Globalization: Process, Drivers, Impacts And Perspectives

Main reasons that caused Globalization

Globalization is the the process through which the companies, organizations move beyond the borders of domestic and the national markets to any other markets outside the geographical borders of any particular  country. It is movement of the investment funds, businesses, people, process, technology and information to any country other than their domestic country. It is the integration and interaction among the people, companies and governments of various countries. The major drivers of Globalization are international trade and investment which is aided by information technology. Globalization effects and gets affected by the environment, culture, polital systems, economic condition. It also impacts the prosperity and the well being of the people and the societies of the world (Giddens 2013).  

It is not a new concept, ever since human civilization people and former business establishments from different geographical regions, were buying and selling goods to each other, one such example is famous Silk Road across Central Asia which connected China and Europe in the medieval times, the Silk route was used for international trade. From ages people and the businesses have been investing in other businesses in various countries. Due to the change in the policies and the technological advancements, from the past few decades the process of Globalization is on increase. The volume of world trade has increased 20 times since 1950 and from 1997 to 1999 the flows of foreign investment almost doubled, from $468 to $827. According to Thomas Friedman, today the Globalization is “farther, faster, cheaper and deeper (Pieterse 2015).

After the Second World War many countries have adopted the free market economy, they have increasing productions and have been creating opportunities for international trade and investment. Governments have realized the benefits of globalization and have negotiated to reduce the barriers to trade and commerce on international level, for these purpose they have established international agreements. The big business have taken advantage of this opportunity and have stepped in the foreign markets, they have built foreign factories, production units and marketing arrangements with their foreign partners. Therefore international industrial and financial business structure is one of the key features of Globalization (Elliot and Lemert 2014).

 Technology is other main drivers of globalization. Advancements in the technology has changed the economic lives. The information technology has provided valuable tools for the identification of economic opportunities to all the participants, consumers, investors and businesses. These economic opportunities with the help of information technology can be fast and informational analysis of economic trends can be done better. Information technology aids to easy transfer of assets and collaboration with foreign partners. An important aspect of Globalization is the movement of people, with the improvement of technology, travel cost and the time taken is also reduced. People travel beyond borders for education, employment and tourism (Elliot and Lemert 2014).

Component 1

Globalization has both positive and negative impacts, at the individual level Globalization affects, the standard as well as the quality of life. At business level Globalization affects the life cycle of the products and the balance sheet of the Organization. It also affects the process of the Governments creating the policies around the world, like the monetary regulations and trade policies. Globalization also has brought some of the important changes that had not only influenced the lives of the people as well, before electronic communication people were dependent on mails for long distance communication. The speed of this communication was limited up to the speed of the mail services. Internet has been connecting people throughout the world (Pieterse 2015).

The improved transport facilities have made global travel easier. Containerization, from 1970, the fast adoption of the inter-modal transport, makes trade less costly and very efficient. Improvement in the technology had made it easier to communicate and exchange information throughout the world. The growth of trade blocs like, European Union, NAFTA, ASEAN have reduced the national barriers. The tariff barriers have been reduced for encouragement of international trade, which has been done with the help of WTO. Firms exploit gains from the economies of scale to achieve specialization. The rise of the global media has also boosted the Globalization process. The interconnectedness of the countries encourages globe trade. The global nature of financial system aids to the enhancement of Globalization process. Another major driver of Globalization is the movement of the labor (Sørensen 2014).

This report is based on Globalization, the various views of Globalization has been discussed in the report. It includes P. Ghemawat’s questioning of whether the world really is as global as we are being told it is and the ideas about how it could be globalised more effectively. Anthony Giddens’ ideas on globalization. The “End of Poverty” movement and the contrary assertion that “Trade NOT aid” is the way to a more globalized world that mitigates against poverty. All the three theories have been discussed in detail in the following report.

World 3.0: P Ghemawat’s questioning of whether the world really is as ‘global’ as we are being told it is and his ideas about how it could be globalised more effectively

Pankaj Ghemawat is known for his work in globalization. He was born on 30 September in the year, 1959. He is an Indian-American economist, global strategist, speaker, professor and authors. He is the one who created the cage distance framework and DHL global connectedness index.

