globalization and its impact on the world. While the writer focuses on the financial and economic impact of globalization the writer also discusses past problems, disease and other issues that globalization has brought to the forefront. There were four sources used to complete this paper.
Globalization and the Debate about its Impact
Globalization has become a buzzword that seems to apply to everything in life, however the true meaning and impact of globalization can be much more narrowly defined by measurable standards. For the most part globalization means the blending of worldwide cultures. In a more focused sense globalization means the opening of world trade, economics and other issues that help to expand society. The impact of globalization has been debated around the world by experts in the field of finance, science, medical and society, with the consensus seeming to be that it is a process that is changing the way mankind will view the future.
Globalization
Before one can begin to understand how globalization has impacted mankind, one must first have a basic understanding of what it is and how it works.
Globalization “is a historical process, the result of human innovation and technological progress. It refers to the increasing integration of economies around the world, particularly through trade and financial flows. The term sometimes also refers to the movement of people (labor) and knowledge (technology) across international borders. There are also broader cultural, political and environmental dimensions of globalization that are not covered here (What is Globalization? (http://www.imf.org/external/np/exr/ib/2000/041200.htm#II).”
The term became commonly used in the 1980’s and for many people it created a sense of forbidden mystery, but the reality of globalization is that it is an easily understood concept once its individual parts are examined.
At its most basic, there is nothing mysterious about globalization. The term has come into common usage since the 1980s, reflecting technological advances that have made it easier and quicker to complete international transactions — both trade and financial flows. It refers to an extension beyond national borders of the same market forces that have operated for centuries at all levels of human economic activity — village markets, urban industries, or financial centers (What is Globalization? (http://www.imf.org/external/np/exr/ib/2000/041200.htm#II).”
Markets have always promoted their business through the use of competition. Whether it was the corner hardware store competing with the store opening across town, or the business in one city reaching out to take business from a similar company in the next town, competition has made the world go round since the beginning of time. Globalization simply means that the boundaries of competitiveness are broadened to include the entire globe.
Many things have contributed to the globalization process however; the Internet is probably one of the strongest contributors to date. With Internet availability and access businesses can now reach customers half a world away and provide them with products and services. In addition the Internet allows for a wide based ability to check out the competition and determine how best to compete with those companies.
Global markets offer greater opportunity for people to tap into more and larger markets around the world. It means that they can have access to more capital flows, technology, cheaper imports, and larger export markets (What is Globalization? (http://www.imf.org/external/np/exr/ib/2000/041200.htm#II).But markets do not necessarily ensure that the benefits of increased efficiency are shared by all. Countries must be prepared to embrace the policies needed, and in the case of the poorest countries may need the support of the international community as they do so (What is Globalization? (http://www.imf.org/external/np/exr/ib/2000/041200.htm#II).”
While the term “globalization” appears to be a fairly recently event, there are analysts and experts who believe it actually began more than 100 years ago, however, they also agree that electronic communication has made the commerce and financial services far more integrated than ever before.
During the 20th century the world saw an increase in global per capita GPD of almost five times, which was never before recorded in the history of the world. The second half of the century saw an unprecedented explosion in rapid trade expansion that was partnered with trade growth to match (What is Globalization? (http://www.imf.org/external/np/exr/ib/2000/041200.htm#II).
The process of globalization includes the fact that world financial markets as well as world trades are becoming more deeply integrated, with some nations moving more quickly than others in the overall process. One example is Asia. Asia has been moving quickly into the modern per capita income world as compared to less industrialized or les developed nations have been able to do since the 1970’s (What is Globalization? (http://www.imf.org/external/np/exr/ib/2000/041200.htm#II).
Another aspect of globalization has been the movement of people who seek better employment. Between 1955 and 1990 the movement was relatively small however, from 1990 until now that movement has exploded and with that movement has been competitive growth for business, competition, finances and individual wealth and success.
Spread of knowledge (and technology): Information exchange is an integral, often overlooked, aspect of globalization. For instance, direct foreign investment brings not only an expansion of the physical capital stock, but also technical innovation. More generally, knowledge about production methods, management techniques, export markets and economic policies is available at very low cost, and it represents a highly valuable resource for the developing countries (What is Globalization? (http://www.imf.org/external/np/exr/ib/2000/041200.htm#II).”
While income is a measurable standard of how globalization has impacted the world, there are other measurements as well that can be examined. One of those standards is the measurement of social conditions. With expanding per capita income, and overall wealth due to globalization comes better social conditions. Overall medical care, education and standards of living are usually improved in relation to the overall growth. This helps to support evidence of the impact that globalization has on society (What is Globalization? (http://www.imf.org/external/np/exr/ib/2000/041200.htm#II).
For instance, some low-income countries, e.g. Sri Lanka, have quite impressive social indicators. One recent paper2 finds that if countries are compared using the UN’s Human Development Indicators (HDI), which take education and life expectancy into account, then the picture that emerges is quite different from that suggested by the income data alone (What is Globalization? (http://www.imf.org/external/np/exr/ib/2000/041200.htm#II).”
