Seminar on Global Development, Economics and Social Issue

UHAP 6013

Individual Assignment – Analyze the significance of globalization and

describe its impact on international economic and political relationship

By:

Fahmi Izzuddin Bin Abdul Rahman

MKMF161043

Presented to:

Prof.Dr.Norhani Bakri
 Globalization is a progression of international integration because of international trade
and investment, interchange of world views, ideas, merchandise, and other form of culture. There
are several major factors in globalization and they are: advancement of vehicular technology (for
example jet engine in aircraft and steam engine in locomotive), innovation in information
technology (from the use of telegraph to internet and smartphone) freedom of trade (organization
like World Trade Organization encourage free trade between countries) and labor availability
and skills. These factors are responsible for propelling more interdependence of trade and
cultural activities. Globalization not only affects the economic development and culture of
society but also the environment, political system, prosperity, lifestyle, and wellbeing of people
all over the world.

The concept of globalization has been around for thousands of years. For example, the
silk road which is an ancient trade routes that are responsible for cultural interactions through the
Asian continent. The area of silk road covered from Korean peninsula all the way to the
Mediterranean Sea. Because of the silk road China and Europe can interact and do business
during the middle age. As mentioned earlier innovation in technology, advancement of
transportation technology and freedom of trade are the major factors in globalization, the impact
of these factors are so strong that they increase the cross-border trade, investment and
immigration so large that many experts believe the world is now in a new phase of economic
development. For instance, in just the space of 2 years (1997-1999) flow of foreign investment
skyrocketed from US$468 billion to US$827 billion. This new form of globalization has opened
economies domestically and internationally. Because of this many countries have implemented
free market economic system and thus opened to new opportunities for international trade and
investment. Government also have reduced the barriers to trade and established international
agreements to encourage goods and service investment. Corporations take advantage of the
reduction in barriers and built foreign factories and setup production and marketing arrangement
with foreign partners. Innovation in information technology have given people new tools for
identifying and chasing new economic opportunities. Scholars and experts have debated the
impact of globalization for a long time and for a good reason. Globalization present a lot of
challenges to national sovereignty, the creation of unchallenged international free market has
benefitted large corporation in the west and leave local business, culture and common people in
the dust (more detailed about this topic will be discuss later) which is why many anti-
globalization movement has taken shape. But globalization also allowed poor countries and its
citizen to develop economically and raise the living standard. Thus, it is the responsibility of
people to understand how globalization works and the challenges of policy facing them.

Significance of globalization

As mentioned earlier, globalization is a process of economic and cultural integration. The

integration allows countries to reap the benefit of economic corporation and work together in
solving political, social and economic challenges. For these reasons globalization is very
important and very significant in the modern world. With globalization, the marketplace of
countries will get bigger and this will expand the reach of buyers and sellers as a result,
producers and manufactures can distribute their goods to more places and the public will have
more choices.
One of the factors of globalizations as discussed earlier is the reduction of trade barriers
by governments. This action allows multinational corporation to widen their operation in foreign
countries. With the money coming in government can use it to improve infrastructure and
corporation can hire local people which will increase employment rate. For example, American
companies expand into foreign markets, develop new revenue streams and bring some of that
money back into their U.S. operations. This increased capital allows for business expansion and
increased levels of hiring.
With international integration, countries leader can communicate with each other to
improve economic condition and share the outcome. The willingness to communicate and
cooperate between government and industry giants will contribute to gaining in knowledge and
resources. Because of this many industries hold international meetings where they share
experience, insights and trends that benefit all. Few example of these meetings are: The
International Consumer Electronic show (CES) a trade show regarding electronic product
organized by The Consumer Technology Association, Langkawi Maritime and Aerospace
Exhibition (LIMA) in this event exhibitor can exhibit their product to the investors or share their
findings to the public.
 With more intense internal or domestic competition, government and companies will
have to take risk and they must grow and adapt internationally. This will open new revenue
streams and new opportunity for business. The development of domestic economy is important
because global institution like International Monetary fund (IMF), United Nations and World
Bank make decision depends entirely on the financial contribution of the country. In every
country and society, a person or an organization cannot assume leadership position if they do not
have strong capital. Domestic competition also necessary because technology development needs
a lot of money. Because of this, a person or an individual with strong capital in powerful
countries have the key role in influencing the decision making both within their own countries
and at the global level, be it politics, conflicts and wars or development in social sectors like
education and health services. In today’s globalization, therefore the capital has assumed the
greatest importance giving major role to as well as creating stakes for those having the large
amounts of capital. The capitalist are also the main beneficiaries in the process.
Alongside the richest countries in the world, Multi National Corporation (MNC) own
most of the world capital and so they are the main players in the global economy. And since
these MNCs mostly belong to the same rich countries of the world there is no major conflict or
competition among them rather they reinforce each other in protecting their mutual interests thus
bringing in harmony in economic, political and social and cultural agenda being pursued under
globalization. The Group of Eight (G8) meetings set the agenda while World Economic Forum
provides an opportunity to the MNCs and the world leadership to interact and develop initiatives
to make the agenda operational. Thus, the main force behind the present-day globalization is the
market (economy). It is important in this context to review the role of MNCs as they are the most
important vehicles of the market economy particularly when the globalization has reduced the
distances and the technological advances have expanded the market opportunities to the whole
globe. They are the catalyst behind both the process of globalization and the market economy,
they get the maximum benefits out of the process and their stakes are the highest in maintaining
the present trend of globalization.

