Globalisation Pro(ECONOMICS)

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In The Partial Requirement For The Course Of

MRS. TEJAL GADE


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You can, if you think You Can. Put efforts solemnly, steadily and

seriously. Have faith in God, and gain grace of Him. Confidence in

oneself and faith in Superself are keys to the success.

Welcome to the world of Globalisation. As we enter the 21 st

century with hopes and new expectations, it is imperative

that we appreciate the world around is changing rapidly,

throwing open great challenges and innumerable

opportunities.

Survival and success depends on the ability to be creative,

flexible and adaptable and even in that there are no definedmodels that can be followed. The best course is to simply

trust your own instinct, stay away from conformity, set

your own rules and accept challenges.

It gives me immense pleasure to present the latest and

updated project on GLOBALISATION for the subject of

MANAGERIAL ECONOMICS.

I am thankful to Mrs. Tejal Gade, lecturer of Managerial

Economics, without her painstaking efforts this project

would have never seen the light of the day.

Suggestions and improvements from readers are greatly

appreciated.


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INTODUCTION

MEANING OF GLOBALISATION

DIMENSIONS OF GLOBALISATION

MODERN GLOBALISATION

DEVELOPMENT SUPPORT GLOBALISATION

MENIFESTATION OF GLOBALISATION

MEASURING GLOBALISATION

GAINS OF GLOBALISATION

EFFECT OF GLOBALISATION

PROBLEMS OF GLOBALISATION

PICTORIAL ILLUSTRATION

BIBLOGRAPHY

INTRODUCTION


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The term "globalization" has been used by economists since the 1980s

although it was used in social sciences in the 1960s; however, its concepts

did not become popular until the latter half of the 1980s and 1990s. The

earliest written theoretical concepts of globalization were penned by an

American entrepreneur-turned-ministerCharles Taze Russell who coined the

term 'corporate giants' in 1897.[7] Globalization is viewed as a centuries long

process, tracking the expansion of human population and the growth of

civilization, that has accelerated dramatically in the past 50 years. Early

forms of globalization existed during the Roman Empire, the Parthian

empire, and the Han Dynasty, when the Silk Road started in China, reached

the boundaries of the Parthian empire, and continued onwards towards

Rome. The Islamic Golden Age is also an example, when Muslim traders

and explorers established an early global economy across the Old World

resulting in a globalization of crops, trade, knowledge and technology; and

later during the Mongol Empire, when there was greater integration alongthe Silk Road. Globalization in a wider context began shortly before the turn

of the 16th century, with two Kingdoms of the Iberian Peninsula - the

Kingdom of Portugal and the Kingdom of Castile. Portugal's global

explorations in the 16th century, especially, linked continents, economies

and cultures to a massive extent. Portugal's exploration and trade with most

of the coast of Africa and the territory of India was the first major trade

based form of globalisation. A wave of global trade, colonization, and

enculturation reached all corners of the world. Global integration continued

through the expansion of European trade in the 16th and 17th centuries,

when the Portuguese and Spanish Empirescolonized the Americas, followed

eventually by France and Britain. Globalization has had a tremendous

impact on cultures, particularly indigenous cultures, around the world. In the

17th century, globalization became a business phenomenon when the British

East India Company, which is often described as the first multinational

corporation, was established. Because of the high risks involved with

international trade, the British East India Company became the first

company in the world to share risk and enable joint ownership of companies

through the issuance of shares of stock: an important driver for

globalization. Globalisation was achieved by the British Empire (the largestempire in history) due to its sheer size and power. British ideals and culture

