Globalisation vs Global Economy

Globalisation vs Global Economy

The term globalisation has received much publicity due to its powerful representation of the most influential forces which influences the future course of the world. This concept focuses on various components namely the political, economic, environmental, social, security, cultural, health among other dimensions.  This research explores globalisation in the form of the global economic patterns and trading activities. Although the concept of globalisation dates back in the 1980s’ this term had deep roots in the ancient times with many people interpreting it differently. These varied explanations have resulted in many reactions from scholars, activists and policymakers, regarding the term globalisation. Whereas some have described it as the force for global economic advancement, others have viewed globalisation as the most dangerous phenomenon which could ruin the economy of the world (You, 2002). However, globalisation could be a source of global conflicts. Still, at the same time, it can manage them via the beneficial effects of competition and the likely global collaboration.  The global cooperation or the creation of new international institutions could help to offset the positive and negative aspects of globalisationwhich originate fromthe competition and the associated conflicts.

Research Questions

How is globalisation applied to the global economy? What are the potential benefits and costs emerging from globalisation?

The globalisation of the World Economy: An Interpretation

Literature has shown that the term globalisation associates with a significant increase in the worldwide business and the transactions in an increasingly open, borderless, and integrated international economy (Stiglitz, 2004). In this regard, the world has in the recent decades witnessed a remarkable growth in trade and exchanges both in the tradition global trade in goods and services as well as in currency transactions, and technology transfer. Moreover, this pattern has also not spared the capital movements, the migration of people via the international travel and the global transmission of ideas and information (Sachs, 2000). The most critical evaluation of the magnitude of globalisation is the volumes of the global financial transactions. Indeed, the New York currency markets transact more than $1.2 trillion daily as the amount of the daily global stock market transactions superseding the above figure in all measures.

Factors Influencing Globalisation

The concept of globalisation seems to have involved significant transparency in the global economy, primarily through its ability to integrate the global markets. Either, this seemingly unstoppable phenomenon it moving towards a borderless world with the focus on increasing global flows. According to experts, the last few decades have witnessed robust globalisation courtesy of some factors.Firstly, technological innovations have contributed to the lowering of the communication and transportation costs (Obstfeld, & Taylor, 2004). These new technologies have also led to a decline in the cost of data processing as it also ensures that one source help to store and retrieve information. The data processing and storage has been successful courtesy of the innovations and development of the microchip and computer revolutions. The prevailing electronic mail, the World Wide Web and internet are among the manifestations of the new technological innovations (Boyer, 1998). Whereas the world operated on a $10 million worth of the mainframe computers in the last two and half decades, it currently thrives on a $2,000 million worth of laptop computers..

Secondly, trade liberalisation and many other forms of economic liberalisation have also contributed to decline the patterns of trade protections hence introducing the world to a more liberal world trading system. The said pattern commenced in in the previous century only for the World War I and II as well as the Great Depression to briefly stop its manifestation. However, this concept resurfaced after the World War II in a nationally accepted language of trade liberalisation through the General Agreement on Tariffs and Trade or GATT of 1946. Years later, this concept transformed into the World Trade Organization or WTO whose impact prevails in form of reduced tariffs and elimination or softening of business barriers in gods and services (You, 2002). Liberalisation has also contributed to increased flow of capital and other production-based factors.

Thirdly, the world has also witnessed institutional changes whereby organisations attracts huge followings courtesy of the new technological platforms. Managers in many contemporary businesses have benefited from the significant communication-based technologies hance are able to influence their followers with ease (Morrissey & Nelson, 1998). Today, business firms have changed their structures from the local, national, international and now operate globally with ease. As a result, companied are reaping huge profits from their massive productions abilities and dominance in the market shares among the global enterprises. This situation has led to the evolution of conflicts from the territorial on the national level to market shares in the global arena. Although some scholars have perceived global companies as a threat to the scope and independence of countries, the latter still remains more influential in the global economy and political system (You, 2002). Still o this point, non-governmental organisations such as the U.N, WTO, IMF and World Bank have also become ambassadors of globalisation

Fourthly, the world agreement on ideology which seem to create belies on the value of market economy and a free trading system. Having originated in China in 1978, this concept thrives on three characteristics namely macroeconomy stabilisation, price liberalisation and the individualisation of state-owned companies (Bhagwati & Srinivasan, 2002). This objective seems to hit the rock because it does not appreciate the significance of establishing market institutions, creating competitiveness and giving an appropriate role for government in the modern mixed economy.

Cultural developments have also contributed to globalisation particularly through the worldwide and homogenised media, popular culture, arts and the dominance of English language as the medium of global communication. These patterns have constructed the notion, especially among countries such as France and others in Continental Europe to perceive that the United States is attempting to cause a political, cultural and economic hegemony (You, 2002). They therefore see globalisation as the re-emergence of imperialism or capitalism through electronic. Besides, other scholars have perceived globalisation as the new form of colonialism whereby America wants to colonise the whole world.

