Is Globalization Good or Bad?

Should Globalization be Encouraged

or be Discouraged?

Contents

I. Introduction ........................................................... 2 II. The Meaning of Globalization .............................. 2 III.The Advantages of Globalization ......................... 3 IV.The Disadvantages of Globalization .................... 5 V. Discussion ............................................................ 6 References ............................................................... 8

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I. Introduction

Globalization nowadays is a very well-know acceptable term. What enables a sliver

handy craft from Kota Gede, Jogjakarta, Indonesia, to be displayed in a café in Munich,

Germany is globalization. The same thing caused thousands of people in California lost

their job due to the closing of their work place because the management had decided to

outsource or shifted some part the “non core business activities” to another country in

the name of “efficiency and competitive advantage. This essay aims to present the

concept whether globalization is good or bad. Another analysis is whether it should be

encouraged or discouraged. It is a constant debate that society should face. By

understanding the nature of globalization, the praise or critics of globalization is purely

justified.

II. The Meaning of Globalization

Ismail (2012) on his book mentioned that the various views on globalization lead to

complexity of discussion as the source of confusing debate. Therefore understanding

the meaning of globalization is crucial. He stated that Giddens (1999) argued,

globalization conceptualized in social, cultural, and political, not just economy. Scholte

identified the concept of globalization with internationalization, liberalization,

universalisation, modernization, and deterritolization. Valacich & Schneider (2009)

reviewed globalization as Integration of economy activities such as international trade,

development in financial and currency system, and labor outsourcing, which were

supported by technological changes (low cost computing factor, network collaboration,

cloud computing, low cost global communication infrastructure, etc) that also brought

cultural changes. Whereas Srinivasan (2002) emphasized globalization on the

dismantling process of barriers to trade along with political, economy. Thus it can be

concluded that globalization is the concept of interaction between people, organization,

and countries that bring significance change humans life aspects where the barrier and

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limitations were dismantled. Due to the wide scope of globalization, this essay proposed

limitation on discussed area only in business, trade, financial, and economy.

III. The Advantages of Globalization

The dynamics of globalization seemed to be enjoyed by large Multi National Companies

(MNCs), bringing global brand that triumphed in less developed countries. As cited by

Guo (2013) on his article, World Investment Report 2011 reported that Coca Cola and

Toyota Motors gained more than one-third of their operating income from developing

country. In China, Nike projected to double its sales up to $4 billion in 2015. This meant

globalization is about companies venturing outside their home country. They were

hunger for new business development.

Taken the data from World Development Indicator (World Bank, 2011), Approximately

1.4 billion people live in extreme poverty on less than $1.25 per day and another 1.2

billion live in moderate poverty on less than $2.00 per day, totaling of 2.6 billion people

living in moderate or extreme poverty (MEP). A further 1.4 billion people live on between

$2 and $9.05 per day for a total of 4 billion people living below $9.05 per day at the

Base of the Pyramid (Arnold & Valentin, 2013). Despite this condition, he cited study

performed by Wolf (2004) and Sachs (2005) revealing economy globalization

significantly decreased low income households and enhanced people’s function. This

was the good side of globalization.

Advanced economy has been dramatically increasing over the decades as could be

seen in increase of volume of trade in goods, services and international financial flow of

assets and liabilities. Increase number of bilateral and regional free trade agreements

steadily supported this condition. They were General Agreement on Tariffs and Trade

(GATT) and World Trade Organization (WTO) in January 1995, The Uruguay Round

(1986-1993) and the last one The Doha Round: the current round of WTO negotiations,

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begun in 2001 in Doha, Qatar. Even an organization under UN was established, the

United Nations Conference on Trade and Development (UNCTAD).

Study performed by Barbieri & Keshk (2012) told us the share of global exports and

imports for global GDP.

Figure I. Ratio of Global Exports and Imports to Global GDP

Meanwhile data taken from assessment performed by Lane & Milesi-Ferretti (2004)

revealed the globalization’s contribution for the increase of share of assets and liabilities

of global GDP. Then it was proven that globalization drove significant growth to

international trade and financial movement.

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Figure II. Ratio of Global Assets and Liabilities to Global GDP

IV. The Disadvantages of Globalization

Globalization poorly addressed as business exploitation performed by western MNCs

and developing countries as the victim (Arnold & Valentin, 2013). As examples, Coca

Cola made several bad track records in the countries they operated in, such as the

groundwater pollution case in around its bottling plant in India and the accusation of

union workers murder in Colombia (Tricker, 2009). This was because developing

countries generally had few regulations to protect the environment. Eager to attract new

investment, they allowed business with few or no restrictions on hazardous waste and

emissions.