were imposed on other nations during this period. The 19th century is

sometimes called "The First Era of Globalization." It was a period

characterized by rapid growth in international trade and investment between

the European imperial powers, their colonies, and, later, the United States. It
http://en.wikipedia.org/wiki/Charles_Taze_Russellhttp://en.wikipedia.org/wiki/Globalisation#cite_note-6http://en.wikipedia.org/wiki/Human_populationhttp://en.wikipedia.org/wiki/Civilizationhttp://en.wikipedia.org/wiki/Roman_Empirehttp://en.wikipedia.org/wiki/Parthianhttp://en.wikipedia.org/wiki/Han_Dynastyhttp://en.wikipedia.org/wiki/Silk_Roadhttp://en.wikipedia.org/wiki/Islamic_Golden_Agehttp://en.wikipedia.org/wiki/Islamic_Golden_Age#Economyhttp://en.wikipedia.org/wiki/Islamic_Golden_Age#Age_of_discoveryhttp://en.wikipedia.org/wiki/Global_economyhttp://en.wikipedia.org/wiki/Old_Worldhttp://en.wikipedia.org/wiki/Muslim_Agricultural_Revolutionhttp://en.wikipedia.org/wiki/Mongol_Empirehttp://en.wikipedia.org/wiki/Silk_Roadhttp://en.wikipedia.org/wiki/Iberian_Peninsulahttp://en.wikipedia.org/wiki/Kingdom_of_Portugalhttp://en.wikipedia.org/wiki/Kingdom_of_Castilehttp://en.wikipedia.org/wiki/Portugalhttp://en.wikipedia.org/wiki/Global_tradehttp://en.wikipedia.org/wiki/Colonizationhttp://en.wikipedia.org/wiki/Enculturationhttp://en.wikipedia.org/wiki/Portuguese_Empirehttp://en.wikipedia.org/wiki/Spanish_Empirehttp://en.wikipedia.org/wiki/European_colonization_of_the_Americashttp://en.wikipedia.org/wiki/Transformation_of_culturehttp://en.wikipedia.org/wiki/British_East_India_Companyhttp://en.wikipedia.org/wiki/British_East_India_Companyhttp://en.wikipedia.org/wiki/Multinational_corporationhttp://en.wikipedia.org/wiki/Multinational_corporationhttp://en.wikipedia.org/wiki/Shareshttp://en.wikipedia.org/wiki/British_Empirehttp://en.wikipedia.org/wiki/Globalisation#cite_note-6http://en.wikipedia.org/wiki/Human_populationhttp://en.wikipedia.org/wiki/Civilizationhttp://en.wikipedia.org/wiki/Roman_Empirehttp://en.wikipedia.org/wiki/Parthianhttp://en.wikipedia.org/wiki/Han_Dynastyhttp://en.wikipedia.org/wiki/Silk_Roadhttp://en.wikipedia.org/wiki/Islamic_Golden_Agehttp://en.wikipedia.org/wiki/Islamic_Golden_Age#Economyhttp://en.wikipedia.org/wiki/Islamic_Golden_Age#Age_of_discoveryhttp://en.wikipedia.org/wiki/Global_economyhttp://en.wikipedia.org/wiki/Old_Worldhttp://en.wikipedia.org/wiki/Muslim_Agricultural_Revolutionhttp://en.wikipedia.org/wiki/Mongol_Empirehttp://en.wikipedia.org/wiki/Silk_Roadhttp://en.wikipedia.org/wiki/Iberian_Peninsulahttp://en.wikipedia.org/wiki/Kingdom_of_Portugalhttp://en.wikipedia.org/wiki/Kingdom_of_Castilehttp://en.wikipedia.org/wiki/Portugalhttp://en.wikipedia.org/wiki/Global_tradehttp://en.wikipedia.org/wiki/Colonizationhttp://en.wikipedia.org/wiki/Enculturationhttp://en.wikipedia.org/wiki/Portuguese_Empirehttp://en.wikipedia.org/wiki/Spanish_Empirehttp://en.wikipedia.org/wiki/European_colonization_of_the_Americashttp://en.wikipedia.org/wiki/Transformation_of_culturehttp://en.wikipedia.org/wiki/British_East_India_Companyhttp://en.wikipedia.org/wiki/British_East_India_Companyhttp://en.wikipedia.org/wiki/Multinational_corporationhttp://en.wikipedia.org/wiki/Multinational_corporationhttp://en.wikipedia.org/wiki/Shareshttp://en.wikipedia.org/wiki/British_Empirehttp://en.wikipedia.org/wiki/Charles_Taze_Russell


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was in this period that areas of sub-saharan Africa and the Island Pacific

were incorporated into the world system.

The term globalisation was used by Theodore Levitt in an article he wrote 20

years ago in the Harvard Business Review. He used it in a limited sense

as a synonym for standardization of a brand for international markets. In

terms of quality, appearance, and every other factor governing the product, it

will correspond to identical standards in whichever part of the world it may

be manufactured or marketed by the parent company, or its franchisee.

Today, the word has acquired a much wider connotation and significance.

The International Monetary Fund has defined globalization as "the growing

interdependence of countries worldwide through the increasing volume and

variety of cross-border transactions in goods and services, and of

international capital flows, and also, through the more rapid and widespreaddiffusion of technology."

MEANING OF GLOBALISATION


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Globalisation, also called as internationalization, means several things to

several people. For some it is new paradigm a set of fresh beliefs, working

methods and economic, political and socio culture realities in which the

previous assumptions are no longer valid. For developing countries, it means

integration with the world economy. In the simple economic terms,

globalization refers to the process of integration with the world economy. In

simple economic terms, globalization refers to the process of integration of

the world into one huge market. Such unification calls for the removal of all

trade barriers among countries. Even political and geographical barriers

become irrelevant.

At the company level, globasitation means two things (a) the company

commits itself heavily with several manufacturing locations around the

world and offers products in several diversified industries. (b) it means the

ability to compete in domestic markets with foreign competitors. In thepopular sense, globalization refers mainly to multi-plant operations.