Component 2

 Idea of globalization vs. idea of globalization by Ghemawat

Globalization has become the talk of the town (Coleman 2016). Due to increase rise of the internet and the social media the  people in the  world  has become closer. People have started thinking that the world is coming closer (Ghemawat 2011). Many a times, they feel that the world is inside the palm. However, Pankaj Ghemawat has an entirely different idea regarding globalization. He feels that the globalization has not gone to such an extent that the world can be called flat. His idea is more or less based on the fact that the world in semi-globalized and there is still time before it becomes fully globalized. He feels that since the time of the Communist Manifesto and Karl Marx , people have started thinking that the work has become integrated but the case is bit different from the way they have been thinking.

To give a real picture of the globalization that exist in the world, he asked the people to recall the things that can happen over the border and the amount of indulgence they have over border. The people believe that the cross border connection is around 95% (Beeson 2014).  He even kept Facebook as the benchmark and said if friends on Facebook can be counted, then also the count will be just 16% whereas the people may think that the count is 95%. The percentage is given based on the friendship that people in the United States can make if they started doing random friends shown over the internet (Gill 2016).

He then gave the example of international phone calls. If the total amount of voice-calling minutes will be 2% out of the total amount of international calls are being made. If the news sources are being counted then there can be only 1-2% of the news that is international (Benyon and Dunkerley 2014). Pankaj Ghemawat then shifted the focus on imports and exports. Once the trade statistics are given attentions, it has been seen that 30% of the GDP can be gained due to the exports. It seems that the business is getting increased side to the exports but the truth is something different (Murray and Overton 2014). One component is exported from Japan to China. the component is used to make a device in china and then the device is again exported to the United States, in this way,  a similar component ends up getting calculated twice. It might seem that the number of exports are increasing and helping in globalization but it is actually one product that is counted twice and building a pseudo globalization (Knudstorp et al. 2017).

Component 3

The foreign direct investment is around 10% as per the data of the years, 2010. When the  people are being asked about the number of  students studying abroad, they tend today its 30% (Clark 2014). However, the real data shows that the percentage is only 2%. As far as the field of education is concerned, people seem to have misconception there as well (Palan, Murphy and Chavagneux 2013).

Ghemawat introduced the term semi-globalised when  he was talking about globalization in the real sense. By the term ‘semi’, he meant partial or very partial globalization. He even uses the term deci-globalization to tell that the percentage of globalization in  the world is just 10%. The idea of globalization that people have in their mind, the percentage shows that it is just 105 of that.

Ghemawat even applied his idea on the students who have just passed the business school. When he carried out a survey with the students of the business school like Wharton and Harvard, he found that the students believe that the world in fully globalized and there is no differences between the countries. Ghemawat talks about the fact regarding how wrong they are. He  feels that those students will not be helpful for production either from the business or from the social perspective.

Another issue that was pointed out is the issue with volume and value (McMillan, Rodrik and Verduzco-Gallo 2014). While people are more interested in volume, they forget about the value that should get churned out due to globalization. The importance to volume used to be important during the 1960s and 1970s (Haynes 2016). Value creation on the other hand will be helpful in  working with fixed amount of resources. The resources will be then shuffled across the countries, which in turn will help in minimizing the costs of production for any company. The value creation will help in gaining potential volumes as far as globalization is concerned (Sadowski-Smith 2016).  The business models that are being used by the countries tend to overlook the issues of value creation (Coleman 2016). Economies of scale are one of the most important aspect of the model that is often overlooked by the business owners (Ghemawat 2011).  In addition to this, the models do not talk about the differentiation but only talks about the cost. Ghemawat finds faults in the model as the model only talks about the cost but not differentiation and differentiation is more important than cost. The models mainly focus on the profit but not products and the quality of the products (Beeson 2014). Enhancing the quality of the products will help in enhance the willingness of the customer to buy the products.  However, the models do not look into those factors (Gill 2016). The idea of Ghemawat is that globalization is that it helps in improving the structure of the industry.

