Globalization is one of the main trends which created a new world order. The novelty is that the current changes are more substantial and more general than any time before in history. This change has had a considerable number of consequences for peace and stability in the world. A global system changes only because the ordering principle is changed (Stiglitz, 2002). Globalization affects all spheres of life and activities changing political, social, economic and cultural relations between states. Globalization proposes both positive and negative changes for the world and has a different impact on developing and developed countries.
Globalization is “neither new nor a folly but a global movement of ideas, people, technology and goods from one region to others benefiting the people at large” (Amartya Sen cited Stiglitz 2002, p. 6). The process of globalization include free trade and economic integration, policy of protectionism and economies of scale, cultural changes and homogeneity, increased political and social cooperation, etc. Stiglitz (2002) underlines that: “globalization is, indeed, a staggering concept” (P. 4).
He explains that, besides internal conditions, the international environment is also conducive to creating the conditions for the establishment of national structures of accumulation in the different industrialized countries of the Western world. There is a certain compatibility in the mutually reinforcing social, economic, and political institutions including domestic and international arrangements (Kahler & Lake 2001). Together with ideological and cultural components, this facilitates a successful regime of capital accumulation. The importance given to social institutions and conscious political intervention is able to alleviate the disruptive consequences of the international-national contradictions of pre-war capitalism (Bhagwati, 2004).
Two main positive feature of globalization include
- more competition between firms and
- more choice for customers.
Within a relatively short time, a higher degree of competition enters the relationship between the industrialized countries, and the question of markets grows in importance as all economies tended to become export-oriented (Boltanski & Chiapello 2006). In other words, regardless of the militarization of the international economy through defense expenditures, the hot wars on the Asian continent, foreign aid, and so on, the inherent problem of overproduction is returning.
The tendency toward increased competition at the same time as the introduction of expensive labor-saving technology with no corresponding increase in demand lead to outlet problems. In addition, new producers with a cheaper production base are entering the world economy (Bhagwati, 2004). Globalization has changed political relations between governments and established global peace.
Globalization supports free trade and policy of protectionism. In general, increased globalization attenuates the ability of national governments to pursue independent macroeconomic policy. Macroeconomic stabilization is important even if nations decide to avoid full participation in the globalized system (Kilgour, 2001). Sound anti-inflationary monetary policies, a movement towards fiscal balance and a stable exchange rate system are the corner stones of good macroeconomic management. If a developing economy is not well managed in these areas, it will have no recourse but to seek assistance from the International Organizations, who will, in turn, demand macroeconomic reforms via structural adjustment (Boltanski & Chiapello 2006).
Globalization processes have changed transportation and communication. The new necessity of this condition is the bridging of local and global levels of organization and strategy by popular forces and social movements. Success requires a new worldview and new understandings of “global citizenship” mediated by the emergent global communication culture (Easterly, 2001). Globalization improves buyer-seller communication and makes global products available to a vast majority of customers. The cost of living in small states can, therefore, be expected to be relatively high, for reasons of scale and competition, together with a narrower range of consumer choice (O’Brien et al 2000).
The negative impact of globalization is financial exploitation of developed countries, great impact of western culture and life style on national identity. Herding behavior, financial contagion and volatile behavior characterize world capital markets. This implies that nations should proceed with caution before liberalizing the financial sector (Bhagwati, 2004). Herding behavior, financial contagion and volatile behavior characterize world capital markets. This implies that nations should proceed with caution before liberalizing the financial sector. The composition of technology imports suggests that it has been strongest for mineral-based activities, and low-skilled labor-intensive activities (Hirst & Thompson 1999).
Globalization has given rise to the emergence of the global corporation. This has been a natural evolution from the national to the international then multinational or transnational and now global corporation. A global corporation differs from other corporate forms in that it operates with a single global strategy with a worldwide system and plan for products, marketing, manufacturing, logistics, research and development, accounting, and human resource management 9Bhagwati, 2004).
No country, developed or developing, can sustain a viable economy without the active participation of global business in many different sectors and industries. Therefore, newly developing countries have no choice but to attract global corporations and FDI as key players in the local economy. Globalization supports individual cultural creativity, democratic institutions and facilitates participatory cultural expression, political structures and entrepreneurs who help transform cultural talents into commercially viable cultural assets (Stiglitz, 2002).
Primarily, the ‘rich’ countries bring their national traditions and culture to the ‘poor’ states forgetting about their heritage. They spread American and European culture through MNEs and TNCs (multinational and transnational enterprises) which control labor relations and economic activities. Such popular approach as cultural diversity management deprives many countries a chance to keep their cultural identity and preserve unique cultural norms and values followed by centuries. On the other hand, the third world countries are weak to monitor globalization processes and influence of the ‘rich’ on their national identity (Easterly 2001).
For instance, corporations can no longer ignore consumer demands for constant product quality, reliability and respect for the environment, or timely delivery of services. Globalization brings new communication and consumption patterns alien to the third world countries. The determining effect on a global business is rendered by such economic centers as USA, European Union, Japan, China, Russia and India (Bhagwati 2004).
In sum, globalization has changed the world towards economic and cultural homogeneity. Globalization facilitates economic openness and competitiveness, bring in foreign direct investment (FDI), technology, management innovations, and help create jobs for the local labor market. Thus, As European and American companies can get in enormous profits from the better coordination, greater product elasticity, improved quality, leaner production, and more time-based competitiveness that information technology offers, they also facades the threat that can come from these consumers’ strategic alliances.
The strength is that modern technology and global marketing are enabling people and nations throughout the world to leap into the modern era. The weakness is that modern technology tends to be more individualistic and anti-egalitarian than the mass assembly technology that revolutionized production in the first part of the twentieth century.
- Bhagwati, J. 2004, In Defense of Globalization. Oxford: Oxford University Press,.
- Boltanski, L and Chiapello, E. 2006, The New Spirit of Capitalism, Gregory Elliot (Translator) Verso Books.
- Easterly, W. 2001,The Elusive Quest for Growth: Economists’ Adventures and Misadventures in the Tropics. Cambridge, MA, The MIT Press.
- Hirst, P. and Thompson, K. 1999, Globalization in Question: The International Economy and the Possibility of Governance, Second Edition; Cambridge: Polity Press.
- Kahler, M., Lake, D.A. 2001, Globalization and Governance.. Web.
- Kilgour, H.D. Globalization: For Whose Benefit? 2001. Web.
- O’Brien, R., Goetze, A., Scholte, J., Williams, M., Helleiner, E. 2000, Contesting Global Governance: Multilateral Economic Institutions and Global Social Movements Cambridge: Cambridge University Press.
- Stiglitz, J. 2002, Globalization and its Discontents, London: Allen Lane.