A company which has gone global is called a multinational corporation

(MNC). An MNC is, therefore, one that, by operating in more than one

country, gains through Research and Development, leading to substantial

production, marketing and financial advantages in its costs and reputation

that are not available to purely domestic competitors. The global views the

world market as one market, minimizes the importance of national

boundaries, raises capital and markets wherever it can do the job best.

MODERN GLOBALISATION


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Globalization, since World War II, is largely the result of planning by

economists, business interests, and politicians who recognized the costs

associated withprotectionism and declining international economic

integration. Their work led to the Bretton Woods conference and the

founding of several international institutions intended to oversee the

renewed processes of globalization, promoting growth and managing

adverse consequences.

These institutions include the International Bank for Reconstruction and

Development (the World Bank), and the International Monetary Fund.

Globalization has been facilitated by advances in technology which have

reduced the costs of trade, and trade negotiation rounds, originally under the

auspices of the General Agreement on Tariffs and Trade (GATT), which led

to a series of agreements to remove restrictions on free trade.

Since World War II, barriers to international trade have been considerably

lowered through international agreements - GATT. Particular initiatives

carried out as a result of GATT and the World Trade Organization (WTO),

for which GATT is the foundation, have included:

Promotion of free trade:

o Reduction or elimination oftariffs; creation offree trade zones

with small or no tariffs

o Reduced transportation costs, especially resulting from

development ofcontainerization for ocean shipping.o Reduction or elimination ofcapital controls

o Reduction, elimination, or harmonization ofsubsidies for local

businesses

Restriction of free trade:

o Harmonization ofintellectual property laws across the majority

of states, with more restrictions.

o Supranational recognition of intellectual property restrictions

(e.g.patents granted by China would be recognized in the

United States)

Cultural globalization, driven by communication technology and the

worldwide marketing of Western cultural industries, was understand at first

as a process of homogenization, as the global domination of American mass

culture at the expense of traditional diversity. However, a contrasting trend

soon became evident in the emergence of movements protesting against
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globalization and giving new momentum to the defense of local uniqueness,

individuality, and identity. These movements used the same new

technologies to pursue their own goals more efficiently and to appeal for

support from world opinion.

The Uruguay Round (1984 to 1995) led to a treaty to create the WTO to

mediate trade disputes and set up a uniform platform of trading. Other

bilateral and multilateral trade agreements, including sections of Europe's

Maastricht Treaty and theNorth American Free Trade Agreement (NAFTA)

have also been signed in pursuit of the goal of reducing tariffs and barriers to

trade.

Global conflicts, such as the 9/11 terrorist attacks on the United States of

America, is interrelated with globalization because it was primary source of

the "war on terror", which had started the steady increase of the prices of oiland gas( due to the fact that most OPEC member countries were in the

Arabian Peninsula.

World exports rose from 8.5% ofgross world product in 1970 to 16.1% of

gross world product in 2001.

MEASURING GLOBALISATION
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Globalization has had an impact on different cultures around the world.

Japanese McDonald'sfast food as an evidence of international integration.

Looking specifically at economic globalization, demonstrates that it can be

measured in different ways. These center around the four main economic

flows that characterize globalization:

Goods and services, e.g. exports plus imports as a proportion of

national income or per capita of population Labor/people, e.g. net migration rates; inward or outward migration

flows, weighted by population

Capital, e.g. inward or outward direct investment as a proportion of

national income or per head of population

Technology, e.g. international research & development flows;

proportion of populations (and rates of change thereof) using
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particular inventions (especially 'factor-neutral' technological

advances such as the telephone, motorcar, broadband)

As globalization is not only an economic phenomenon, a multivariate

approach to measuring globalization is the recent index calculated by the

Swiss think tankKOF. The index measures the three main dimensions of

globalization: economic, social, and political. In addition to three indices

measuring these dimensions, an overall index of globalization and sub-

indices referring to actual economic flows, economic restrictions, data on

personal contact, data on information flows, and data on cultural proximity

is calculated. Data is available on a yearly basis for 122 countries, as

detailed in Dreher, Gaston and Martens (2008). According to the index, the

world's most globalized country is Belgium, followed by Austria, Sweden,

the United Kingdom and theNetherlands. The least globalized countries

according to the KOF-index are Haiti, Myanmarthe Central AfricanRepublic and Burundi.

A.T. Kearney andForeign Policy Magazine jointly publish another

Globalization Index. According to the 2006 index, Singapore, Ireland,

Switzerland, the U.S., theNetherlands, Canada and Denmarkare the most

globalized, whileIndonesia, India and Iran are the least globalized among

countries listed.

EFFECTS OF GLOBALISATION
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Globalization has various aspects which affect the world in several different

ways such as:

Industrial- emergence of worldwide production markets and broaderaccess to a range of foreign products for consumers and companies.

Particularly movement of material and goods between and within

national boundaries.

