lobalisation is a major factor currently shaping the worldeconomy. Globalisation may not be a new concept and can be dated back to the70s the changes it makes to the world currently occur more faster, spread morewidely and have a much greater business, economic and social impact. This essayaims to give a detailed understanding on what globalisation is by using variousacademic/scholarly sources is essential and the effects globalisation.
Assummarised by Wetherly and Otter (2014), this essay will use the threecompeting perspectives on globalisation and will use examples from differentcompanies, sectors and countries.The concept of globalisation has been argued to have nodistinct definition and the term ‘globalisation’ has been around since the70’s, it has received mixed views both good and bad. A contempory definition ofglobalisation, from Weatherly and Otter is that globalisation is “The processby which it is argued that the world has become more integrated….an increase inflows across boundaries… not only economic flows of trade and investment in theform of multinational companies…also the transmission and mixing of culturalinfluences, migration and increased communication”. (Wetherly and Otter,2011:467). This definition focus on the importance of how the world has becomemore combined as the interaction across the globe has become more progress theresult are not only economic growth but also cultural mixing the definition isand in-depth explanation of how the world has spread it communication by tradeand investment causing makes send of different nationalities which in turn hasincreased our multinational companies around the globe.According to Hamilton and Webster (2012) it is understood asa process in which barriers (physical, political, economic, cultural)separating different regions of the world are reduced or removed, therebystimulating exchanges in goods, services and money”. (Hamilton & Webster,2012: 384) Whether ‘a destructive force or an inevitability of modern society,Globalization is the focus of a multitude of disciplines’.
(Mooney and Evans,2007)EFFECTS OF GLOBALISATION According to Weatherly and Otter (2014) there are three maincompeting perspectives of globalisation each poising both positive and negativeopinions. They are Neo-Classical perspective which states globalisation isgood, Socialist/Marixst perspective is that globalisation is bad, and theStructuralist perspective is that globalistaion can be good but depends on thenational and global structures in place. Neoclassicaltheory derives its base from Adam Smith (1723-1790) and David Ricardo(1772-1823. Its core belief is that competition regulates economicmovement establishing stability between demand and supply through the operationof market forces as well as enabling resources to be allocatedefficiently Adamsmiths Absolute advtage : imagine two countries. If country A is great atproducing cars and country B at producing wine, then it makes sense for countryA to specialise on cars and country B to specialise on wine and trade. Bothcountries are happy! came from the view of Adam Smith; that the market andtrade liberalisation are the route to economic development andgrowth.(Weatherly and Otter; 2014:266).
David Ricardo argued that free tradecould benefit two countries even though one country produced all of the tradedcommodities more efficiently than the other. Trade between nations was alwaysmutually beneficial as it allowed for specialisation and division oflabour which in turn brought about an increase in world output and ‘Comparativeadvantage’.Accordingto this perspective consumers, workers, and firms all make a rational decision tomaximize personal satisfaction and interests. These choices are based on wellinformed assessment of utility.
Ref16As liberal democracy spreads the world will develop more universalprinciples of economic and political organization, resulting in a truly globalcivilization (Held. Et al.,1999). Hyperglobalist go further by suggesting globalization is as a unique, legitimate and natural process ofamalgamation of the worlds economy, where transnationalgovernance organizations will emerge paving the platform for governments tomerge creatinga global system ref (14).Thus from a neoclassical perspective Lucas(2000) points out that whilst the 20th century saw a rise in global incomeinequality, this gap will be reversed in the 21st century.
Equal accessto technological advancements and establishments, open economic policies andfree flow of capital on international level will reduce income inequalitiesallowing poorer countries to grow and catch-up ref17 . from neoclassicalperspective the success of Asian countries like Japan and China are keyexamples of outwardly open growth approaches.Globalizationhas yielded immense benefitsGlobalization of knowledge has brought improvedhealth, with life spans increasing at a rapid pace. Goods and people aretransported with greater ease and speed due to technolody advancements. Thepossibility of war between developed countries decreases. Free trade betweencountries increases.
Cost and price reduction (economies of scale and globalproduction).Increased access to knowledge, information and technology. Increasedprosperity. Increased wages.
Health improvements/. Increased security. Greaterchoice. Marxist /socialist argue globalization,Marxist /socialistargue globalization, is a phenomena which validates and legitimises theneoclassical global mission to create a worldwide free marketconsolidating Anglo-American capitalism throughout the world’s keyeconomies (Callinicos et al. 1994; Gordon 1988; Hirst 1 997; Hoogvelt 1 997).This sceptical criticism has strong association with Marxist thinking, whichconsiders capitalism, as a social order, rooted in a policy of expansion toretain profits and control through continuous exploitation of new markets. Marxist believe the contemporary world order is the result of Westerncapitalist powers dividing and reshaping the world into favoured economiczones, multilateral organisations and surveillance, such as the G7 and WorldBank.
