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Give an account of the term ‘Globalization’

highlighting its advantages and disadvantages

Globalization is the process by which individuals and organizations start operating on an

international scale. They become more interdependent and interconnected. In other words it is the
spread of products, technology, information, and jobs across national borders fostered through free
trade.
The term comes from the word ‘globe ‘meaning thereby that the countries of the world are
getting together. They become more interdependent and interconnected. The term globalization no
doubt denotes broader meaning encompassing social and political spheres as well, but it is more
referred to and discussed in economic context. As an economic term, it relates to the mobility of
capital, labor, products, and services all around the globe to help it to assume the form of a well-
integrated unit. The world has never been more interconnected as it is now. What unfolds in one
region has its implications for another. On one side it has raised the standard of living in poor and
less developed countries by providing job opportunity, modernization, hence improved access to
goods and services. On the other, it destroyed job opportunities in the developed and high-wage
countries as the production of goods and companies have moved across borders to countries where
the labor and other utilities were cheap and regulations soft.
This mobility and phenomenon is not new. It is as old as the history of mankind. As a matter
of fact, globalization had started more than 2,000 years ago. It was for the first time in history that
luxury products like silk from China started to appear on the other edge of the Eurasian continent
– in Rome. They got there after being carried for thousands of miles along the Silk Road. But the
percentage of the total economy, the value of these exports was tiny as compared to the present
one.
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Subsequently, the major chunk of international trade was taken up the Arab Muslim traders
(7th-15th centuries) as the new religion spread in all directions from the Arabian Peninsula. By
the early 9th century, Muslim traders already dominated Mediterranean and Indian Ocean trade;
afterward, they could be found as far east as Indonesia, which over time became a Muslim-majority
country, and as far west as Spain. The main focus of Islamic trade in those Middle Ages were
spices which were traded mainly by sea.
However, global trade kicked off in the Age of Discovery that is after the discovery of the
Americas by European explorers towards the end of 15th Century and onward. Subsequent
scientific discoveries and invention of steam and internal combustion engines gave a boost to the
international trade and colonization of the world. By the imperialist powers. This Age of Discovery
rocked the world. However, the speed of the global trade and globalization in the present context
increased more pronouncedly during the last 50 years, particularly after the introduction of market
reforms by Deng Xiao Peng of China in 1978. That made the movement of TNCs of the industrially
advanced nations to China easy and resultant movement of goods and services to and from China
all over the world. The newly created World Trade Organization (WTO) encouraged nations all
over the world to enter into free-trade agreements and most of them did. In 2001, even China,
which for the better part of the 20th century had been a secluded, agrarian economy, became a
member of the WTO and started to manufacture for the world. In the 2000s, global exports reached
a milestone, as they rose to about a quarter of global GDP (Source: World Economic Forum).
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The other important example is North American Free Trade Agreement (NAFTA), signed in
1993 which gave American auto manufacturers the incentive to relocate a portion of their
manufacturing to Mexico where they saved the costs of labor.
China and India have benefited to the maximum from globalization, to a lesser degree
Indonesia, Cambodia, and Vietnam in Asia, and Ghana and Ethiopia in Africa, according to a
World Bank report 2018.
The increased interaction between people and companies at the global level is due to the
advancement in transportation and communication technology like mobile phones, aircraft, ship,
railways, and internet. These means of communication make the exchange of goods and
information easy and quick. Corporations become transnational corporations. It’s not only the
manufacturing units or the capital which cross the borders it is an exchange of goods, services,
money, knowledge, language, and ideas as well which take place. The goods produced in country
‘A’ find itself in competition with the goods produced in countries ‘B.’ The goods cheaper in price
and better in quality attract the customer. The difference in price is due to the difference in
manufacturing conditions in the home country that is cheap labor, cheap raw material and utilities
and supporting regulations governing foreign trade and investment. A European company can
produce a computer and mobile phone in China and then sell in the USA.
Concerning social aspect, we see that even cultural values are getting global including
language, apparel, eating habits, music, and many rituals. The English language has become more
global than any other language. Likewise, the companies McDonald, KFC, Pizza Hut, and