Financial- emergence of worldwide financial markets and better

access to external financing for borrowers. Simultaneous though not

necessarily purely globalist is the emergence of under or un-regulated

foreign exchange and speculative markets.

Economic - realization of a global common market, based on the

freedom of exchange of goods and capital.

Political- some use "globalization" to mean the creation of a worldgovernment, or cartels of governments (e.g. WTO, World Bank, and

IMF) which regulate the relationships among governments and

guarantees the rights arising from social and economic globalization.

Politically, the United States has enjoyed a position of power among

the world powers; in part because of its strong and wealthy economy.

With the influence of globalization and with the help of The United

States own economy, the People's Republic of China has experienced

some tremendous growth within the past decade. If China continues to

grow at the rate projected by the trends, then it is very likely that inthe next twenty years, there will be a major reallocation of power

among the world leaders. China will have enough wealth, industry,

and technology to rival the United States for the position of leading

world power.

Informational- increase in information flows between geographically

remote locations. Arguably this is a technological change with the

advent of fibre optic communications, satellites, and increased

availability of telephony and Internet.

Language - the most popular language is English.

o About 75% of the world's mail, telexes, and cables are inEnglish.

o Approximately 60% of the world's radio programs are in

English.

o About 90% of all Internet traffic is using English.

Competition - Survival in the new global business market calls for

improved productivity and increased competition. Due to the market
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became worldwide not specific area, there are many industries around

the world. Industries have to upgrade their products and use

technology skillfully for facing the competition and increasing their

competitive.

Cultural- growth of cross-cultural contacts; advent of new categories

ofconsciousness 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 bemoan the resulting consumerism and loss of

languages. Also see Transformation of culture.

Ecological- the advent of global environmental challenges that might

be solved with international cooperation, such as climate change,

cross-boundary water and air pollution, over-fishing of the ocean, and

the spread of invasive species. Since many factories are built in

developing countries with less environmental regulation, globalismand free trade may increase pollution. On the other hand, economic

development historically required a "dirty" industrial stage, and it is

argued that developing countries should not, via regulation, be

prohibited from increasing their standard of living.

Social(International cultural exchange) - increased circulation by

people of all nations with fewer restrictions.

o Spreading ofmulticulturalism, and better individual access to

cultural diversity (e.g. through the export ofHollywood and

Bollywood movies). Some consider such "imported" culture a

danger, since it may supplant the local culture, causing

reduction in diversity or even assimilation. Others consider

multiculturalism to promote peace and understanding between

peoples.

o Greater international travel and tourism

o Greaterimmigration, including illegal immigration

o Spread of local consumer products (e.g. food) to other countries

(often adapted to their culture).

o World-wide fads and pop culture such as Pokmon, Sudoku,

Numa Numa, Origami, Idol series, YouTube, Orkut, Facebook,and MySpace. Accessible to those who have Internet or

Television, leaving out a substantial segment of the Earth's

population.

o World-wide sporting events such as FIFA World Cup and the

Olympic Games.
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o Incorporation of multinational corporations in to new media. As

the sponsors of the All-Blacks rugby team, Adidas had created

a parallel website with a downloadable interactive rugby game

for its fans to play and compete.

Technical

o Development of a global telecommunications infrastructure and

greater transborder data flow, using such technologies as the

Internet, communication satellites, submarine fiber optic cable,

and wireless telephones

o Increase in the number of standards applied globally; e.g.

copyright laws,patents and world trade agreements.

Legal/Ethical

o The creation of the international criminal court and

international justice movements.o Crime importation and raising awareness of global crime-

fighting efforts and cooperation.

Whilst it is all too easy to look at the positive aspects of Globalization and

the great benefits that are apparent everywhere, there are also several

negative occurrences that can only be the result of or major motivating

factors that inspire some corporations to globalize.

Globalization the growing integration of economies and societies around

the world has been one of the most hotly-debated topics in internationaleconomics over the past few years. Rapid growth and poverty reduction in

China, India, and other countries that were poor 20 years ago, has been a

positive aspect of globalization. But globalization has also generated

significant international opposition over concerns that it has increased

inequality and environmental degradation.

Sweatshops

It can be said that globalization is the door that opens up an otherwise

resource poor country to the international market. Where a country or nation

has little material or physical product harvested or mined from it sown soil

there is seen the opportunity by huge corporations to take advantage, in

some ways even exploit the export poverty of such a nation. Where the

majority of the earliest occurrences of economic globalization are recorded

as being the expansion of businesses and corporate growth, in many poorer
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nations globalization is actually the result of the exploitation of that state of

poverty.

