Globalization Good or Bad

Globalization is defined as the process by which geographic boundaries have been transcended by increased technological progress. It is the development of a one-world marketplace or a worldwide economic ecosystem governed by the interconnectivity of individual component economic units. Globalization involves a set of processes, rather than an end situation, representing the unrelenting erosion of all barriers to free trade and increasing worldwide economic integration.

Business expansion through internationalization is a positively correlated function of globalization. It has created a singular, unified worldwide economic collective, operating as a dynamic composite personality, permeating all market verticals, industry sectors, and political covenants.

This operational landscape, created as a side effect of globalization, has facilitated numerous undisputed benefits to all market participants. These include the emancipation of women, increased routes to market for businesses, lowered production costs, improved supply chain networks, and a deeper global labor pool. The process of globalization through all methods has resulted in a more liberated free-market economic archetype.

The advent of the Internet in the early 1990s and subsequent technological progress have facilitated a convergence of competitive advantages. Businesses now have increased access to a more educated, culturally diverse talent pool, allowing for and assisting in the development of sustainable competitive advantages. Supply chain networks that transcend traditional geographic boundaries have lowered production costs, improving organizational bottom lines. Improved profits through cost-saving have shifted the demand curve for labor. Standardized product offerings through certified global manufacturing methodologies have afforded consumers the luxury of taking quality for granted. As the world becomes smaller with easier access to information, substantial improvements in education and healthcare have been possible. Originally thought incurable diseases now have therapies, lowering infant mortality rates and improving life expectancies. For instance, between 1950 and 1990, the worldwide infant mortality rate fell from 174 deaths per 1,000 to 64 deaths per 1,000.

Additionally, once culturally suppressive states are now accepting the possibility of women in the workforce. By limiting the economic participants available in their respective economies, a country lowers its ability to compete against more gender-accommodating and accepting countries. Globalization has fundamentally altered the way organizations compete, market, and define their value propositions. Businesses are no longer defining strategy with a local bias but are competing within a global business ecosystem, where decisions can only be made by understanding all of the inputs and outputs of that system. They can no longer operate as independent components of an economic collective but must act as interrelated component parts of an overall system. Open markets are the best engine for improving living standards and building shared collective prosperity. Only countries that remove the shackles to free trade, capital movement, and international competition will realize socioeconomic progress.

While the benefits of continuous globalization are significant, it is evident that for every positive, there is often a negative. Some economists argue that globalization has a debilitating effect on emerging markets and infant industries. The interconnectivity of rich and poor nations is sometimes viewed as a zero-sum game, existing outside the framework of the Pareto criterion. It is argued that one economic unit (country) cannot benefit without making another economic entity worse off.

However, engagement in trade can still be acceptable and beneficial if the alternative is less savory than the losses trade might incur. It is clear that there are significant inequity problems as a result of globalization. It is argued that globalization has increased sovereign wealth income inequalities, with continual divergence resulting in more polarization of incomes worldwide. Greater access to labor markets has facilitated increased employment, yet the excess supply has created a producer sovereign labor market and lowered global wage rates. Lower disposable income, particularly in emerging economies, reduces aggregate demand within the national economy.

The lowered demand for internal labor as a result of decreased money supply can lead to a vicious cycle of unemployment due to cyclical demand. This means that rather than leveraging the opportunities created by the fruits of globalization, poorer nations are struggling with internal economic strife, falling even further behind their Western counterparts. The second cost of globalization stems from the resource and economic interdependencies it creates. When economies and businesses within those economies are so closely linked, there is a systemic risk to the entire economic ecosystem. If one part of that system were to fail, there could be a domino effect impacting all other elements of that system. This was evidenced in the collapse of the housing market in the United States in late 2007.

As financial institutions began to falter in the US due to complex structured products, the problems inevitably spread to firms in Europe and the United Kingdom. The sheer density and number of unknown correlations between firms meant that no single organization had a complete picture of its exposure to its counterparties. This lack of knowledge prevented firms from implementing any risk-mitigating strategies and ultimately led to the failure of Lehman Brothers, a century-old Wall Street investment banking giant. Lehman Brothers International built itself on the foundation laid by economic globalization. The firm grew from a tier-two investment bank with $17 billion in revenue in 2003 to $57 billion in 2007. However, as the financial services world joined hands in the 1990s, agreeing to ever more lenient repurchase financing terms, the stage was set for an eventual collapse.

Complex financial alchemy was used to develop highly structured, highly profitable instruments of speculation. Easier access to overseas markets and clientele created by globalization had allowed the firm to offer its services to an ever-widening foreign audience. When the market began to sink in 2007, Lehman Brothers found itself in an unfamiliar situation. Not only were US markets falling, but it seemed that world markets were acting in unison and collapsing together. Lehman Brothers, as a function of globalization, experienced a black swan event—an event so statistically implausible that it was unlikely to happen in a million years.

The global recession of 2010, partly caused by globalization, led to a desire by governments and market participants to reconsider the economic bonds built through globalization. This was observed during the Great Depression of the 1930s. Severe economic dissatisfaction, followed by economic disagreement, can climax into economic warfare and possibly military conflict. It is seen that globalization allows foreign powers, in the form of external political influencers and multinational corporations, to govern the resources of a nation to suit their own motivations.

The fundamental aim of this essay was to discuss the positive and negative effects of globalization and their impact on the business playing field. Whether globalization is viewed as a negative or inherently positive force for economic progress, it is unmistakable that it produces massive opportunities and frightening challenges. Globalization can either favor or work against an economy depending on the situation, but it undeniably impacts all economies. It must also be accepted that the combination of variables, both known and unknown, that has led society to a globalized one-world economic system are still abundantly active. The trend is still bullish and is likely to accelerate with diminishing economic resources, increasing technical progress happening daily, and rapidly falling barriers to progress.

Thus, there is a strong connection between globalization and the development or non-development of a country. In a situation where the economies of different countries are highly correlated, it is important for these countries to work according to the international scenario. Different countries adopt various policies, but in the case of globalization, it is often observed that the policies of one economy are adjusted slightly to align with the policies of other economies. In conclusion, globalization is a journey to be embraced rather than feared. It is the key that will remove the chains of impoverishment from third-world economic powers and the lock that will bind a composite global economic collective into achieving sustainable socioeconomic progress.

Did you like this example?

679

36