From the last part, globalization will leave positive and negative impact on the world.
The next section the impacts of globalization will be discuss.

Positive impact of globalization

 Globalization has turn the world into a small world. Things like intercontinental travel,
international businesses trade and communication are no longer a monumental task thanks to
advancement of technology and the reduction of trade barriers. The negative impact of
globalization cannot be ignored, however that does not mean globalization is not important or
relevant in the modern world. Globalization is the very thing that speed up positive change. So, it
is important to understand the positive impact that it brings to the world.

The most optimum form of economy is when the level of supply match with the level of
demand. With globalization, such situation is possible. With the reduce of trade barriers a
country can outsource the production of goods and service or just buy them from another
country. With this, the selling price can be lower and as a result it will increased the demand of
the product.

With globalization, the competition between producers will get more intense. When these
producers or companies getting more competitive that is when they will get more creative and
innovative. This will result in higher quality products and services and as result the consumers
will be satisfied and more incline to spend their money. Consumers will also have more choices
when these producers decide to expand their business and go international.

Globalization will have the ripple effect in spreading of education. It is easy today to find
educational facilities anywhere in the world. A person does not have to be educated in his or her
own country they can go out and get new experience and perspective. Societies have become so
large that they created new culture. Language, cooking style and customs have change due to
globalization. And this will create much more diverse and interesting world to live in.

Negative effects of globalization

From the previous section, while globalization does have many positive effect especially
in developing countries it also will leave negative effects. Most economist did not take in
considerations of real world problem when they praise the concept of globalization. In the real
world, resources are limited and business are constantly laying off their workers because of the
increased competition. When the decline of employment and income happened, governments and
local business will try to raise trade barriers and this will put an end to globalization and it will
start trade wars. Trade war is when multiple countries raise each other tariffs or other trade
barriers in retaliation for other trade barriers. Trade wars is bad particularly for poor countries
because it will result in decrease in subsidies and decrease in subsidies will increase the price of
product and when this happens the people will have less choice and purchasing power. For this
section, the negative effects of globalization will be explored in detail.

According to Gail Tverberg, globalization will cause rapid decline in finite resource. In
her article, she uses China energy consumption as example. The data that she uses is taken from
BP Statistical Review of World Energy and it shows that since China joined the World Trade
Organization in December of 2011 they have increase the consumption of coal from about 0.8
billion metric tons in 2001 to about 2.2 billion metric tons in 2010. Other finite sources like gas
and oil also share the same increasing trend in the same period of years. Gas consumption
increased from about 1 billion metric tons to around 2.3 billion metric tons and oil consumption
increases from estimated of 0.25 billion metric tons to about 0.4 million metric tons. From the
same report (BP Statistical Review of World Energy) it can be seen that from 1965 to 2010 the
world coal consumption share the same trend as China. India coal consumption increases from
about 0.1 billion metric tons to about 2 billion metric tons and for United States the number
increases from about 1.0 billion metric tons to 3.5 billion metric tons. But the biggest increase
come from the European Union with increase of about 1.5 billion metric tons to 3.6 billion
metric tons.

Globalization also increases world carbon dioxide emission well beyond the expected
numbers. The expected numbers were introduced in 1997 when the Kyoto Protocol was
introduced. The Kyoto Protocol is an international treaty in which state parties must reduce the
greenhouse emission. It extent the 1992 United Nations Framework Convention on Climate
Change (UNFCCC) based on the fact that global warming is real and carbon dioxide emission
have caused it. The expected carbon dioxide emission in the year of 2010 is around 27 billion
metric tons but the actual emissions is almost 35 billion metric tons.