Starbucks coffee, and Chinese food have crossed their parent countries’ frontiers.
In the political domain the monarchies, Kingdoms, and authoritarian regimes are giving way
to democratic ones. At present, there are far less military regimes in the world as there were 50
years back particularly concerning Africa, Asia, and Latin America. Likewise, the state-controlled
economies are being replaced by market economies. This phenomenon is quite visible in the ex-
Warsaw pact Eastern European countries. Even China had to introduce market reforms in 1978 on
its Eastern coast.
However, there are both positive and negative effects of this globalization. Economic
globalization also exhibits the feature of domino effect at the international level. For instance, if
there is an economic recession in one corner of the world its effect moves from country to country.
If the purchasing power of country ‘A’ is reduced that results in the exports of another ‘B’ if
country ‘A’ imports from country ‘B.’ We have observed this phenomenon during the 2007-8
economic meltdown. The Economic Meltdown of 2007-8 also known as the global financial crisis
is considered the worst financial crisis since the Great Depression of the 1930s. It began in 2007
with a crisis in the subprime mortgage market in the United States, (A subprime mortgage is a type
of mortgage that is normally issued by a lending institution to borrowers with low credit ratings
who, as a result of their deficient credit histories, would not be able to qualify for conventional
mortgages.) and developed into a full-blown international banking crisis with the collapse of the
investment bank Lehman Brothers on September 15, 2008. Excessive risk-taking by banks such
as Lehman Brothers helped to magnify the financial impact globally. However, by way of massive
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bail-outs of financial institutions and other fiscal policies, the world financial system was
prevented from possible collapse. The crisis was nonetheless followed by a global economic
downturn, the Great Recession. The European debt crisis followed later. This also affected China’s
GDP growth rate being the largest exporter to Europe and America.
Trade war (2019) between world’s two giants USA-China affected the world GDP growth
though not significantly but did negatively by 0.3%. Therefore the first significant feature of the
globalized economic system is that it has an inbuilt domino effect mechanism.
As regards advantage, countries can do what is best for them. For instance, if you can buy
steel from another country at a cheaper rate, then there is no need of producing your own. You
have to go and focus on your own competent area where you have a competitive edge over others.
That is the best economic strategy to move in this highly competitive world. This strategy will
give you a larger market, more GDP, and more jobs to the people. Due to this globalized
competition in the products and services consumer benefit a lot also.
While talking on the subject Chinese president Xi Jinping in a speech in Davos in January
2017, “Some blame economic globalization for the chaos in the world,” he said. “It has now
become the Pandora’s box in the eyes of many.” But, he continued, “We came to the conclusion
that integration into the global economy is a historical trend. [It] is the big ocean that you cannot
escape from.” He went on to propose a more inclusive globalization, and to rally nations to join in
China’s new project for international trade, “Belt and Road”.
As regards disadvantages, this globalization has resulted in unemployment in the
industrialized countries, particularly Europe and America, as their companies have moved to
those countries where labor is cheap, and the environmental regulations are not that much strict.
The environment has happened to be one of the important causality due to extraordinary
emissions of CO2 on account of the increased burning of fossil fuel through the increased use of
cars, aircraft, and ships to transport goods in addition to the increased industrialization without
any check to the emission of greenhouse gases. Increased atmospheric levels of CO2 have
caused global warming and climate change which in turn have resulted in various ecological
problems adversely affecting human beings, animal and plant life. Human, animal, and plant
disease are spreading more quickly due to globalization.
However, harmful impacts of globalization can be minimized to a great extent by taking the
following steps:
1. Countries should go for production of those goods for which they have a competitive
advantage over others
2. Creating more awareness and enforcing of strict regulation to discourage the use of fossil fuels
and encourage the use of renewable resources like solar, wind, and hydal.
3. Checking the fast depletion of equatorial forest cover of Amazon basin, Congo basin and
equatorial forests of Indonesia and Malaysia on account of rapid industrialization, mining, and
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urbanization (an offshoot of globalization) and going for afforestation of the same in addition to
the introduction of agroforestry.
As regards the non-economic cultural side of the globalization, the development of the
multicultural and multi-religious societies around the globe seems evolving in the years ahead with
a dominant taste of western culture with other cultures and values keeping their own distinctive
character intact.
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