Economic activity has the tendency to be in a cyclical pattern that could be seen as

peak (expansion) and through (recession). According to the Business Cycle Dating

Committee of the National Bureau of Economic Research (NBER), the arbiter of U.S.

business cycle peaks and trough, a recession was normally visible in production,

employment, real income, and other indicators such as real GDP, unemployment,

industrial production and a retail sales index. Recession in one part of economy would

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significantly dragged others to the through. Bernanke on his June 2012 speech in front

of Congress, blamed European crises that caused decline is US exports and business

and consumers’ confidence, and to put US financial system under pressure (Berge,

2012).

The integration of financial system has made world economy in inter-related connection

as shown by the increase of financial markets liberalization. Thus, creditors failed to

analyze eligible creditors, boosting aggregate demand, credit and leverage fuel financial

bubbles that feed into a euphoria that perpetuates the virtuous cycle.

Being global was also about strategic challenges with all new risks and uncertainties

about integrating domestic and local markets of competition, high degree of imitation,

price and profit swings. It was difficult to be locally flexible and adaptable as an

organization or a country try to broaden their global footprint.

The overview from Global Policy Forum mentioned that northern countries opened

world markets for their product and supported by elites in the Southern. International

financial institutions and regional trade agreements supported their actions, forcing the

Southern reduced their tariffs, privatizing state enterprises and relaxing environmental

and labor standards. Painful choices must be made by the Southern between economic

development and the welfare of their citizens. No wonder critics have called

globalization as a new form of imperialism: powerful countries and corporations

exploiting the labor and resources of poorer countries.

V. Discussion

As the author discussed earlier, globalization drove prominent strategic benefits: the

ability to access new customer markets, new suppliers, new distribution network and

new business partners. It was all about the efficiencies and competitive advantages.

Local producers can sell their products internationally with the same playing field with

any producers. For financial part, the good side of globalization was about easy credit

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and rising leverage, as money flows easily across local and national boundaries. The

author totally supported globalization.

But globalization was also a double headed snake. Corporations faced unstable and

unpredictable demand and business opportunities with new competitors giving constant

pressure led to undermine profitability. Financial liberalization caused international

financial crises. And also developing countries were not to integrate with the global

economy due to the late start. The power of corporations and the global financial

markets adversely dictated economic policy those poor countries. MNCs took

advantages, employed cheap labors, gained huge profits, and paid small tax.

Whatever your point of view, globalization was a powerful force that inevitable. For

unemployed workers whose old jobs are now being shifted to other low labor countries,

it was monstrous. For investors considering increases in the value of their stocks, it was

right choice. If both developing and developed countries diminished their protectionist

measures and unnecessary regulation, international trade would increase and

prosperity would go for all as "invisible hand" would have worked.

To say globalization is good or bad, with all the consideration taken, the author would

have to agree. And yes we should encourage globalization. I believe, Globalization is, in

fundamental nature, a mechanism that creates opportunities for faster growth and more

rapid poverty reduction in those poor countries in which the domestic economic and

political stability is conducive.

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References

Arnold, D. G. (2013 ). Global Justice and International Business. Business Ethics Quarterly , 23:1 pp. 125-143.

Arnold, D. G., & Valentin, A. (2013). Corporate social responsibility at the base of the pyramid. Journal of Business Research, , in press.

Barbieri, K., & Keshk, O. (2012). Correlates of War Project Trade Data Set Codebook, Version 3.0. Retrieved from http://correlatesofwar.org.

Berge, T. J. (2012). Has Globalization Increased the Synchronicity of International Business Cycles? Kansas: FEDERAL RESERVE BANK OF KANSAS CITY.

Guo, X. (2013). Living in a Global World: Influence of Consumer Global Orientation on Attitudes Toward Global Brands from Developed Versus Emerging Countries. Journal of International Marketing , 1–22.

Ismail, M. N. (2012). The Globalization Debate: A Case of barking up the Wrong Tree. Kuala Lumpur: University of Malaya Press.

Lane, P., & Milesi-Ferretti, G. (2004). The External Wealth of Nations Mark: Revised and Extended Estimates of Foreign Assets and Liabilities,. Journal of International Economics , vol. 73, pp 223-250.

Srinivasan, T. N. (2002). Globalization: Is It Good or Bad? Stanford: Stanford Institute for Economic Policy Research.

Tricker, B. (2009). Corporate Governance: Principles, Policies and Practices. Oxford: Oxford University Press.

Valacich, J., & Schneider, C. (2009). Information Systems Today: Managing the Digital World. San Diego: Prentice Hall Press.