Since China enter the World Trade Organization (WTO) the oil price has spiked up. The
only time this happen before is during the 1970s when the oil crisis occur. The price spike ended
in 1983, and this was done by increasing the oil production and reducing oil consumption by the
encouragement of more aerodynamically efficient cars and the cut back of oil usage in
generation of electricity. As mentioned before, China entering the WTO cause the oil price to
increase again because they buy more cars than anyone else. There also other reasons why the oil
price increase such as the supply for oil is not growing and the demand has exceeded the supply.
It looks like the decrease in oil price like in 1983 will not happen as the demand will just keep on
growing especially in the Eastern part of the world.

Employment rate can also be affected by globalization and this was done by levelling the
playing field of nations. For example, a country with lower cost structure like lower wages, more
benefit and more flexible rules on pollution will be able to out compete more developed country.
This in turn will create more job to the less developed country and as population of the more
developed country increases the number of employment will decrease.

Since large Multi-National Corporation can move to places where the tax rate is the
lowest, government that is affected by this will move the taxation to their citizens. Most citizens
will not be able to move away from where they live and so they will suffer large tax. Together
with low employment rate, each community will have to compete with one another regards to tax
breaks they can give to employers. The only part of sources of government receipts in the US
that come entirely from corporations is the corporate income taxes. And since 1945 the numbers
have decreased by half in 2012. Because of this tax revenue from personal income taxes
increases.

To succeed in business an individual or company needs to be competitive. However, in

the current state of the world economy this can lead to drop in currency value as every country
will want to get export advantage and reduce their goods and services at lowest price as possible.
Country or nations can reduce their price paying their workers with lower wages, allow more
flexible pollution rules, use lower quality fuels that pollute more and debase the currency in
hoping it will create inflation and lower the value of the currency. This situation can end badly as
prices of imports will be high in debased currency. On top of that, the supply of money will be
out of balance with really goods and service and this will cause bubbles like artificially high
stock market prices and high bond price and eventually will create investment crashes.

Since globalization cause in reduction of trade barriers, product can be gained easily and
cheaply from anywhere. This situation can encourage country not produce its own food, clothing
or other essentials items. Hence it will create a situation where one country will depend heavily
on other countries for things like financial services or expensive medical services or anything
that is not oil dependent. This predicament happens to Malaysia right now as the country
depends heavily on coal as it is the main source of energy in the country. However, coal is
obtained from Indonesia so Malaysia main source of energy relies heavily on Indonesia. If this
relationship stay healthy than there should be no problem. But if the instabilities become too big
the system will stop working.

There are many civilizations in the past that begins from small base and eventually turn
big, over use their resource and finally collapsed. Currently history is in the brinks of repeating
itself. The major difference is that, in modern world instead of one country or civilizations
involved, multiple countries is in this together. The collapsed of one country will cause a ripple
effects and drag down many other countries and most of the system established between them.
Countries that will not be affected are the one that does not depends on globalization,
unfortunately there are not many of them. Since the interdependence between countries was less
in the past, when one area in crisis it was possible to leave the area and let it heal by itself. The
selfheal is possible by introducing new technology and economic regeneration. However, in
current world economic model, if a worldwide failure happens that will spell disaster to modern
civilization and the world might never heal.

Political consequences of globalization

For the next part, political consequences of globalization will be discussed. Political
globalization is the worldwide growth of political system. The system consists of national
governments, intergovernmental organisations and civil society. The major issues of political
globalization are the fact that it poses challenge to national identity, national sovereignty and the
nation state is losing power and importance. Political globalization also inspire activist all around
the world to oppose the idea of globalization because of the decline of national identity. This
protest is called anti-globalization.

Challenges to national identity

National identity is an individual identity to his or her state or nation. It can be described
as the country is one unit but consists of many traditions, culture, language and politic. It can
also be subjective feeling for instance an undocumented immigrant could have strong sense of
patriotism even if he or she does not have legal citizenship of the country. Patriotism is a national
pride and the act to show the love of one’s own country. It is a positive form of national identity.
The negative side of national identity is chauvinism. Chauvinism is an “aggressive” form of
patriotism and national superiority. Chauvinist people belief that they are special, unique and
strong while everyone else are weak and inferior. Chauvinism can be a big problem in a country
with wide diversity of races and ethnic and often can end in conflict. This is especially true for
country like the United State where there many immigrants there. Groups like the “Alt-right”
with far-right ideologies and white supremacy ideologies has become a challenge to the minority
as they are often bombard with racist remarks and in some places even denied basic human right.
Chauvinist are strong advocate against globalization as it undermines the importance of being a
citizen.