Indeed the gaps may have narrowed. A striking inference from the study is a contrast between what may be termed an “income gap” and an “HDI gap”(What is Globalization? (http://www.imf.org/external/np/exr/ib/2000/041200.htm#II).The (inflation-adjusted) income levels of today’s poor countries are still well below those of the leading countries in 1870(What is Globalization? (http://www.imf.org/external/np/exr/ib/2000/041200.htm#II).And the gap in incomes has increased. But judged by their HDIs, today’s poor countries are well ahead of where the leading countries were in 1870. This is largely because medical advances and improved living standards have brought strong increases in life expectancy (What is Globalization? (http://www.imf.org/external/np/exr/ib/2000/041200.htm#II).”
While life expectancy may have increased, there are still some areas of the world where the spread of disease, including AIDS in Africa is reducing life expectancy.
Countries with a strong growth record, pursuing the right policies, can expect to see a sustained reduction in poverty, since recent evidence suggests that there exists at least a one-to-one correspondence between growth and poverty reduction (What is Globalization? (http://www.imf.org/external/np/exr/ib/2000/041200.htm#II).”
From the beginning of time globalization has been greatly impacted by trade issues. Experts have recently begun to debate the impact and cause of globalization and how it will impact the future of the world with regard to economics and other measurable standards (history of globalization (http://www.answers.com/topic/history-of-globalization).
Adam Smith, who is a world recognized economic expert took aim at globalization for many years.
Smith believes that globalization dates back to David Hume’s era and only captured the public’s attention within the past few decades (the Adam Smith address: (http://findarticles.com/p/articles/mi_m1094/is_n1_v31/ai_17900497/pg_5).
Smith believes that the basis for globalization is the mobility of products and goods and capital that cause the rules society has been familiar with to be tossed away. He attacks the idea that globalization is causing a reduction in wage ability.
One example that he argues against is that higher productivity no longer equals higher pay. The ability now to always find a country in which the product can be made less expensively removes the incentive pay for high productivity according to the theory.
Smith reminds the world that “30% increase in productivity took place only in the manufacturing sector; anyone who has even a bit of familiarity with recent economic trends knows that vigorous manufacturing productivity growth has been offset by near-stagnation elsewhere. In fact, over Lind’s period overall business sector productivity rose only 13% (the Adam Smith address: (http://findarticles.com/p/articles/mi_m1094/is_n1_v31/ai_17900497/pg_5).The 15% decline in wages is similarly misleading, for at least two reasons: it omits growing benefits, and it applies only to blue-collar workers. A better indicator is real hourly compensation, which actually rose 2% (the Adam Smith address: (http://findarticles.com/p/articles/mi_m1094/is_n1_v31/ai_17900497/pg_5).And it turns out that even the gap between 13% productivity increase and 2% compensation growth does not mean that labor’s share in national income fell over the period; in fact, it rose slightly (the Adam Smith address: (http://findarticles.com/p/articles/mi_m1094/is_n1_v31/ai_17900497/pg_5).”
Smith believes that society is to eager to blame individual income changes on the mobility of products and goods and stresses that for the most part the mobility is a positive change for most of the nations in the world.
Another well-known economic analyst Milton Friedman, believed that everything wrong in the world could be righted with free market trade. He promoted such ideas of private utilities and removing government involvement from society and business in every conceivable area (the Great Experiment: The Facts About Globalization (http://www.americanassembler.com/issues/globalization/index.html).
Recent studies indicate that such ideas, while looking good in theory are not conducive to successful society. California is a classic example of what can happen if free market utilities are allowed to roam unfettered by government standards of any type.
Friedman believes that complete free growth opportunities without boundaries, such has been the case in some areas of globalization actually harm the worldwide economy and in turn society in general (the Great Experiment: The Facts About Globalization (http://www.americanassembler.com/issues/globalization/index.html).
Conclusion
While globalization has been occurring since the beginning of time the recent expansion of electronic communication has caused the concept to explode with growth. Free trade is not a new concept, though the past few decades have seen in expand to include competition across different nations instead of different towns. Adam Smith has a valid point in the balance and counterbalance impact that globalization has on the world. While blue collar workers are experiencing some negative affects of world trade, the other areas of business are experiencing extremely positive aspects of the globalization process. Overall globalization is providing a positive and forward thinking ability for society to succeed, however, it will be important along the way to monitor its progress and be sure it is fairly distributed.
References
History of globalization (Accessed 6-10-07)
http://www.answers.com/topic/history-of-globalization
The Adam Smith address: what difference does globalization make? – speech delivered at the 30th annual meeting of the National Assn. Of Business Economists, Sept. 10-13, 1995 – Transcript Business Economics, Jan, 1996 by Paul Krugman (Accessed 6-10-07)
http://findarticles.com/p/articles/mi_m1094/is_n1_v31/ai_17900497/pg_5
The Great Experiment: The Facts About Globalization (Accessed 6-10-07)
http://www.americanassembler.com/issues/globalization/index.html
The Free Market God
What is Globalization? (Accessed 6-10-07)
http://www.imf.org/external/np/exr/ib/2000/041200.htm#II
