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A paper which studies the positive and negative aspects of globalization.

GLOBALIZATION During the early 20th century the world economy supported high levels of trade and relatively free capital flows between industrialized nations. Therefore it could be said that the process of globalization started along time ago and not recently as it is perceived for most of the people around the world. Usually globalization is taken to mean growing international trade and investment, but there is more than that. Globalization involves economic activity, having to meet international competitive standards: price, productivity, and profitability. Globalization is a broad and complex issue.

Something that has become part of our daily lives, economically, politically, culturally and environmentally. It affects wages, how hard people work, interest rates, and the television consumer’s watch. It creates losers as well as winners. The process of internationalization of the economy has both positive and negative impacts on firms, people and the world in general. The last two decades have seen the most rapid and broad institutional transformation in human history. It is a conscious and intentional transformation in search of a new world economic order in which business has no nationality and knows no borders. “It is driven by global dreams of vast corporate empires, compliant governments, a globalize consumer monoculture, and a universal ideological commitment to corporate libertarianism” (Korten 1996:121).

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Globalization as a process that increases the extent and form of cross-border transactions among crowds, assets, goods and services and that intensifies the economic interdependence between and among globalize entities, which may be private or public institutions or governments1. This process is driven by economical adoption of the system of free-market economy and economic liberalization, both within and between countries, technological advances in information and communications technology (Kumar 1997:97).

“Globalization differs from other forms of intensified interdependence between national economies: true economic globalization involves a qualitative shift toward a system based on a consolidated global market place for production, distribution and consumption rather than on autonomous national economies” (Korten 1997:92).

In the process of understanding internat

ional business activities, experts have categorized firms according to the extend and form of their international activities. In a much more broader conception, any individual or corporation appealing in cross-border commercial transactions with others individuals, private firms, public-sector organizations, or not profit organizations, is said to be likable in international business (Griffin 1998:15). Multinational enterprises (MNEs) are used to identify firms, which have extensive involvement in international business, engage in foreign direct investments (FDI), and own or controls value-adding activities in more than one country.

As Sony Chairman Akio Morita2 points out the mean of lowering all economic barriers between North America, Europe, and Japan, would create the nucleus of a new world economic order that would include a more harmonized world business system with agreed rules and procedures that transcend national boundaries. Morita clearly states that in his view, it is time for all local interest, including local cultures and other symbols of local identity. To give way to the larger good that the free-market system makes possible.

In his ideal world: Japanese rice farmers would not be able to keep their market closed, nor would Japanese be allowed to exclude foreign suppliers from their production systems or imported goods from retail shelves. However, neither Americans nor Europeans would be able to deal with unfairness through methods such as unilateral tariffs. Within such a world order, complaints about restrictions on foreign access to markets would be quickly investigated and resolved by supranational arbitration panels that would “propose specific remedies to facilitate foreign entry in areas found to be unfair or insufficiently open” (Korten 1996:123).

Governmental efforts to maintain competition through antitrust regulations would be tempered by acceptance of the needs of companies that are “sharing research and development, carrying out joint manufacturing, or forming various kinds of beneficial partnerships and alliances” (Korten 1996:123). Therefore, governments would have to be able to coordinate exchange rates to reduce arbitrary risk from currency fluctuations incurred by global corporations as they move goods and capital freely around the world to wherever offers the greatest return. Local people, acting through their governments, should no longer have the right to govern their own economies in the local interest. Government should respond instead to the needs of the global corporations. Read about the forms of employee involvement

In July 15, 1991 the International Monetary Fund pull out on a study by DeAnne Julius, the chief economist of Shell International Petroleum Company, to pressure the importance of trade agreements that would assure capital the same freedom of movements as goods. It proposed three principles:

* “Foreign companies should have complete freedom of choice as to whether they participate in a local production facility.

* Foreign firms should be governed by the same laws and be accorded the same rights in a country as domestic firms.

* Foreign firms should be allowed to undertake any activity in a country that is legally permissible for domestic firms to undertake”

3. Carla Hills, U.S. trade representative under the Bush administration, expressed her commitment to this goal: “We want corporations to be able to make investments overseas without being required to take a local partner, or export a given percentage of their output, to use local parts, or to meet any of a dozen other restrictions”.

There is a continuing tension between the multinational and the transnational view of the global corporation. A multinational corporation takes on many national identities, maintaining relatively autonomous production and sales facilities in individual countries, establishing local roots and presenting itself in each locality as good local citizens. However is transnationalism that involves the integration of a firm’s global operations around vertically integrated supplier networks (Asian Business 2000:26).