A new shape of economic and political domination has cause a lot of concern among
anti-globalism activist. They often use McDonald’s and Coca-Cola as examples of “agents of
globalism” or “culture imperialism”. This is because any business organization or enterprise that
can dictate taste will thrive and local authorities will lose control over the distribution of goods
and services. For example, large supermarket and shopping mall has taken over local farmers,
fisherman and businessman to be the main distributor of food, cloths and services. This view of
world power depicts military force as useless or hopeless as the control of culture and its
production is more relevant than geographic border. We can see this happening right now from
country like China. Back in the old days they expand their power by conquering other countries,
but now they focus more on development of technology and entertainment industry as evidence
of their space exploration program and the rapid rise of their tech companies like Alibaba,
Tencent, Huawei and many more. China also spend a lot of money on film industry, the
company ‘Wanda Group’ already have collaboration with many big budget Hollywood films in
hoping someday they can compete with the other big Hollywood studios like Warner Bros and
Universal. In 2014 Wanda group total assets reportedly was at US$86.15 billion making them the
world's biggest private property developer and owner and the world's largest cinema chain
operator. National boundaries are getting more transparent and if there is any nation try to censor
or exclude global pop culture it usually makes the object or product more attractive and
irresistible. For example, this year (2017) in Malaysia, the local government try to censor the
new Disney film “The Beauty and the Beast” but the backlash they got from the netizen cause
them to abandon the idea and instead of censoring the film they change the rating from PG
(Parental Guidance) to PG 13.

The products that are needed in the transaction of popular culture are related to lifestyle:
film, music, comics, fast foods, entertainment system, gadgets, fashion and beverages. In today’s
world, anyone can get anything from anywhere through the internet. Back in the 90s, technology
activist often used “Information wants to be free” as slogan against limiting access to
information. The slogan was invoked as a retaliation towards the system of governmental control
whether it is about control of intellectual property rights or control of information. One notable
example of control of information happened in 1999 when Serbian officials shut down operation
of Radio B92. To continue their coverage, the radio station move their service to the internet.

Anti-globalization

Anti-globalization is a movement or organization where the participant opposed the idea

of globalization and capitalism. They are technologically savvy even at the early stages of the
internet, for example the organisation Greenpeace an NGO environmentalist held numerous
demonstration against genetically modified (GM) food in the 1990s. The organization claim that
GM food contain unknown danger to human and the environment. This statement is obviously
not true as genetically modified food provide many advantages such as: making the food
healthier (genetically modified soy contains omega-9 fatty acid that can lower cholesterol level)
and easier to digest (Golden Rice). Genetically modified food also increase the resistant of
certain food to herbicide or extreme weather making ideal to be planted in third world country.
Many scientific organisations and bioengineering industry respond with these facts to the masses
hoping to calm the weather, however it was too late. Greenpeace movement and media coverage
had turned the public sentiment against GM food and the science community was defeated
before they can even present a counterargument. This movement utilize the power of the internet
to gather large amount of people and mobilize them for political protest. The participant belief
that economic efficiency and human decency are far more important than corporate competition
and profits. While the intent is noble, the result can backfire.

Anti-globalization activist also often attack the World Economic Forum. The forum is a
platform for local and social movement build network, plan for future action and be a unified
international movement. Anti-globalization activist held the World Social Forum (WSF) to
retaliate and use the slogan “Another world is possible”. The WSF eventually becomes a
periodic meeting and turn into rallying cry for protest of the Iraq war. The forum change its
location in 2004 to India so people from Asia and Africa can attend easily. The concept of
gathering place for organization and individuals opposing to globalization was soon copied. As a
result, organization like European Social Forum was born and held in 2002 in Italy. They use the
slogan “Against the war, against racism and against neo-liberalism”. The forum attracts over 1
million participants and was held 5 more time in 2003 (Paris), 2004 (London), 2006 Athens,
2008 (Malmo) and in 2010 (Istanbul).