One particularly disturbing practice is the use of Sweatshops by

manufacturers. According to Global Exchange a non-profit organization

based in San Francisco, CA, these Sweat Shops are widely used by sports

shoe manufacturers and mentions one company in particular Nike. As a

leading retailer of sports equipment and apparel Nike, which is an American

based corporation, is maintaining huge profit margins by producing its

products at the very extreme end of minimal cost. There are factories set up

in the poorest of Asian countries where employees work for barely enough

to survive and even children are being put to work. Then as labor laws alter

in those countries and stricter rules govern the manufacturing process the

factories are closed down and relocated to other nations, less likely to have

such strict laws and enforcement.

There are several agencies that have been set up worldwide specifically

designed to focus on anti-sweatshop campaigns and education of such. The

Decent Working Conditions and Fair Competition Act is a legislation

passed by theNational Labor Committee in the USA. The legislation now

suggests that companies are legally obligated to respect human and worker

rights by prohibiting the import, sale, or export of sweatshop goods. There

are very strict standards set out by the International Labor Organization and

any violations shall be banned from the US market.

Specifically, these core standards include no child labor, no forced labor,

freedom of association, right to organize and bargain collectively, as well as

the right to decent working conditions.

Tiziana Terranova has stated that globalisation has brought a culture of "free

labour". In a digital sense, it is where the individuals (contributing

capital)exploits and eventually "exhausts the means through which labour

can sustain itself". For example, in the area of digital media (animations,

hosting chat rooms, designing games), where it is often less glamourous than

it may sound. In the gaming industry, a Chinese Gold Market has been

established.

PROBLEMS OF GLOBALISATION
http://en.wikipedia.org/wiki/Sweatshopshttp://en.wikipedia.org/wiki/Global_Exchangehttp://en.wikipedia.org/wiki/Nikehttp://en.wikipedia.org/wiki/National_Labor_Committeehttp://en.wikipedia.org/wiki/International_Labor_Organizationhttp://en.wikipedia.org/wiki/Child_laborhttp://en.wikipedia.org/wiki/Forced_laborhttp://en.wikipedia.org/wiki/Freedom_of_associationhttp://en.wikipedia.org/w/index.php?title=Tiziana_Terranova&action=edit&redlink=1http://en.wikipedia.org/wiki/Sweatshopshttp://en.wikipedia.org/wiki/Global_Exchangehttp://en.wikipedia.org/wiki/Nikehttp://en.wikipedia.org/wiki/National_Labor_Committeehttp://en.wikipedia.org/wiki/International_Labor_Organizationhttp://en.wikipedia.org/wiki/Child_laborhttp://en.wikipedia.org/wiki/Forced_laborhttp://en.wikipedia.org/wiki/Freedom_of_associationhttp://en.wikipedia.org/w/index.php?title=Tiziana_Terranova&action=edit&redlink=1


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The current trade system has adopted a principle of minimum

interference, in the form of tariffs and subsidies, and maximum

growth. It sees economic growth and increasing consumption as endsin themselves and pursues growth at all costs. The problem withuncontrolled growth is that it is depleting the natural capital, the

environment on which the global economy is based, faster than it can

be replaced.

There are major contradictions between the objectives of the WTO,

IMF, World Bank and the types of projects that they fund. They pay

lip service to the problems of poverty, ethical development and

environmental protection but do very little to fix them.

The goals of the trade organisations, corporations and lobbyinggroups are commercialisation, privatisation and deregulation of the

world's domestic economies.

ENVIRONMENTALAGREEMENTS

Our current trade system is oppressive, unfair and is destroying our

environment.

Several of the more recent agreements brokered by the WTO werenotable for their exceptional bias towards big business and wealthy

countries - specifically, the Agreement on Agriculture (AOA) and theTrade Related Intellectual Property Rights (TRIPs) Agreement.

Multilateral environment agreements that govern trade in the productsof biodiversity, protect endangered species or habitats, or control the

movement of toxic waste around the globe could be undermined by

trade agreements. These agreements include the Montreal Protocol,the Convention on International Trade in Endangered Species(CITES), the Convention on Biological Diversity, and the Basel

Convention on Trans-boundary Movement of Hazardous Waste.


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Another problem with the free market economic system is that it is

over simplistic. Many of its supporters believe that economics works

according to laws of physics, biology or nature and if it is left alone,

will eventually regulate itself for the benefit of all humanity. There is

an almost religious faith in the theory of free trade extending back tothe 18th Century. Because free trade is seen as more efficient it is

considered better generally. Massive destruction of human cultureand the environment is seen as just collateral damage to economists

dedicated to the idea of a free market.

Those advocating the free market system claim that eventually the

poor in developing countries will benefit from deregulation. The theory

is known as 'trickle down effect', because over time the wealth

generated by liberalisation is supposed to trickle down from the richto the poor. So far the world trade system has increased the wealth of

a small minority of people, mostly in developed countries but the poorhave become poorer.

It is taken for granted that constant economic growth is desirable

even if we are depleting our resources faster than they can be

replenished.