For example, when Otis Elevator set about to create an advanced elevator system, it contracted out the design of the motor drives to Japan, the door systems to France, the electronics to Germany, and small geared components to Spain (Korten 1996:125). System integration was handled from the United States. Although a transnational corporation may choose to claim local citizenship when that approach suits its purpose, local commitments are temporary, and it actively attempts to eliminate considerations of nationality in its effort to maximize the economies that centralized global procurement makes possible (Smith 1998:111).

The more protected individual markets are, the more a global firm is forced to function in a multinational mode – producing locally in each setting to achieve access to that market and integrating itself into the local economy (Korten 1996:125). As local settings are opened to the global economy, it becomes possible, and highly profitable, for a firm to take advantage in the differences between localities in regards to wages, market potential, employment standards, taxes, environmental regulations, local facilities, and human resources. Therefore multinational arranging its global operations to produce products where costs are lowest, sell them where markets are more profitable, and shift the resulting profits to where taxes are least oppressive (Korten 1996:126).

Consequently, the ability to shift production from one country to another deteriorates the good deal of any local-market and modifies the balance of power from the local human interest into the global corporate interest (Smith 1998:113). A recent study of Multinational enterprises by the Office of Technology Assessment of the U.S. congress state that the interest of all nations ought to be fairly straightforward quality jobs, a rising standard of living, technological and industrial development, ensured rights of workers and consumers, a high-quality environment at home and globally….

As compared to nations, the interest of Multinational enterprises are far more situational-oriented and linked to opportunity. Multinational companies are truly the servants of demanding consumers around the world. When governments are slow to grasp the fact that their role has changed from protecting their people and their natural resource base from outside economic threats to ensuring that their people have the widest range of choice among the best an the cheapest goods and services from around the world (Smith 1998:114).

Globalization is about businesspeople having to consider international investment and international borrowing, whether they end up engaging in it or not. It is also about consumers having to consider imported products and satellite television whether they purchase them or not, and about domestic wages being constrained by what companies may have to pay equivalent workers in other countries, whether there are migrant workers or not (Bryan 1999:13). “The big work behind business judgment is finding and acknowledging the facts and circumstances concerning technology, the market, and the like in their continuously changing forms. The rapidity of modern technological change makes the search for facts a permanently necessary feature” (Gates 1999:3).

Information changes the way people and organizations work and the way commerce is conducted across organizational boundaries. Internet technologies also will change the boundaries of organizations of all sizes. In changing the boundaries, the “Web-work style”4 of using digital tools and processes that enables both organizations and individuals to redefine their roles in today’s business world. A corporation can use the Internet to work with professionals that remain “outside” the corporate walls as a consultant rather than as company employees. Medium-size and small companies can take advantage of the boundary changing capabilities of the Web to act much bigger than they are without adding employees or offices.

Production is increasingly affected by technology, the time spent before, doing a product was much higher than it is now a days. For instance Intel Corporations has consistently had a ninety-day production cycle for its chips, which power most PCs (Gates 1999:145). Intel expects to maintain this ninety-day production rate despite the increasing complexity of the microprocessor. The number of transistors in the chip has increased from twenty-nine thousand in the 8086 processor to seven point five million in the Pentium processor in 1998. “Technology is all around us now a days” (Smith 1998:112).

Nevertheless globalization can also trigger negative impacts on firms, countries and societies and the world in general. As an example of this the 1999 protest at Seattle meeting of the World Trade Organization clearly brought issues like the extent to which the public has been amazed and alarmed by, the forces of globalization. As mentioned earlier above the extend to which globalization claims to be something new is something to think about twice, hence having the assumption that this has an impact on negative aspects brings out at least three reasons:

* Globalization is everywhere. Globalization touches more and more workers, consumer, and employees each day. As globalization increasingly grows and creates more opportunities for jobs and more for business all around the world, is at the same time decreasingly diminishing opportunities for new investments, new jobs and new business to be created in Third – World countries that dose not have the technological abilities, and the budget to be able to withstand today’s world economy and are being left aside in today’s world.

* Globalization confronts an uncertain future. Labor unions fear for the security of jobs, global issues as the protectionisms of the environment, controls over the mass production that globalization has come out with and yet has not have the ability to introduce that mass production to the public. The culture of globalization in countries underdeveloped.

