Globalization: Causes, Consequences And Reflections

Globalization: Causes, Consequences and Reflections

Preface

Globalization, a proverbial phenomenon observed mostly in the domains of commerce and culture, poses sweeping impact to the modern world and overall human experience. It is recognized as the expanding collaborations amongst interest groups, corporations, and countries that go beyond nation-state borders, as societies around the world experience an increased level of interdependence. In essence, it refers to the collective perception of "the compression of the world and the intensification of consciousness of the world as a whole" (R. Robertson, Globalization, 1992:8) This movement, some deems inevitable and irreversible, is manifested in the prevalence of multinational projects and the gradual integration of regional markets, which was resulted from rapid movements of information, labour, capital, products, and services. It is also reflected in the sizeable growth of world trade as percentage as Gross World Product (GWP) - from 8.5% in 1970 to 16.2% in 2001(17).

The following discussion briefly outlines the causes, consequences, as well as the authors' conclusion of globalization. Consequences described herewith are focused on business and trading. Broader effects that take place in the cultural and political front, although equally significant, are not included.

Causes

The majority of research and debates points to technological advance as the first and foremost driving force for globalization. Granted, the improvement of technology drastically reduced the costs of communication and transportation, providing the backdrop of a closer-connected world. Apart from IT revolution, public policy is another imperative factor that determines the pace and direction of economic integration (18).

Technological Innovation

The availability of low-cost, rapid communication and transportation fundamentally changed the business landscape, as the former enabled business to tap in larger markets, access more capitals, assets and technology, and the latter drove up the volume and frequency of foreign trades. Multinational corporations, who were notably benefited by this windfall of opportunities, capitalized on production of a greater scale and enjoyed substantial growth over the years, resulting in a prowess as seen today.

Additionally, the emergence of Internet spawned the brave new world of e-commerce, where of prolific exchange and trades occur in cyberspace that are boundless in time and place.

Liberalization Policies

The establishment of international institutions, such as WTO, NAFTA, and EU, is

Geoffrey Garrett rationalized the [2000: 22](19):

There is a credible argument that since the onset of the information technology revolution there is essentially nothing governments can do to stop global financial flows. On such view, there is no mystery to the spate of national-level moves to capital account liberalization in the 1990s; if capital controls don't work, why risk sending negative signals to the financial markets by persisting with them?

Consequences

Consequences of globalization can generally be categorized into increased trading activities, increased investment activities, and altered relationship. Each of these categories includes a set of direct and indirect consequences. Many of the indirect consequences are usually result of imperfect attempts to globalize. These indirect consequences are often misunderstood as the direct consequences of globalization.

Increased Trading Activities

Owing to improving technology, lowering import and export tariffs, signing of more liberal trade agreements and introduction of new international organizing bodies such as WTO and World Bank, the cost of trading internationally is decreasing. It follows naturally that companies have pursued the profit trails and increased their business activities across the traditional national borders.

Standardization of Goods and Services

Trade as a result of globalization has also allowed companies to mass-market their products around the world. The immense world population expands companies' target market and the bigger market encourages companies to produce at greater economies of scale to drive down cost and increase profits.

As a result of mass-production and mass-marketing, goods and services are gradually become more common in different countries. By influencing consumers with the same products around the world, opponents argue that globalization is gradually morphing the world into a single world culture where everyone "lives in a world of MTV and drinks Coca-cola" (3). However, proponents argue that globally integrated countries such as Italy, Sweden, the Netherlands, and Japan have been able to retain distinctive cultures (3). Despite oppositions to standardizing force of globalization, such standardization (if it is indeed happening) is actually beneficial for companies since a standardized world culture will allow companies to create similar branding and marketing message for all countries, resulting in reduction of cost.

Sustainable Growth

From the under-developed countries' perspectives, globalization brought along with it the sudden realization of new opportunities followed by accelerated attempts to exploit these opportunities without much consideration for consequences. In the 90s, Malaysian and Indonesian logging companies began clear-cutting at an increasing pace when they realized the opportunities afforded by the global market (10). Although the respective governments have since introduced tighter regulations for its logging industry (11), the episode does highlight two important issues. First, realization of a greater free market can prompt locals to eagerly participate in unsustainable business practices. These practices results in accelerated depletion of natural resources and usually takes intense activist lobbying before government steps in to regulate such practices. Second, the buyers from other countries are frequently unwilling to accept responsibility for poor business practices of their suppliers, preferring to reap in the benefit of lower cost and plead ignorance. Interestingly, it can be argued that both issues are not necessarily direct consequences of globalization, but rather, mismanagement of countries' global integration.

Increased Investing

Another consequence of globalization is an increase