STATISTICS

World cross-border global transactions have grown from $3 trillion in1990 to $10 trillion in 2007 and are expected to increase to over $70

trillion by 2025. About 84% of this was merchandise and 16% is

services. About 75% of the value of world merchandise trade is from

manufactured goods, mainly transport, machinery and electronic

equipment. Minerals and agriculture, which form the main source of

income for the developing world, make up 22% of merchandise trade.

About 40% of international trade occurs through transnationalcorporations.

Some transnational companies are so big that they have greater

sales than the total sales of many developed countries. The

combined sales of the world's largest 350 multinationals total one

third of the combined GNP's of all industrialised countries, and


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exceed the individual GNP's of all developing countries. The GDP of

the poorest 48 nations (i.e. 1/4 of the world's countries) is less than

the combined wealth of the world's 3 wealthiest individuals. So

extreme is this discrepancy in ownership that In 2004, approximately

0.13% of the world's population controlled 25% of the world's assets.

In 1960, 20% of the world's population living in the richest countries

were 30 times richer than the poorest 20%. By 1997, they were 74times richer. Between 1975 and 1997, GDP increased about 50% in

the most developed countries and fell by about 15% in the least

developed countries (United Nations Development Program Figures

1999).

After fifty years of free market economic or economic rationalism,more people in the world than ever are poor, hungry, sick or dying

and the environment is getting worse. While more people are getting

richer, more people are becoming poorer. The gap between rich andpoor is getting wider and the quality of life for all people is decreasing.

TRANSPORTANDENVIRONMENT

The trade system promotes increasing consumption even when it

involves the loss of natural habitats and biodiversity, the naturalcapital on which the global economy is based. More trade means

more transport and this means more roads, noise and more airpollution. A rise in levels of global transport has also resulted in

increased transmission of alien species from one country to another,

for example in the ballast of ships. The introduction of these species

into sensitive ecosystems results in disaster for some environments.

One economic theory promoted by free market economists, the

theory of comparative advantage, is that nations should specialise inproducing that at which they are best. This runs against the views

held by most environmentalists that it is better to produce locallybecause it reduces transport costs.


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There are limits to the capacity of ecosystems to absorb pollution

both in terms of the rate and the total of amount pollution, but there

are no defined limits for trade, industrialisation and growth.

Growth driven economics has resulted in the production of timberfrom unsustainable sources and the loss of the world's tropicalforests. Marine fisheries have been over-exploited and fish stocks are

in serious decline.

Where national laws intended to protect the environment challenge

WTO rules on trade, the result has nearly always been that WTOrules have had precedence over the nation's laws.

There is no place for the precautionary principle in WTO rules. WTO

free trade rules have been used to oblige Europe to import hormone-

treated beef, and to prevent countries from choosing to import

shrimps which are caught using special nets which do not trap and kill

turtles.

LABELLING

Over the past twenty years there has been a movement to give goods

and services that are environmentally and socially acceptable a label

to distinguish them from other goods. The WTO see such labelling asa barrier to trade and therefore illegal. Examples include organic food

or timber from sustainable sources, and products that have beenproduced by people who have been paid a fair wage.

DEMOCRACY

The WTO is not a democratic institution. It is dominated by a few

powerful Western governments acting on behalf of the corporations.

Influence at the WTO is bought with a donation of a few hundredthousand dollars to a leading political party. This 'donation' will givethe company access to key negotiators at a conference.

The WTO is not transparent and is not accountable to anyone.


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As the corporations increase their control over the economy, society

and the environment, democracy is weakened.

The WTO has a one-country one-vote structure but wealthy

companies and powerful countries wield most influence. The morepowerful groups exert leverage over governments in poorer countriesto conform and often determine the agenda of negotiations.

Access for the public to information about the activities of the WTO islimited. Even members of governments are unable to get answers to

queries about trade negotiations. Disputes are settled through theAppellate Body and are conducted in closed sessions. There is no

public input permitted.

The larger trading countries like the US and trading blocks like the

EU, determine the agenda of negotiations and pursue self-interests

and the interests of their transnational corporations.

BIAS

Governments are obliged to inform the WTO of changes that are

made to its national laws that may relate to trade. Once trade rules

are in place, a government cannot change their national laws if they

directly counter the trade rules.

Disputes between members are mediated by the Dispute Settlement

Body (DSB).

The WTO have increased levels of poverty for the majority of the

world's peoples, facilitated a concentration of wealth in the hands of afew rich people, allowed growing inequality within and between

nations, and facilitated unsustainable patterns of production and

consumption.

COMPETITION

Currently there is the tendency for more power to be concentrated

globally in the hands of fewer businesses. Transnational corporationsare merging or acquiring smaller companies. Monopoly capitalism is


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not good for consumers and the environment because it increases

authoritarianism and decreases competition. Small business cannot

be expected to compete with large corporations because large

corporations are able to reduce costs. Large corporations can even

drive down prices and because their large size buffers them againstlosses, they can eventually force small companies out of business.