* Globalization is a combination of forces. In there is no single force from which globalization emerges. It is a combination of many forces that come together in imperfect ways at inconvenient times. Technological advances give the way to a mass production, Opening the markets to export made possible sales of goods abroad by firms that have not traditionally had the opportunity or political alliance to enter in foreign markets. Individually, these advances and accomplishments generate what is called globalization

5. The global economy has created a dynamic in which competition among localities has become as real as competition among firms (Korten 1996:129). As an example of this Moore County, South Carolina, won a competitive bid in the 1960s and 1970s when it attract a number of larger manufacturers from the unionized industrial regions of the northeastern United States with promises of tax breaks, no environmental regulations, and compliant labour.

Proctor Silex expanded its local plant, Moore County floated a five point five million municipal bond to finance necessary sewer and water hook-ups even though nearby residents were living without running water and other basic public services (Korten 1996:130). Then in 1990, the company decided that Mexico offered more competitive terms and moved again no furtherer than Mexican border to get a better deal. It left behind eight hundred unemployed Moore County workers. Some companies such as General Electric, Ford, General Motors, GTE Sylvania, RCA, Westinghouse, and Honey-well moved as well to the same place, seeking low-cost locations in which to produce for the U.S. market. Growth has been explosively increasing from six hundred and twenty two factories employing 119.550 workers in 1980 to two thousand two hundred factories employing 500.000 Mexican workers in 1992.

However the productivity of Mexicans workers who work in modern plants is comparable to that of United States workers, average hourly wages where Mexican employees make $1.64, compared with an average manufacturing wage of $16.17 in the United States (Korten 1996:131). In order to maintain Transnational Corporations demands, the Mexican government denied workers the right to form independent labor unions. In the summer of 1992, more than fourteen thousand Mexican workers at a Volkswagen plant turned down a contract negotiated by their government-dominated labour union.

The company fired them all. The lost of enforcements in environmental regulations is another negative aspect. As Korten mentioned in his book: An investigative team from the United States General Accounting Office reported to Congress that all six newly opened U.S. plants inspected in Mexico were operating without the required environmental licenses. Other studies found evidence of massive toxic dumping in factory zones, polluting rivers, groundwater and soils and causing severe health problems among workers and deformities among babies born from young women working in the zone (Korten 1996:132).

Surprisingly workers all around the world in Third World Countries like Mexico, including children, are heroes of the new economic order in the eyes of corporate libertarians – sacrificing their health, lives, and future on the pedestal of global competition. “The trend is clear. The largest corporations are paying less taxes and receiving more subsidies. This is the globally competitive market at work, forcing localities to absorb private cost to increase private profits.

The game of global competition is rigged. It pits companies against people in a contest that the people almost always lose”6. In conclusion it can be gathered that globalization is a global reality that has to be embraced regardless of its positive and negative impacts in firms, people and the world in general and that soon or later will knock in your door. “The world economy has become more integrated. But To travel is not the same as to arrive. Full integration will Be reached only when there is free movement of goods, Services, capital and labour and when governments treat Firms equally, regardless of their nationality.”

The Economist REFERENCE LIST

* Bryan Dick ; Michael Rafferty. 1999. The Global Economy in Australia. SRM Productions Services.

* Dunning H. John. 1985. Multinational Enterprises, Economic Structure and International Competitiveness. British Library Cataloguing.

* Gates Bill. 1999. Business @ The Speed of Thought. Viking Publications.

* Griffin, Mahoney, Pustay and Trigg. 1998. Wesley Longman Australia Pty Limited.

* Korten C. David. 1996. When Corporation Rule The World. Earthscan Publications Ltd.

* Kumar N. 1997. Technology, Market Structure and Internationalization. London.

* Smith Grieve ; Michie. 1998. Globalization, Growth, and Governance. Oxford University Press.

* www.globalize.org

BIBLIOGRAPHY

* Asia Business. April 2000.

* Bryan Dick ; Michael Rafferty. 1999. The Global Economy in Australia. SRM Productions Services.

* Dunning H. John. 1985. Multinational Enterprises, Economic Structure and International Competitiveness. British Library Cataloguing.

* Gates Bill. 1999. Business @ The Speed of Thought. Viking Publications.

* Griffin, Mahoney, Pustay and Trigg. 1998. Wesley Longman Australia Pty Limited.

* Korten C. David. 1996. When Corporation Rule The World. Earthscan Publications Ltd.

* Kumar N. 1997. Technology, Market Structure and Internationalization. London.

* Smith Grieve ; Michie. 1998. Globalization, Growth, and Governance. Oxford University Press.

* Seitz. John. 1995. Global Issues An Introduction. British Library Cataloguing

* www.globalize.org

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