October 4, 2016    9 minute read

Demonising Globalisation Vs Opening Up Nations To The World

Winners and Losers    October 4, 2016    9 minute read

Demonising Globalisation Vs Opening Up Nations To The World

Globalisation is related to the unification of the world order. It describes the process through which regional economies, societies, and cultures have become integrated through communication, transportation, and trade. Globalisation refers to “entrenched and relatively enduring forms of global interconnectedness” and “the significant shift in the spatial reach of social relations towards the interregional or intercontinental scale.”

A Historic Process

Globalisation is not a new process. National economies have gradually become more open, with the first wave of globalisation happening before WWI, though many other academics trace it to much earlier times.

It can, however, be argued that today one might be experiencing a new form of globalisation, marked by deeper integration, not solely in trade and product movements, but with the deeper cultural integration of countries.

Rapid development in technology and communications is helping connect different geographical localities with the advent of fibre optic communications, satellites, and the increased availability of telephones and the internet.

This article aims to explain the concept of globalisation, exploring it as a political, economic and cultural process. It attempts to assess whether the financial processes in recent times have become truly global, looks at possible limits to globalisation in today’s world. Positive and negative aspects of globalisation are highlighted. In particular, it is important to see who gains and who loses from the process. Is this a process that benefits everyone?

Globalisation: A Political, Cultural And Economic Process

The development of globalisation has wide-ranging impacts on political events. Some argue that through the creation of regional trade blocks (EU, NAFTA, APEC, etc. ) and supra-national institutions of governance (WTO, IM, etc.)

Globalisation might affect policy making, the power of a state and their sovereignty. Globalisation has resulted in decreasing trade barriers between countries, and privatisations.

Issues taking place abroad come to matter more at home and vice versa, with events happening in other parts of the world having significant implications, extending far beyond the borders.

Often globalisation is perceived by people through the influences it has on the economy. Globalisation is an economic process, and it assumes increases in international trade, deeper integration of financial markets (international trade of currencies, the trend of buying shares beyond the border).

A Broad Concept

Some view globalisation as being a part of greater deindustrialisation of developed countries and their move to specialisation in services and exporting manufacturers from emerging economies like China or other nations in emerging Asia. It is also characterised by increasing competition, with greater pressures on firms to become more competitive and efficient in their operations.

Cultural globalisation is not less important, being marked by the growth of cross-cultural contacts: the advent of new categories of consciousness and identities which embodies cultural diffusion, the desire to increase one’s standard of living and enjoy foreign products and ideas, adopt new technology and practices, and participate in a “world culture.”

Some argue this has resulted in greater consumerism with people wanting to buy more goods and having a larger choice in them. Some see cultural globalisation as convergence in tastes, and ways of living.

Some consider this to be a threat to local, national identities and increased “Westernisation.” Migration is also important, as well as the growth in international travel and tourism.

Thus, globalisation is a very broad concept – it is a term that embodies and reflects some processes and trends, all leading to the greater unification of the world and erosion of the importance of national borders.

Have Economic Processes Become Truly Global?

One of the salient questions that sociologists and political economists often debate is the extent to which the world today has become global. At the two extremes are the views of globalists and sceptics.

Globalists argue that today everyone lives in a globalised world, increasingly becoming embedded in interregional, intercontinental networks. For them, social, political, economic activity is no longer constrained by territorial boundaries.

For sceptics, however, globalisation is a myth used to justify and legitimise the spread of capitalism across the world’s economic regions, a form of Western imperialism serving the interests of powerful forces in the West, or as a mere ideological and social construction. Some argue that it is increased regionalisation that is taking place as opposed to globalisation.

Assessing Globalisation

Globalisation can be measured in a variety of ways. Andrew Glynn assesses the extent to which globalisation has taken place through the trends in international economic integration (trading – exports/imports, FDI, financial capital flows and migration). This is one credible attempt to measure and assess the extent of globalisation.

Volumes of international trade are often important indicators of the degree of interdependence between countries and regions in the world. Thus, exports to GDP ratio is often used as a proxy in empirical tests. In recent years trade ratios have risen steadily, although the increase was not spectacular since the 1950s with the exception of China and India (for these two countries the growth is notable).