(ref 4 p5) (ref 4 P5). Marx agreed with Smith that capitalism led tounmatched economic growth but he argued the system was unethical andimmoral because capital and political power was contained in the hands of thefew allowing them to utilize their advantage of exploition. As growth andwealth increased so workers conditions deteriorated. (ref otter & whertbyp269)This pursuit of capitalist globalization has raised inequalities within nations and between nations , the disparitybetween the prosperous nations and the poorest nations isincreasing whereby the rich are getting richer and the poor getting poorer .(ref 6) research shows 20% of the world’s wealthiest population control86% of world GDP and 82% of world exports (Herriott and Scott-Jackson, 2002).
Thisincreasing economic divide between industrialised states anddeveloping states has widened persistently, particularly through thedebt adjustment period of the 1990s, which only justifies the Marxistposistion as opposed to the neo-classical perspective which predicts convergence. (REF8 Róbinson Rojas Sandford) Marxist believe Mncpursue unfair working conditions and social injustice through theexploitation of labour in underdeveloped countries to cut costs and increaseprofits. For instance from the early 80’s Nike closed its US factories andoutsourced almost all of its production from Asia.
As a result Nike grew at anremarkable rate, by taking benefit of global outsourcing opportunities tomanufacture low cost merchandise and reinvesting these savings into innovativedesigns and marketing. (Locke,2009) (ref 9) However in the 1990s Nike faced apublic relation disaster, over its use of child labour inPakistan along with poor working conditions and low wages in itsfactories in Indonesia China and Vietnam. The company’s integrity aboutits commitment to labour, environmental and health standards were called intoquestion and these unethical standards led to a boycott of its products byconsumers.
(Locke,2009) (ref9) Dependency writers question the degree ofprogress that has occurred in developing countries that have opened up toglobalization. small group of elites have emerged with vast control overbusinesses and government. Widespread Corruption, income gaps between therich and poor has fuelled ethnic and religious tensions. Repressiveadministrations have responded to rule their people through denial of humanrights. Another major highlight of the development in all these areas has beenthe environmental damage that has been created. (Wetherly and Otter, 2014). Globalization can also have a significant negative impacton taxation.
Since many companies are able to trade with one country whilebeing based in another, large corporations often exploit tax havens such asLuxembourg, Switzerland, and Hong Kong to avoid paying taxes in the countrieswhere they generate their profits. According to the WorldInstitute for Development Economics Research (WIDER), multinational corporations (MNCs)worldwide may be evading taxes up to the amount of $500 billion annually. MNCsare able to move profits to low-tax jurisdictions, through transfer pricing totransferring royalty-generating patents to allocating more debt to high taxjurisdictions. (Kundu, 2017). the poorer coutries have bared the greaterharm , although the developed nations have not escaped its effects.
recent studies show the cumulative total of this revenue forgovernments across the world could be increased by around 4.5% (Kundu,2017). Google, Micorsoft, Apple, Amazon, Starbucks, and Ikea are a few ofthe Corporate giants who have come under the radarand regulators such as the European commission now wantcorporations to pay taxes for profits made in each respective country. (CHEW,2016) Structuralist Structuralist arguederegulation and the globalisation of financial markets, coupled with the speedof financial innovation and the shocking financial disaster highlight the flawsof the deregulated neoliberal system (Crotty, 2009). The belief is theprocess of globalization is beneficial provided that the correct economicand political structures are put in place.
Here the challenge for policy-makersis to build the right type of internal and external environment in whichbusinesses both at the national and international level can grow. The newlyindustrialized countries (NICs), Thailand, Malaysia, the Philippines, Hong Kongand Taiwan as well as the rise of BRICS countries, have experienced notablerates of economic growth. These countries have attracted much debate,neo-classicalist see this as a triumph of market forces embracingworld trade. However structuralists, agree these countries have used trade togrow but, structural changes that were put into place prior to open trade needto be considered (Wetherly and Otter, 2014).
Over the preceding four decades, China has emerged as akey global player in the world economy Chinese policymakers have drawn onthe country’s own experience of reform and opening up as well as the evolvingideology of the Communist Party of China (CPC). For Chniese policymakers thestate has been central to attain global success and the market has beenthe chief channel for this to occur (Vangeli, 2017). Advocaters of the stateplaying a more involved role in the economy, cite the china model as achallenge to the neo-classicalism. Stiglitz refers to the Chinaphenomena a “wake-upcalll” in relation to how to proceed. (Vangeli, 2017) China, as thefastest growing economy in the world, is the prime example of how itsglobalisation policy has been carefully managed by the state.(otter), Chinaillustrates the significance of due consideration to the institutionalstructure in which market transformations can be entrenched (see Rodrik and Stiglitz otter).The government still maintains a tight control over the financial system,capital resources , and exchange rate.However Amartya Sen, believes there is no ‘level playing?eld’ between the developed and LDCs.
(wetherby otter) Stiglitz and Rodrik,argue how each country integrates especially LDC’S is dependent on theexceptional conditions of individual circumstances and it is not possible tohave a ‘one size ?ts all'(Wetherly and Otter, 2014:P277) Rodrik suggests forglobalization to be successful and benefit everyone, international regulationsand state economies need to be able to maintain controls over their financesand exchange rates and decide their own social affairs (Rodrik 2011).