Liberalization can help in shooting up the GDP of any nations (Benyon and Dunkerley 2014). Liberalization on the immigrations will be  helpful in shooting up the GDP of many nations.   Increase in the GDP will in turn help in the globalization of the world (Murray and Overton 2014).

Ghemawat also went to the extent to explain the idea of globalization with the help of waves and oceans. It has been said that political openness helps in globalization. As only 10%-20% of the world is globalised, hence, it is not only about a homogenous mixture. If the political parties are getting involved then it would not be mixture of the waves but of two oceans. The margins of the ocean should merge giving rise to the globalization (Palan, Murphy and Chavagneux 2013). Globalization might give rise to further political openness which will come as complimentary (Knudstorp et al. 2017).

Four dimensions of Globalization according to Anthony Giddens

According to Giddens, globalization intensifies the worldwide social relations, connecting the far flung localities in a way that the happenings in one country affects the occurrences of another country, which might be thousand miles away.  All the efforts made to classify the processes of Globalization over simplify and reduces the complexity (Sørensen 2014).

World Capitalist Economy

The power heads of the world are the capitalist states, these are states where the capitalist economic enterprise is the main form of production. Economic policies of these states, both domestic and international various regulations on economic activities, the institutional organization of these state maintains an insulation of the economic from the political. This provides a great opportunity for global business activities of the business corporations, which have bases in the domestic country but develop many regional involvements in other countries. Big transnational companies today have large budgets than all. But there are factors where the power of these enterprises cannot compete with the power of the state. The most  important factors are the territoriality and the control of the ways of violence. When the nation states are main actors within the global order, the businesses or the corporations becomes the dominating agent in the global economy. The level of the wealth of the state determines the its influence in the political order (Hirst, Thompson and Bromley 2015).

Nation state system

This dimension of the globalization has been one of the reflexivity characteristic of the modernity from a very long time. Sovereignty can be comprehended as an element which can be seen and analyzed reflexively. Sovereignty is connected to change of borders in the initial nation-state system development, through recognizing the borders autonomy inside terrorist claimed is sanctioned (Hay and Marsh 2016).

The third dimension is the military order. Massive destruction power of the modern weapons created a scope of this dimension. Every country, has has military strength much more than the states used to have in pre modern civilizations. Even the economically weak, poor countries have strong military. During the cold war, the two militarily powerful countries, US and the Soviet Union created a polarized system of military alliances. The nations in in these alliances accepted the drawbacks over the opportunities to apply the military strategies externally (Hay and Marsh 2016).

The fourth dimension is related to industrial development. The most common element of this dimension is the expansion of International division of labor. The global division of labor involves differentiation between the more and less industrialized regions. Divison of labor is the basis of the modern industries, and it is not just limited to the level of job but also on the regional specialization in terms of type of industry, skills and the production. Significant increase in global interdependence can be seen since the Second World War. The main characterstics of the globalization are the diffusion of technology throughout the world. Industrialism not just affects the production but also other matters related daily lives, it also affects the general interaction of people. Industrialism also conditions our sense of living in unity irrespective of geographical barriers. One of the most significant impacts of industrialism is the change in technologies of communication. The other main aspect of Globalization that lies within dimensions of the institutions is the cultural globalization (Giddens 2016).

According to Giddens, Globalization is the main driving force behind development that brings those changes that transform the contemporary societies.  It has some drawbacks but that does not mean that the process can be criticized, though it has conflicting aspects. It cannot be stopped but its negative impacts can also not be ignored, like the increase in the social unevenness, environmental and financial risks. According to the critics of the Globalization, different societies face different impacts. Globalization puts impact on societies, companies and the lives of people. The impacts are are the hierarchical system of three different levels. Individuals affect the global corporations or the local companies and their value chains. People also form a part of the society where the transnational or global companies grow, which in turn influences the lives of the people. To meet the objectives, firms establish themselves in the value chains of the global industries value chains, which influences the whole world for both eshort and long term, with the time lags and the delays. Globalization has given birth to new individualism, changes in the professional work, many people are planning their careers than before. They gain new qualifications and skills and use it in different professional areas. Another factor that Giddens discusses about global risk of social disorientation, which negatively affects the lives of the people, the environmental dangers that is also related to the health risk. These types of risks reduce the quality of lives of the people (Giddens 2016).