Regardless of the views and explanations given on this term, the reality is that globalisation transformed the world and poses both advantages and disadvantages. At the same time, it must prevail that factors pushing for globalisation such as technology, institutional ideology, cultural development and policy are still robust and active (Clavin, 2000). This situation therefore means that the world is likely to continue experiencing rapid changes with every passing year.

Impact of Globalisation on National Economies

Global economies have witnessed the significant impact of globalisation with manifold consequences. This phenomenon causes a strong influence on the productivity of goods and services, employment of labour force and additional inputs into the production procedures (Sachs, 2000). At the same time, globalisation impacts both physical and human capital investment. This phenomenon affects technology and leads to the diffusion of the same from establishing countries to others. Globalisation also has a significant impact on efficiency, productivity and competitiveness.

The most prevalence impact of globalisation include the prodigious growth of foreign direct investment commonly called FDI, which is larger than the magnitude of world trade development. This type of investment influences the transfer of technology, in the restructuring of industries and in the development of global businesses (Fischer, 2003). The mentioned effects have collective effects on the national economic situation. Next, new technologies have contributed immensely to globalisation as the latter too and increased competition create room for more technological advances and robust diffusion of the same across the nations and in foreign investment.  In the similar situation, increased trade in services such as legal, financial, information and managerial services and all types of intangibles have also dominated the international business platforms (Obstfeld & Taylor, 2004). For example, the foreign direct investment in form of service exports have increased from a third to a third as they also signal the promising future trends. This commodity has elevated the status of intellectual capital in the global market.

Competition-based Benefits of Globalisation

Having noted earlier that globalisation associates with both positive impacts, it is worthy stating that global competition is one of such gains. Although competition attracts fear, this factor plays a critical role in enhancing not only the production but also efficiency. Business competitiveness and widening market contributes to specialisation, labour division which increases the productivity in the global platform (Stiglitz, 2004). Additional positive gains from globalisation include the trade-based gains which embodies a mutual benefit via exchange among parties such as organisations, nations among others. Next, globalisation lead to increased productivity due to rationalisation of production on the global scale as the transmission of technology and competitiveness for global continuity in innovation (You, 2002). Generally, the positive impact of competition which originates from globalisation indicates its expected value in promoting the levels of all parties with the likelihood of increasing the output and higher real wage levels ad living standards. The outcome it the push for the wellness of humanity in the world.

The Expenditure and Expected Risks for Globalisation

The development of globalisation to its current status has attracted huge costs which associates with additional challenges regardless of the affected jurisdiction. For instance, there could be equity challenges in distributing the gains obtained from globalisation among the involved parties (Morrissey & Nelson, 1998). Evidence have proven that majority of these gains go to the wealthy and influential nations and people thus risking to cause global conflicts. Some economists have recommended that the world embraces a convergence approach towards the global gains because the poor nations are recording rapid development than the wealthy ones. However, this notion stands no waters before what is on the ground (Sachs, 2000). The many developing nations are facing marginalisation in the distribution of globalisation gains hence derailing behind the wealthy nations.

Another cost from globalisation is that the fluctuation of the local economies many present regional or international effects.   This impact prevailed between 1997 and 1998, when the exchange rate and financial challenges affected Thailand, then Southern Asia, South Korea before moving to Russia (You, 2002). This episode presents the vulnerabilities that comes with an interconnected economy. Here, the emergence of another great depression like that of 1930 could result to the breaking of these networked economies and cause a severe global crisis which may lead to military conflicts and global wars. Other challenges from the globalisation is the fact that the national economies are changing from the sovereign administrations and other forms of controls including the most powerful economies in the world (Fischer, 2003). Globalisation is therefore likely to undermine these national sovereignties because it creates an impression that they are controlling global forces as well as the perception of disaffection among the voters (You, 2002). This could lead to extreme xenophobia and nationalism accompanies with the calls for protection and development of fundamentalist or extremist political organisations whose end result would be disagreements.

Conclusion

The issue of globalisation has received mush publicity among the multi-generational scholars who have presented varying definitions of the same. However, the most vital explanation to this concept provides an in-depth understanding that globalisation aims at interconnecting global economies to operate as one. There are various factors that have contributed to the development of globalisation from its genesis to date as exemplified by technology, world agreement and ideology, cultural development and others. More so, this concept has also many benefits and setbacks. Besides fostering productivity and robust foreign investments, this concept also threatens the independence and economic situations of the underdeveloped nations though unequal distribution of globalisation gains.With such information in prevalence, there is need to understand the impact of globalisation on trade an economy towards developing structures that could convert the potential risks of this phenomenon towards curbing the same.

References

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