From the early section, it was clear that the intention of anti-globalization movement is
good but the outcomes are usually not favourable. On top of that, anti-globalization movement
attract a lot of people to forums, rally and protest. Because of this many politician, experts and
economist have criticise the movement. The critics that was thrown to them are usually because
their lack of evidence or the evidence contradict their point of view like the case of GM food.
Anti-globalization movement while having large member, are often disorganize, lack common
goal and sometimes contradict one another. There are even members of the organization who are
aware of this situation but argue that if they have a common enemy, political differences should
not matter. Anti-globalization also is ineffective. The activist always argues that the trade
barriers that was done by rich nations is harmful to poor countries. However, the World trade
organization is working hard to remove those barriers and so third world should be encouraged
to participate with free trade instead of against it. For example, resources like sugar are heavily
subsidies for countries with strong economies with influence over the World Trade Organization.
This will result in double or triple the profit made by the producing country. Anti-globalist
usually comes from first world country NGO and unions. The people that they are defending are
the people of third world country and they are relatively supporting and accepting the concept of
globalization. Alan Shipman says in his book that the anti-globalization people try to defuse “the
Western class war by shifting alienation and exploitation to developing-country sweatshops". He
continues saying that people from third world country do not support anti-globalization
movement. Many other critics agree with these statements and added that people of third world
country sees anti-globalization as a threat to their livelihood and the end of globalization means
their country will suffer with greater poverty. However, that does not mean all of third world
country citizens agree with globalization. For instance, there is a case in India when farmers
protest the patenting of seeds.

Reduction of importance of nation state

Globalization has given rise to MNC which reduce the ability of state to manage their
own economies. MNC like McDonald’s have authority and great power and therefore nations no
longer have complete control. The top 500 companies now are in control of 1/3 of global GDP
and 76% of world trade. Trade blocks such as North American Free Trade Agreement (NAFTA),
reduce state control over their own economy. The WTO and IMF weaken the nation’s security
and independence.

Intergovernmental organization like the European Union, WTO, International Crime

Court and G8 takeover the national functions to facilitate international agreement. As a result,
nation sovereignty in making importance decision was reduced. These organization had
intervened the country that their control on almost every field. However, these organization do
help. In the previous year’s many of them help in shaping the public policy, developmental
efforts and humanitarian aid. They spend millions of dollars to uplift underprivilege societies and
help regions in conflict with basic humanitarian services. But this can backfire as there are also
other countries that does not receive the same treatment give rise to terrorism and with the help
of technology the criminal activity grow stronger every day.

Globalization can be connected to western propaganda. For example, the United States
had interfered many middle east countries in recent time. They use the excuse of “being the
world police” to bring peace to the region but really all they want is oil. They do this by taking
control of economic, social, political and cultural aspects of these countries and in some extreme
case like the Iraq war, they just come and create false conflict by condemning Iraq of having
weapons of mass destruction. This in turn allow them to invade the country and take their oil.
 In conclusion, globalization has reduced the nation abilities to manage their own
economy by intervening in the nations affair in almost every fields. The affected nations have
little choice to participate and gave away their “freedom” to the demands of globalization. The
state is still the most important factor in shaping a country’s economics. When their shape their
own policy, this will enable them to control their response to globalization. The political impact
of globalization is strong and will affect the whole world. The idea of one government control
will lead to big scale corruption, lack of transparency and inefficiency.

Pros and cons of political globalization

This part is the conclusion of political globalization. As discuss earlier political

globalization is growth of worldwide political system with the involvement of national
government, international governments and society. International government are organisations
like the European Union, United Nations, World Trade Organization and Association for
Southeast Asians Nations (ASEAN).

The involvements of these international organizations have pros and cons. The pros are,
it contributes to world peace. International organizations depend on peace so they can do
business effectively. And since it involves many countries, access to financial aid and support
can easily be obtained and the risk of invasion is greatly reduced as more restriction is put on big
powers. They also reduce nationalism and promote unified region. With unified region, smaller
country can get involve and be more influential in international economy. When many countries
work together, governments can learn from one another and create more peaceful, understanding
and tolerance society.

Political globalizations come with many drawbacks. The biggest of them being the
reduction of state power. When this happens, the nations affected by it will lose their identity and
the citizens might see this as challenge and radical ideologies will arise from it. In united states
group like the Alt-right and white supremacy ideologies threatens their very own constitution
and raise many concern among the minorities. Other drawbacks include unfair decision made by
bigger country. As mentioned earlier political globalization has given rise to the formation of
international organization and often the more powerful countries will shape policies for the
region. The policies can be one sided and totally unfair to less developed countries. Big countries
can also veto decision and slow down decision making process making coordination hard and
costs a lot of money.