The increase in international trade has mostly been due to the trade in manufactured goods and some services (e.g. outsourcing of IT services from India). Although there is a rise in trade among different nations, large sections of the economy are not subject to substantial competition from abroad, remain domestic.

The Impact Of FDIs

Another popular measure that is used as a sign of increasing globalisation is foreign direct investments. Growing volumes of FDIs are often viewed as evidence to support globalisation claims. There was indeed a significant rise in FDIs since the 1990s.

However, it is necessary to interpret this trend with caution. Thus, it primarily represents mergers and acquisitions activity, which does not have a significant effect on actual industry behaviour. Moreover, if one looks closer at FDI patterns, it is evident that most FDIs are still centred around particular geographical locations – the so-called Triad (The USA, Europe and Japan).

The Triad is, thus, a major force in the international arena, and most FDIs flow between these geographical locations. According to Rugman and Verbeke, the 500 largest global multinational enterprises (MNEs) account for 90% of FDIs, and more than half of international trade, but the majority of these MNEs are not truly global because most of their operations are clustered around the Triad. Thus, there are some signs of regionalisation.

A Slow Process

The increase in financial flows is also often used in globalisation literature to illustrate greater interdependence between countries and regions. Financial capital has indeed become more mobile with trading taking place around the clock and investors being able to invest their money wherever they want, although it is argued that these financial flows mainly constitute flows of Asian savings to the US. Migration – another indicator of globalisation – rose only modestly 2-3% in the last 30 years, and it is not too significant.

Overall, it can be concluded that national economies have become more open since the first wave of globalisation that took place before the First World War. Greater integration is taking place, and people do live in a more globalised world.

However, the speed of integration and globalisation should not be exaggerated as it often is. It is still limited, and a large proportion of production is still nationally rooted, and there are signs of greater regionalisation moves rather than internationalisation. This should not, however, be viewed as a rejection of the globalisation thesis. Regional integration might be a very important step towards an even more globalised world.

Is Globalisation Good And Who Is Benefiting?

Proponents of globalisation claim that it is a phenomenon that is mostly beneficial for all parties involved. It has positive implications for business, culture and democracy. A large emphasis is put on the “trickling down” of benefits to all stakeholders in the process.

One of the positive effects of globalisation is the increase in the choice of goods available to the customer. Greater competition between producing companies is believed to lead to a more efficient use of resources, lower production costs, and ultimately to lower prices for the traded goods and services.

The “free market” view is that globalisation might lead to the levelling up or “convergence to the top” in the standards of living, with people in developing countries having better life chances, as they can get employed by local MNCs affiliate, and earn a wage instead of being left in poverty and unemployed.

The Effect On Labour

This view, however, is often challenged by the left wing, who argue that globalisation is more likely to lead to a “race to the bottom,” as companies will seek the countries with the lowest wages and standards and relocate there, and they might engage in social dumping.

This would also mean that workers in Western countries, especially unskilled ones, could suffer from being unemployed, as MNCs move to developing countries and exploit cheap labour there. The global dominance of MNCs is often viewed negatively as well as their unrelenting pursuit of profits.

That results in depletion and neglect of many other factors – for example, impact on the environment. Empirically, the effect of globalisation on world inequality and world incomes is very difficult to assess and single out from other impacts.

However, it is found that although there is a catch up of developing countries’ revenue in relative terms, in absolute terms there is an increase in the poverty gap. Within the countries, inequality also increases, with a phenomenon of two job individuals taking place, whereby there is a significant difference between well-paid and low-paid workers.

Conclusion

It can, thus, be argued that globalisation as a process does have winners and losers – not everyone gains from it. Though free-market theory suggests that there should be a “trickle-down” effect regarding benefits to everyone, and to the poorest as well, however, the empirical evidence suggests that this is not so.

MNCs and some richer individuals particularly in the West might benefit while increasing trends of inequality across and within nations indicate that globalisation is relatively open to accusations of being a way for the rich to get richer and for the poor to remain poor.

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