SPECULATION

The current trade system has promoted deregulation of the

investment sector of the financial market. This has stimulatedincreasing movement of large amounts of short-term capital, which

has resulted in increasing economic instability and insecurity indeveloping countries. Speculators have been able to withdraw their

investments at short notice and undermine economies, particularly in

countries which have a relatively immature financial market. This has

precipitated economic crises in some South East Asian countries and

increased the number of people in poverty. In Malaysia in 1997, for

example, capital flowing out of the country resulted in the Malaysianstock market losing 40% of its value in six months. Furthermore

deregulation has resulted in fluctuating commodity prices in global

markets, which has added to increasing economic insecurity.

Sustainable development is not possible in a boom and slump

economic system fuelled by speculative investment.

LABOURLAWS

The increase in the mobility of capital and companies globally hasresulted in companies moving to countries where labour laws areweakest and wages lowest.

THIRDWORLDFARMERS


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Many small-scale farmers have no choice but to work with poor soils

and in difficult climatic conditions. Free market principles do not allow

for compassion. Support for small-scale farmers is less likely with

trade liberalisation. Hard economic policies may force more Third

World farmers to sell up and move off their land.

Many developing countries that oppose trade agreements are forced

to accept them or risk being isolated in the global economy.

Countries that are massively in debt to the World Bank have been

more compliant in adopting trade liberalisation and many have beenobliged to increase exploitation of their natural resources and

adopted unpopular austerity measures, which have hit the poor

hardest. Countries in debt have been manipulated into restructuringtheir economy towards producing goods for export markets. In theory

greater exports means people are able to afford more imports and

consumerism stimulates growth. When countries are forced to turnover most of their land to grow cash crops or expand mining

operations, the effects on the environment and local communities are

usually negative. Producing exports does not necessarily lead to

development. World market prices for exports may be low for many

years or wildly fluctuate and sometimes they collapse. Among fields

of tobacco, coffee or cocoa the poor frequently go hungry throughlack of adequate nourishment.

PANTETING

Indigenous peoples in developing countries have accumulated

knowledge in areas such as plant breeding for hundreds or

thousands of years. Under the rules of free trade agreements

transnational companies can expropriate this knowledge and claim

traditional plant varieties or plant uses as their own.

GENERALPROBLEMS

Over a quarter of the developing world live in poverty and millions of

people in the developed world live below the poverty line. Over one


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billion people still live on less than one dollar a day. The current trade

system has been unable to reduce poverty.

PICTORIAL ILLUSTRATION


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DIMENTIONS OFGLOBALISATION

Specifically, globalization can be viewed as a four-dimensional construct based

on the premise that an enterprise can be more or less global along each of four

major characteristics:

(i) Globalisation of Market Presence: The first dimension-globalisation ofmarket presence-refers to extent to which company targets customers in all

major markets within its industry throughout the world. On the basis count the

presences of the companies vary from low to high. For example, in 1933, NTT

of Japan had no presence at all either in N.America OR IN Europe. In

comparison, IBM, Sun Microsystem and Cannon were the most globalised

firms.


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N.America Europe Asia

IBM 41 33 16

Fujitsu 06 26 65

HP 51 34 09

NEC 06 04 88Compaq 45 38 05

Canon 30 29 37

Sun Microsystem 51 24 25

NTT 00 00 100

Microsoft 56 30 09

Percentage regional distribution of IT sales for selected companies in 1993

(Source: The Economic Times, December 26, 2003)

(ii) Globalisation of Supply Chain: Internationalisation of supply chain refers to

the extent to which the company is accessing the most optimal locations for the

performance of various activities in its supply chain. It may be possible for a

firm to have a fairly local or regional market presence and yet have a highly

globalised supply chain, or vice-versa. For example Toyota has a good supply

chain. In 1995, Toyota produced about thirds of all its cars in Japan; the

remaining one-third were produced in affiliates spread over 25 countries in

America, Europe and Asia.

(ii) Globalisation of Capital: This refers to the extent to which the company is

accessing optimal sources of capital on a worldwide basis. The Hong Kongbased Internet Service Provider China com presence as well as supply chain,

and yet have a highly globalised capital base. In 1999, China Coms market

base and operations were centered primarily around Hong Kong and China.

Yet in the same year the company got listed itself on the US based Nasdaq.

(iv) Globalisation of Corporation Mindset: Last but most important dimension

is the globalization of corporate mindset. This dimension refers to the ability of

the company to understand and integrate diversity across cultures and markets.

General Electric Services is a good example of a firm with an increasingly

global mindset. The human capital of GE is highly globalised, it has strong

worldwide corporate culture; and the composition of the leadership is

increasingly diverse in terms of nationalities.