The growth of companies beyond their own nations, outsourcing and the global division of labor has been the reason of social unevenness. The transportation technologies, information and communication technology employment increases in the nation states, these creates short term and temporary jobs in the nation states where the the jobs has been outsourced. The quality of the lives of the people is reduced by the short-term employment (Giddens 2013).

It has been noted by Giddens that decline has been caused in the number of the employees in manufacturing industry in EU, due to the transfer of industry to the developing nations. He does not think it to be the main cause for unemployment in EU because technology change has affected a lot, because in many industries the need of human labor are reduced because of technology. Outsourcing is a problem and it should let companies to decrease the prices, thus helping the consumers and generating income for future investments. Demand should be created by the lower prices. The impact of differentiation on individuals results in weakness to gain new knowledge (Giddens 2013).

As the multinational corporations grow, they reduce the strengths of the nation states. It causes deeper social unevenness. The Globalization process, the global markets, is affecting the nation states in to extent that the nation states find it difficult to manage the economies. One of the results of this is the increased dissatisfaction with the politicians. Weak nation state-system is the reason for growth of the world economy, yet the states have important powers through the military powers, which shapes the direction of political developments and social services. Nation states control territory and not the transnational corporations. Giddens argues the strengths of the transnational corporations, according to him nation states have more power than transnational corporations and this will be continuing in the future as well, but the growth of transnational corporations make the nation state weak, which in turn decreases the positive nations state impact on lives of individuals. Giddens also argues that the constant need to adapt to the global changes has in expert systems. These can now a days found everywhere in the globe, that suggests people which job would be more appropriate for them (Giddens 2016).

The turnover of the big global companies might be greater than the GDP of most states, but still the nation states are powerful. It is because their control over the territory, where corporations have to legitimately make military forces, either individually of in collaboration with other companies and they are responsible for abiding law either individually or in collective.

The “End of Poverty” movement and the contrary assertion that “Trade NOT aid” is the way to a more globalised world that mitigates against poverty

The military conquests at different [arts of the world seem to be the main reason that gave rise to poverty (Tobin and Rudra 2017). The military conquests have brought with itself colonisation, seizure of land, slavery and forced labour. The problem keeps on continuing mainly because of the tax policies and unfair debt (Bergh and Nilsson 2014). The wealthy countries taking undue advantage of the poorer countries is not anew thing in the society. The financial crisis in the world in persisting because of many policies those are unchallenged (Rahim et al. 2014). Only 20% of the population of the earth is consuming 80% of the resources. The rate is 30% more than the amount the earth could regenerate (Kaplinsky 2013).

Many steps have been taken to stop the global poverty and many people feel that currently the world is closest to ending the global poverty (Sharma, Morley and Díaz-Bonilla 2015). Since 1990 until today people living on extreme poverty has fallen from 40% to 20%. In between the time, around 700 million people have been able to lift themselves up from the extreme poverty situations (Kingfisher 2013).

Te rate of poverty is falling but it should fall in a faster manner (Okungbowa, Ewere and Eburajolo 2014). The developing countries are growing at a fast rate and due to that the income inequality has widened further.

As opined by Le Goff and Singh (2014), World Bank group has taken up end of poverty movement seriously and it has adopted two new goals-

• Ending extreme poverty by 2030
• Enhanced shred prosperity maximising the income growth for 40% of the population who are the poorest in the country.

Two main groups will be helpful for World Bank group to help in achieving the goals (Singh 2013). They are:

• Private sector
• Civil society

The private sector has an essential role to play to end up poverty by creating jobs  in their organization (Wade 2017). The poverty of the world has been taken care of by keeping in mind that  only jobs will help in combating the poverty level of the world. The private sector is also need to meet the emerging needs of the economies by investing in the development of the infrastructure (Saraiva 2016). The foreign assistance can also come to help for various nations, yet the nations are not able to function properly even with the fund from the foreign nations.  One of the biggest examples is India. India suffers from $1 trillion gap when it comes to the financing of the infrastructure (Chaudhry and Imran 2013).