Economic impact of globalization

Economic globalization is part of globalization alongside political globalization. It refers

to economic interdependence because of rapid rise of cross border trade of goods and services,
international capital flow and advancement of information technology. The major factors of
economic globalization are marketization and increase rise of significance information in many
fields. In other words, advancement in science and technology has spread the market economic
system to the whole world down to the production chains level to different countries.

With the advancement of technology, the cost of communications and transportation has
decrease significantly. According to Shangquan (2010), in today’s world, the cost of shipment
like ocean shipping is much cheaper than 70 years ago in the 40s. The same thing happened to
air shipment with today cost is only 1/6 of what it used to be and with integration of internet,
telecommunication only cost 1% of its cost in the 40s. The price of electronics is also affected,
as their price in the 90s are only 1/125 of the 60s, and in 1998 the price goes 80% further down.
Because of this, the cost of international trade and investment are also reduced making it possible
to do global production. An example of global production is the production of automobile.
Rarely an automobile is made in one country, the parts come from various places like the chassis
was design by German engineers but the engine is Japanese, the gearbox system is Korean and
the cooling system is from the USA but the parts was assembled in Malaysia.

The advancement of information technology is the major factor of economic

globalization, but the trend is the world-wide market oriented reform. With the integration of
World Trade Organization, many nations have cut their non-tariff and tariff barriers this result in
more countries open their account. The change to market economies has made it possible for
world economies to be unite as whole.

The main carriers of economic globalization are the Multinational Corporation (MNC).
They are the one that organize production and allocate resource to maximize profit. Back in 1996
there are about 44,000 MNC which had 280,000 sub companies and offices. They control almost
80% of foreign investment in the US and about 70% of technology transfer was made among
them.

Financial sector is the sector that enjoy the highest rate of development, it is also the most
influential. International finance exists because, international trade and investment activities
needs it. Economy globalization is important because it presents the opportunity for global
industry to restructure and readjust. Because of advancement in technology every industry need
to upgrade their organization. The countries in the west are entering the period of information
economy and have started to give labour intensive industries to developing countries. The rate of
productivity has risen because of this as a result economic globalization has cause competition at
international level between market to be more intense. To cope with the rise of competitiveness
many domestic and international corporations have merge and acquire each other assets which
result in many restructuring. One example of the acquisition of the company Ericson by Sony,
Sony later use the technology developed by Ericson and make their own line of smartphone.

The progress of economic globalization was dictated heavily by developed countries.

This means that they can set the rules for economic exchange. International economic and
financial organizations are under the control of big western countries. They are the biggest
beneficiaries of economic globalization and they have been using it to dominate and promote it.

Major Players in Economic Globalization

The major players in globalization are the one that makes all the rules and policy. As
discussed earlier they are some of the most powerful companies and countries in the world. In
this part, all the players in economic globalization will be studied in detail.
 Earlier we have discussed that Intergovernmental Organization (IGO) like the UN can
shape policies of the region and sometimes can veto decision to go their way. But who and what
are they? They are an organization made of two or more countries working to solve issue that
concern all of them. They mainly yearn for peace, security and various social issues. IGO are
important for international law as they are establishing by treaty act that gave power to them.
Treaties are form when represented from governments of the countries involved went to the
approval process. IGO are different from treaties like North America Free Trade Agreement
(NAFTA) because these treaties do not have organization and depends on the administration be
recognized as ad-hoc (solution designed for specific problem) commission. There are also a
private form IGO that are called International Non-Governmental Organizations (INGO). INGO
purpose is to find solution that can be beneficial to undeveloped countries that are suffering from
economic globalization. They done many humanitarian projects, present the problem of citizens
to the government and monitor policies.

