization. The recent years bear testimony to the fact there has been an increased level of integration of developing countries into the international financial system. Globalization has injected a serious instinct of competition in the markets world wide which has generated economics efficiency of the highest degree all over the globe. As a consequence of globalization, various multinational companies have come into being in various foreign lands which improve the economic conditions of various under developed countries. The multinational companies bring with them the expertise and managerial abilities of the developed countries and train the workforce of the under developed countries making them more technically skilled and honing their skills to perfection (Walker & Mark, 1996).

They bring with them foreign capital which backs up and takes care of the risks associated with financing various new investments. But like every coin has two sides globalization has its own merits and demerits. It serves as a necessary evil for every economy of the world.

ADVANTAGES OF GLOBALIZATION:

Globalization is just the opposite of autarky which implies a closed economy. Thus globalization opens the economy to be accessible to various other economies of the world. The merits of going global are many. Due to Globalization, the consumers become aware of the various other goods and services they were initially unaware of and thus they now demand access to a wide range of new goods and commodities. This leads to the setting up of new industries and thus employment is generated (Maswood, 1999).

The extent of the market, under globalization is widened which reduces the risk associated with various economic activities, thus creating a more conducive environment for investments and innovations which lead to economic development of a nation.

Globalization leads to technology transfer from developed countries to under developed countries which increase the production capacity in the less developed countries.

Though for a short term, the foreign capital brought in by the process of globalization, solves the problem of the unfavorable balance of payment situations.

It led to a more than 100 times increase in the volume of international trade in between the years of 1955 to 2007.

The global trade resulted in making available the life saving drugs which were earlier unavailable in to the underdeveloped markets, at very affordable costs (Gupta, 2005).

The domestic countries become more efficient and serious towards their commitment towards the economic activities on account of the severe competition level in the markets.

The producers will now make more efforts towards luring the customers and serving them better. Even the government in underdeveloped countries which is generally corrupt and inefficient becomes more active and changes its style of working under the impact of globalization.

Economies now attract various developed countries for investing in their economies as a result of free regulations. Thus globalization brings about a spurt of rapid economic development of the under developed countries (Worthington, 2001).

Globalization leads to creation of one world, breaking all national boundaries and making the culture of one country reach another, thereby fostering the spirit of oneness and tolerance among all.

DISADVANTAGES OF GLOBALIZATION:

Globalization has been criticized on various grounds. The basic demerit is the exploitation of the under developed countries. The developed countries have an advantage over the underdeveloped countries and thus may try to dominate over them. Globalization also brings about the access of MNCs to cheap raw materials in the under developed countries, which they process in their own countries and consequently sell them at higher prices in the backward countries, keeping a huge profit margin and thereby amassing more wealth for their own nations. Globalization brings about installation of more of the capital machinery and thus results in unemployment in the underdeveloped countries (Worthington, 2001). Due to the inequalities in distribution of income the gap between the rich and the poor goes on widening. The rich become richer and the poor poorer. The interdependence of the economies implies that when one of the economies is facing depression or recession, the other linked economies are sure to reel the vibe of negativity.
The small and cottage industries and infant industries may face closure on account of cheap imports being easily available in the market due to globalization. It leads to disintegration of democracy as the multinational giants try to turn the course of various policies in favor of their business operations (Fischer, 2003). The pursuit of rapid economic development becomes so prioritized that the basic ethics of humanism are ignored and paid least importance. Globalization induces the demonstration effect, whereby people of the under developed countries imitate the standard of living of developed countries. It also leads to consumerism whereby people are tempted to spend more and more on new commodities and wouldn’t hesitate to resort to unfair means of amassing wealth. This increases the level of corruption.

CHALLENGES BEFORE THE NATIONAL GOVERNMENT:

Under the impact of globalization, the role of the national government has been reduced to negligible limits. The state faces a lot of challenges to finally integrate the nation’s economy with the world economy. The process of transition is quite tedious.

The distinction between foreign activities and domestic activities was blurred. The role of the government has withered over the years. The sovereign state has lost its powers of policy making to the supranational institutions like the WTO, the EU, and the NAFTA etc. The prevailing set of rules and laws of the government face serious challenges, as globalization brings with itself, foreign culture thereby changing the traditional model of the underdeveloped countries (Fischer, 2003). Thus, over the years, laws have to be amended in accordance with the changes in the cultural and social values of the people. Efficient coordination of internal policies of the government is required to prove its credibility in the international level. The transition involves major changes in the employment level of the nations and thus the government should be actively cooperating and looking after the employment changes. The role of the financial sector changes significantly during the transition and the government has to take undertake proper reforms to change the structure of the banking system so that they make available required credit facilities that are indispensable for globalization. Thus a vast array of challenging tasks lies before the government of the nation who has to undertake these activities with full cooperation and perseverance (Mark, 2000).