Quite like India, other developing nations also need the dollar aid so that the poverty levels of the countries could be reduced accordingly (Tobin and Rudra 2017). Many dollars are being spent on assets that might not yield high income in some of the developing nations. U.S. Treasuries or German Bunds are some of the assets that might be located in developed countries but might not help in yielding better results from the company (Bergh and Nilsson 2014). However, if the similar amount of money could be used in the developing countries, it would help in yielding better results for the world. The public private partnership will also help in eradicating the poverty from the world (Rahim et al. 2014).

The World Bank Group is helping the governments so that the business climate  and help in attracting  high level  of investments from the investors (Kaplinsky 2013). The  International Finance Corporation has helped 103 developing countries by investing  $20.4 billion. The International Finance Corporation has also helped by creating 2.5 million jobs (Sharma, Morley and Díaz-Bonilla 2015). The return that has been achieved from the investments is also good. There has been a return of 20% from the investments that has been made by International Finance Corporation in the past 15 years (Kingfisher 2013).

Along with the private sectors, the civil society is also help in eradicating the poverty (Okungbowa, Ewere and Eburajolo 2014). The civil society not only helps in making the lives of the poor better but also helps in creating movements that will  help in eradicating poverty and give rise to movements that will in turn give rise to globalization (Le Goff and Singh 2014).

The contribution of the united states  has been helpful in making the world aids free (Singh 2013).  Between the years, 2000-2012,  the intake of life-extending antiretroviral medication by the people in the developing countries grew from 50,000 to 9 million (Wade 2017). The President’s Emergency Plan for AIDS Relief (PEPFAR) has played  a vital role  in making the world  aids free and supply medicines to different parts of the country.

Conclusion

After going through various aspects of globalization, it can be concluded that globalization consists of various aspects  and  the feedback related to globalization may not be same for everyone. In the write-up, there are various aspects of globalization that are discussed. After going through three different aspects of globalization, it seems that there are other factors that can also be counted as a part of globalization.

Ghemawat breaks the notion of many individuals when it comes to globalization. He makes the individuals come face-to-face to the reality that is related to globalizations. According to Ghemawat, people think that globalization has made things very near and people of one country is well acquainted with other countries that are located abroad. Ghemawat feels that the connection of the individuals from one country with another is very less, quite contrary to the way the people think. He gives the examples of the number of international friends one cam have  in Facebook, to the international calls and the exports and imports to show that the international relation of the people are quite less as compared to the extent to which that is thought to be. He believes that the people need to take few more steps to give globalization the real meaning.

Giddens have provided four dimensions of globalization so that the readers are able to get a better idea about globalization. World Capitalist Economy, Nation state system, military order and industrial development are the four dimensions that are presented by Giddens. The capitalist states are the power heads of world. The capitalist economic enterprises are the main source of productions for these sates. Sovereignty is one of the main characteristics of Nation state system.  Sovereignty will help the nations in strengthening their place in the global platform. The third dimension by Giddens throws light on the military issues.  globalization has led to increase the  power of many countries and military strength much more than the states used to have in pre modern civilizations. The industrial development is one of the most famous form of globalization. Significant increase in global interdependence can be seen since the Second World War. The global interdependence has also given rise to globalization as a whole. The fourth dimension by Giddens has been hugely visible in many countries. The developing countries have been benefited due to the industrial development that has happened due to globalization.

The amount of poverty present in the world can also affects globalization. When a country takes parts in any global meet, the country should be prepared enough with all the resources so that they can present themselves in those meets. If the amount of poverty in any country is more, then that country will not be able to become global as there are huge population who are not getting the bare necessities in life. It might happen that one part of the population is living lavishly but a huge part of the population is facing issues to make the ends meet. Such counties cannot be said to be any near to globalization. A country will be able to represent globally after ensuring that poverty is kept at bay. However, there have been a lot of changes in the level of poverty among the individuals of the nations. Since the 1990s, the conditions of the people have be improved to a great deal. Many people have gone above the poverty line. The changes have been met mainly because of the developing countries that are growing to huge extent. The growth of the countries has helped in reducing the poverty level in many nations.

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