By far the biggest players in economic globalization are the Multinational Corporations.
As mentioned before there are over 44,000 MNC which had 280,000 sub companies and offices.
MNC owns and controls productions of goods in many countries including their own. Because of
this they are sometimes referred to stateless corporations. Their activities usually involved
importing and exporting goods. Because of this they need to invest a lot in foreign countries,
buying and selling license and involved in contract manufacturing. To reduce the cost of
transportation of goods, they need to open manufacturing facilities in the country that they invest
in. Therefore, we see many manufacturing facilities in developing countries like Indonesia and
Malaysia. MNC are not new their presence can be detected as far as the 1600 with organization
like the East India Company and Dutch East India Company. MNC can be easily detected as
they have very distinguished characteristics like having a complete decision making system,
seeking markets worldwide, high economic and technical knowledge and their most recognizable
characteristic is monopoly. Lately MNC received a lot of criticism from human right activist and
even from governmental organizations. MNC have very low regards to working conditions and
environmental pollution. They also often use tax avoidance scheme which allow them to get
advantage over smaller or local companies. Local or smaller companies finds it hard to success
and thrive because of this for example large supermarket has rendered the existence of local store
obsolete. If this goes on local business will be pushed out and maybe even will gone forever.
There are also many report that connected some MNC to use of slave labour. Big clothing
companies like Nike and Adidas are often criticise for using child labour to produce their
product. These children usually work in sweatshop and has long hours of working with little
breaks. Even technology based companies like Apple has been connected to slave labour. The
Verge which is a technology based website reported that there are 10 Apple facilities that uses
child labour in 2012 and there are 14 facilities using the service of bonded labourer. These
workers are paid with very low wages and terrible working conditions. MNC also have very low
regards to the environment and has applied many cost cutting decision to save money while
putting the environment at risk and their employer’s lives. One notable example is the Deepwater
Horizon oil spill. The incident is the largest accidental marine oil spill in the history of petroleum
industry. In 2011 US governments has determined that the cause of the accident is defective
cement on the well. The problems come from BP, their rig operator Transocean and contractor
Halliburton for their many cost cutting and inadequate safety system decision. The incident costs
11 lives and millions of dollars in fines and other payments US$4.25 billion dollar to be exact.
The problem does not end there as the oil spill has contaminated large area of the Gulf of Mexico
and has threated many wild lives with the spreading of cardiotoxicity that comes from various
chemicals and oil from the facilities.

Pros and cons of economic globalization

Just like political globalization, economic globalization has its pros and cons. Economic
globalization has accelerated economic growth and reduced poverty. According to Dollar and
Kraay (2001), countries that partake in globalization has enjoy almost 6% of growth rate of real
per capita GDP. The IMF state that the benefits of economic globalization will be shared by all.
Globalization can increase the income growth even to countries with inequality problems like
China. China experience 3.8% of income growth and in Bangladesh the rate of dollar per day
poverty fall to 36% from 43%. Economic globalization given birth to supply chain. Supply chain
is a complex network of interconnected companies, its purpose is to produce, handle and
distribute products of various forms worldwide. Because of globalization the cost of production
has greatly reduce therefore companies has taken this opportunity. Supply chain involve the
process of transformation of resources into finished goods that will be sell to the consumer.
Globalization also given birth to labour unions. The labour unions is an establishment which
purpose is to solve the problem of unfair, poor and unregulated working conditions. Unregulated
jobs ca lead to low minimum wage, insecurity of job and poor working conditions. To prevent
this from happening a technique called collective bargaining was invented. Collective bargaining
is a way employees can legally address their issues like poor working conditions and wages.

Economic globalization is not all good. It can lead to many unwanted situation like
capital fight. Capital fight happens when money flow out of a country at fast rate because the
country’s unfavourable financial conditions such as tariff, taxes, labour costs and debt. When a
country suffers from capital fight what usually flow is a steep drop in exchange rate or an
unwilling devaluation. To rectify this situation, the currency value will have to go down but the
assets value of the country will go down as well. Capital fights affect all countries including the
developed one. The times magazine in 2009 state that because of tax increase in the United
Kingdom many entrepreneurs run to low tax places like Jersey and the Isle of Man in Ireland.
Capital fights can cause liquidity crisis which can lead to difficulties in shipping and finance.
Holders will be forced to sell and borrowers will face higher loan cost and collateral.

Country that experience rapid growth will also experience less global inequality.
Economic inequality difference between years, societies, economic system and wars. Inequality
affect the equality of outcome and equality of opportunity. Many experts consider inequality as
social problems. International inequality is the inequality between countries. Even though the
inequality difference changing rapidly, the difference between rich and poor is huge. Recent
development like “Just in time manufacturing”, have affected manufacturing worker’s jobs.
When bigger companies that control the supply chain decide to reduce manufacturing, the
worker will lose their job.

Economic globalization has open new way for business to avoid paying taxes or pay
taxes at much lower price by the creation of tax haven state. Tax haven is a country where taxes
are levied at a low rate or there is no tax at all. Because of this tax competition was created
between governments. The main feature of tax haven is that, the law can be used to avoid tax
laws or other jurisdictions. Tax Justice Network reported in 2012, estimation of USD$21 trillion
is sheltered from tax havens. Tax shelter will be disadvantageous to the poor. Many tax havens
are thought to have money laundering, and terrorism connection. Investigation of illegal tax
haven produced very little conviction. To solve this problem some government even use
computer spyware hoping to catch the big companies in the act and scrutinize them.