IMPACT OF GLOBALIZATION ON A COMPANY:

The finger licking chicken that is so accessible to us these weekends has an important lesson to teach on globalization. Initiated by Harland Sanders who was born in Indiana, US, KFC is a chain of restaurants serving chicken under the brand name of Kentucky Fried Chicken. He set up a restaurant in Henryville that earned appreciation of the localities for the finger licking grilled chicken, salads and sandwiches that they sold.

The popularity soared and attained heights and led to the expansion of the restaurant at first and then the opening of a single franchise within the geographical limits. People from all over the nation were drawn towards the awesome tasting chicken recipes of the KFC kitchen (MacKay, 2004). It led to the expansion of the restaurants to many new territories within the geographical boundaries. But it was only after the advent of globalization that KFC set its footprints upon the foreign land. The recipes have been flown in from the land of origin to various countries world wide and have earned the appreciation from all quarters.

It is due to globalization that we are able to access to the services of this restaurant which would otherwise remain limited to the United State’s boundaries. Sanders in 1964 put up the KFC chain for sale $2 million US and since that time the chain has been sold for a total of three times. The last time was selling it to the PepsiCo in 1986, which made it part of its Tricon Global Restaurants division, which in turn was spun off in 1997, and has now been renamed to Yum! Brands (Gupta, 2005).

The business that initially began as a small restaurant and then expanded into a motel, now due to globalization, has a net worth of $520.3 million. Its fan following is strong and it has a strong hold over consumers since time immemorial. It has generated employment in the areas of operation thereby contributing to the pace of economic development. Fast food chains like the KFC and the Mc Donald’s would have been limited to their place of origin, the United States, had it not been for globalization. Globalization has made the enterprise a multinational with it spreading its influence over large number of countries. KFC operates more than 5,200 restaurants in the United States and more than 15,000 units around the world.  Thus, globalization has widened the scope of market for KFC and has resulted in amassing huge amount of profits from the foreign shores (Jones, 1999).

CONCLUSION:

Globalization is a necessary evil. It has its own shares of advantages and disadvantages which make it difficult to conclude whether it is to be projected as a positive or a negative concept. Over all, to sum up, Globalization has resulted in brining the countries closer together and has catered to various needs of the consumers in the under developed countries (Mrak, 2000). The pace of economic development has also been pepped up. Thus globalization, if allowed at a proper degree, is very beneficial to boost the economics machinery of the nation.

REFERENCES:

1. Beerkens, E. (2003). “Globalisation and Higher Education Research”. Journal of Studies in International Education, Vol 7, 2, pp; 128-148.
2. Bhagwati, J. (2004). “In Defense of Globalization”. Oxford, New York: Oxford University Press.
3. Gupta, K.R. (2005). “Liberalization and Globalization of Indian Economy”. Atlantic Publishers and Distributors.
4. Hirst, P. and Grahame T. (1999). “Globalization in Question”. Cambridge: Polity Press.
5. Jones, R.J. B. (1995). “Globalisation and Interdependence in the International Political Economy”. London: Frances Pinter.
6. Maswood, S. J. (1999). “International Political Economy and Globalization”. River Edge, NJ: World Scientific Publishing Company.
7. Mrak, M. (2000). “Globalization: Trends, Challenges and Opportunities for Countries in Transition”.  United Nations Industrial Development Organizations.
8. Piero, S. and Ricardo, D. (1955). “The Works and Correspondence of David Ricardo: Volume 10, Biographical Miscellany”, Cambridge, UK: Cambridge University Press, pp. 434.
9. Walker, G.R. and Mark A. F. (1996). “Globalization: An Analytical Framework,” Indiana Journal of Global Legal Studies, Vol 3, pp; 375-412.
10. Worthington, G. (2001). “Globalization: Perceptions and Threats to National Government in Australia”. Parliamentary Library, Research Paper 27.
11. Fischer, S. (2003). “Globalization and Its Challenges”. American Economic Review; Vol 93, 2, pp; 1-30.
12. MacKay, H. (2004).  “The Globalisation of Culture?” In A Globalizing World? Culture, Economics Politics”, New York: Routledge, pp; 48-84.

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