A true Global company is the one which scores high on all the four dimensions

discussed above.


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DEVELOPMENT SUPPORT AND

STRATEGIESGlobalisation is not a new phenomenon. Trade across the countries is as old as

business itself. However ,the volume of international business and the number

of players in it have increased dramatically over the last decade. Today every

nation and an increasing number of companies buy and sell goods and servicesin the international market places. A number of development around the world

has fuel this activity.

(i)The emergence of N.America Free Trade Agreement (NAFTA),comprising United States, Canada and New Mexico, has created a huge North


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American market. Movement of goods and services among these countries is

easy as all trade barriers have been removed.

(ii) The European Union (EU) is now well on its way to creating marketthat may be described as United States of Europe. The group consist of 25

nations. All these countries have not only removed trade barriers among them,

but have also adopted a single currency, called the EURO.

(iii)The most recent change of the General Agreement ofTariffs and Trade(GATT) are stimulating increased world trade. Under thisagreement, tariffs will be reduced world wide by 38%, and in some cases,

eliminated completely. GATT itself has been relaced by World Trade

Organisation (WTO), which came into existence on January 1, 1995.

(iv)There is also recent economic progress among lessdeveloped economies. A good example is India, which for years, has hada love-hate relationship with multinational business. The Government of India

has been known for its slow-moving bureaucracy and this has been a major

stumbling block in attracting foreign capital. Over the last few years, however,

there has been a dramatic turn-around in government policy, nad a growing

number of multinationals recently have been attracted due to the current Indian

governments willingness to reduce redtapism.

MENIFESTATION OF

GLOBALISATION

Globalisation manifests itself in many ways. The more important of them are:

1. Configuring anywhere in the world

An MNC can locate its different operations in different countries on the basis of

raw material availability, consumer markets and low-cost labour. World class

companies have located their manufacturing operations in low labour-cost

countries as their own based home based labour aither too expensive or militant.


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2. Interlinked and independent economies

In terms of economic-welfare, globalization refers to the unique economically

interdependent international environment. Each countrys prosperity is

interlinked with the rest of the world. No nation can any longer hope to lead an

existence of solitude and isolation in which only domestic industries, no matter

how inefficient, plod on merily.

3. Effect related industries and ancillaries

Globalization may also render many companies to go sick. Large scale

restructuring may result in closure or hiving-off oa a part or whole of their

operations. Many ancillaries units will laso be rendered sick in the process.

4. Increasing trend towards privatization

Governments everywhere are, to a certain extent, withdrawing from owning and

running business enterprises. Private entrepreneurs are given greater access andfreedom to run business units. The rolr of the government is reduced to the

provider of infrastructure for private business to prosper.

5. Infrastructural resources and inputs at international prices

Infrastructural inputs must be ensured at competitive prices, if the companies

were to compete globally. The advantages of cheap labour (and other inputs)

evaporate in the face of continous inflation and high infrastructural costs.

GAINS OF GLOBALISATION

Globalization wil help unleash the potential energies of creative and

enterprising people. Unfettered positive creativity and enterprise should be the

hallmark of a progressive people and a progressive system. Let us see as to how

this process will benefit one and all in the world.

1. Continous Improvement in economic efficiency:

In a flobalised economy, the pattern of production will be determined by the

market mechanism. Allocation of resources will be determined by consumers

choices and preferences. Rewards to the productive factors will be determined

by this contribution to the total product. Thus maximization of productive


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efficiency, distributive efficiency and allcative efficiency will be possible under

the conditions of a free market.

2. Continous improvement in factor payment:

Countries will be specialising in those products where they have the

competitive advantage over others. Among other things, the competitive

advantage of nation is determined by other factor endowments. Thus capital

abundant countries will specialize in the production of capital goods whereas

labour abundant countries will involve in the production of labour intensive

goods and services.

3. Benefits from human capital flows:

The movements of enriched human capital flows from the developing countries

to the developed countries imparts demographic stability to the developed

nations whose populations would otherwise be on the decline.Further,thedeveloped countries can enjoy the economies flowing from avaibility of

enriched immigrant human capital . The cost of human capital formation in the

developed countries is relatively much higher than the developing countries.

4. Borderless Financial capital and Wider Investment Opportunities:

Globalisation or opening up of the economy leads unrestricted flow of factors

across the national borders. Amongst the factors,financial flows are of great

importance particularly in the context of developing countries. Financial flows

are of two types, namely foreign direct investment and foreign portfolio

investment.

BIBLOGRAPHY

Google.com

Economic Times December 2003

Text book of BBM of Business Environment by K. Aswathappa and

G.Sudarshan Reddy (II Year)

Managerial Economics-II by Krishnan Nandela of BMS (III Semister)

Business Magazine of December 2005

India Today of june 2007


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Documents

Globalisation Pro(ECONOMICS)