Culture can also be affected by economic globalization. The common people will follow
the international flow of market and capital by immigrating. Different resources and economic
measure affect culture and cause integration of culture. When they migrate to different countries
they have learn different language especially English. With that they will expose to different
music, culture and be more savvy with technology. Global entertainment and media
establishments export information across the globe. This can lead to one way information and
exposure to western culture and products. News outlets like BBC, CNN and Reuters has more
influence compared to other region media like Al Jazeera which is based in Qatar.

Risk brought by economic globalization to developing countries and the prevention

When developing countries like Malaysia participate in economic globalization process,

they can better utilize their comparative advantage, introduce advanced technologies and
management experience. It also can be used to eliminate the monopolies of MNC. However,
globalization also come with big risks.

Economic globalization has increased the gap of between the North and South. The UN
stated that the number of developing countries that take advantages of globalization is less than
20. The income per capita difference of the rich country and poor country has enlarged to 70
times. Over 80% of capital are flowing among the western countries and East Asian countries.
Developing countries are unable to attract capital other than donations and financial aids.
Developing countries also needs to tax the public or raise their tax to finance social safety net.
This means that countries to tax most in good times to those are most vulnerable in bad times.
There is also the risk of dumping. Dumping is when a product is sell at unfair low price.
Economic globalization will increase dumping in developing countries with inadequate
infrastructure and low knowledge to produce products by the local industries. For example, in
China they use cheap labour cost to produce toys and electronics and other products. The
products produced are usually low quality and cannot compete with the product produced by the
MNC which has flooded the market.
 To prevent the risk of economic globalization to developing countries, according to
Shangquan (2000) international economic organizations must have bigger role in the process of
economic globalization. Developing countries need to be promised that their interest will be
fulfilled. Globalization cannot guarantee fair economic order and because of this some countries
unable to gain any benefits. So, developing countries are at crossroads. One road will lead them
to be spare tyre for of developed countries because of their dominance and the other road which
is the road where they did not participate in globalization will cause them to be left behind in
economic development. Therefore, developed countries should be more considerate to the
realities of developing countries and lend a helping hand whenever they could.

Conclusion

In conclusion, the world is getting smaller and growing faster due to globalization. And
along the way it leaves many positive and negative impact. Big corporations can invest and
expand beyond domestic and national markets to foreign markets all over the world, allowing
them to dictate taste and be relatable to the society. Globalization also help connecting one
country to another very quickly with the help of reduction of trade barriers and advancement in
information technology. It also helps to optimize the supply to demand ratio creating the
optimum level for business. The competitiveness between companies will also increase because
of globalization and this will result in more choices and cheaper price for consumer. When the
big companies come to foreign countries they tend to create manufacturing facilities to reduce
the cost of shipment. When this happens, it will create a lot of job opportunity for the residents of
the area and it will also increase their education level.

However, globalization poses a lot of challenge to a country. Globalization will cause

increase use of finite resources like coal and oil. When this happen carbon dioxide emission will
increase and this can cause a lot of environmental issue. Globalization can also cause decrease of
employment rate, when the playing field is level countries with cheaper cost structure will get
more advantages as companies tend to go there. This means other countries with higher cost
structure will lose capital and the people will lose their job. The currency value can also drop
because of nations try to compete with one another and since globalization means integration of
countries worldwide, when one country fall it will produce a ripple effect and effect the rest of
world.

The two-major part of globalization can be divided into two, politically and
economically. Politically, globalization effect on how the political system growth. The system
consists of national government and intergovernmental organization. Political globalization can
be a threat to national identity and sovereignty. This because the main player of globalization are
the large corporations that has very little regards to tradition and culture. As a result, many
radical group of chauvinistic people exist. This group of people is dangerous to minorities and a
threat to peace. Other form of protest is the anti-globalization movement. This group are made of
people with high technical knowledge and can rally thousands of people to their protest in a
really short time. Anti-globalist is often criticized because of their hypocritical nature and often
disregard logic and truth to emotions and personal agenda.

And finally, globalization has strong economic impact. Economic globalization refers to
the interdependence of countries because of reduction in barriers trades and advancement of
technology. They consist of several major players the biggest one being the MNC. MNC can do
devastating damage to the environment as well as their employers live. However, they also bring
many positivity to developing countries and often being the catalyst of progress. Economic
globalization present many risk to developing countries, to prevent the risk from happening
developed countries need to lend a helping hand and international economic organizations need
to have a bigger role in the process.
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