Understanding Globalisation: Challenges And Opportunities

Defining Globalisation

Question:

Describe the Management and Organisation in Global Environment?

Globalisation is the process of integration and interaction whether it is among governments, companies or people. It is the movement that is now becoming worldwide towards trade, economic, communications and financial integration. It implies on the broadening outlook of an interdependent and interconnected world that has free transfer of services, goods and capital. But many economists correct that, this free transfer does not include free movement of labor. Thus smaller economies are at several times hurt by the hindered movement of human resources. According to many “globalisation” in a much simpler sense is the deepening, widening and speeding up of the interconnectedness between global forces. But we need to further elaborate it as globalisation can be in continuance of regional, local or national level. Dicken in the year 2004 commented that defining globalisation is a tough task as the definition can give rise to many questions instead of giving answers. According to him globalisation these days have developed in a catch all term which is used by everyone for many bads and goods of this contemporary society. (Dicken, 2007) Dicken explains that how globalisation is actually geographical as understanding it needs a prior knowledge about the configuration of time, space and place. These configurations are later reconfigured due to changes in political practices, economy or technology. Globalisation is being enabled by technological flow of goods, people, media and information in a interconnected and may be “shrinking world”. There are many catch phrases like “border less world”, “the flat world” and “the shrinking world” that are being used in reference to globalisation. But is it too early to coin globalisation along these phrases.

In a report under the title “The collapse of Global trade, murky protectionism, and the crisis” by Richard Baldwin and Simon Evenett talk about how these phrases like “border less world” and “the shrinking world” are false. (Baldwin, 2008)As trade worldwide is suffering a globally synchronized collapse which is both quite sudden and severe. Many economists accept that the failures to achieve international stability that is essential for global order as the factor that contributed the most for this failure. One of the incidences that highlight this shortcoming in global order is the attack of 9/11 as leaders all around the world saw the true picture that there is a urgent and grave security risk if terrorists that have access to mass weapons are not controlled. One of the other major challenges to the global order in the recent years was, a credit crisis in the year 2007-2008 which threatened the failure of the international financial system. This economic collapse occurred as the global leaders were not able to cope up with the economic and security challenges. Over the period of the thirty years foreign investment and international trade has become quite significant to the global economy.

The end of poverty movement is about people demonstrating about the enormous figures of world poverty. But there is always a danger that the messages that people want to give through demonstrations like the ones outside G8 summit are diluted. As they believe that telling leaders about the poor in the world will turn the plight of these poverty stricken people. An agenda is needed to end poverty but this agenda cannot include neo-liberalism, capitalism and markets. This is quite impossible in a world where political advisors are neo-liberal and are focused on profit making. In today’s business world trade is dependent on investment in areas like technologies and in countries where technology is not developed suffers due to its lack. (Cameron, 2004)

Impact of Globalisation on Trade, Technology and Economy

Technology is among the many primary facets of globalisation that has helped to change the concept of distance and time. Through technology our perception about time and distance has changed. It has helped us to feel closer to our family and friends. But contrary to this, a report by C.K. Prahalad with the title “Saving the Worlds Poor” shows through facts that sixty five percent of the world population is still living under two thousand dollars a year. Out of these a major percentage owns a telephone, television and have access to internet thus the Maslow’s Triangle of needs has been inverted. In theory globalisation has helped people to have access to technology and information. But in the trade sector the story is quite different as many meetings related to trade, environmental and international monetary organisation never used to garner any attention, whereas now these meetings draw the attention of many anti-globalisation activists. The reasons for these demonstrations are the budgets of some corporations that are larger than the GDP of many nations in the world. According to a study the top hundred economies consists of forty nine countries and fifty one multinational corporations. Post the great financial crisis we are seeing a dry up in the trade finance. International trade is about one company that is buying from another company which involves risks and profits. But the GFC has affected trade finance in two ways firstly the traders who were used to doing this kind of trade are getting fewer oppurtunities. As banks do not trust other banks which is causing the paired credit to break down, even though trade credit according to many trade experts is a safe credit risk. Secondly the traders are opting to trust their past partners due to the fear of the unknown.

Another reason for the extreme demonstrations against globalisation at G7 and WTC conferences is murky protectionism. (Crang, 2003) As many example were witnessed in the recent years for murky protectionism in which none were of violations regarding to WTO obligations. But they are all of abuses of legal and legitimate discretion which are being used discriminate against companies, investors, foreign goods, and workers. Elisa Gamberoni along with Richard Newfarmer presents some figures to support this claim. Out of the seventy eight trade measures that the governments have enacted on seventeen were offenders from the G 20. Developing nations were deploying all forms of protection like border measures and tariffs. Example Russians raised the tariffs on used cars whereas the non tariff measures includes example from Argentina where non automatic licensing was applied on textile, Tv’s, leather goods, and shoes. In some developing countries the tightening of standards has caused slower imports as we saw in India where Chinese toys were banned. Green policies are also a form of murky protectionism tactic. In France many of the banks were bailed out on conditions that they have to lend to airlines as cancellation of the new Airbus planes should not occur. Thus the nature of protectionism is quite murky making it hard to enumerate. There is a lack of transparency that is making harder for the politicians to retaliate against trading partner’s measures. (Parker, 2005)

The phrase “Borderless world” is a myth as US comprises of the world twenty five of the total economy. So in a borderless world the trade including both export and import will each make up for the rest seventy five percent. As the sale transactions and purchases will be distributed all around the world. But the truth is that US trade level is just twenty nine percent that includes both imports and exports. In the coming few years America will be importing less and will thus have a less global economy. Economists Eric van Wincoop and James Anderson have successfully calculated the average cost ignoring tariffs for international trade. According to them it is equivalent to one hundred and seventy per cent tariff. Thus even in countries like Canada and US where the borders are adjacent national borders exist. Therefore the world economy is still a thin crust of global economy which may appear thick due to the presence of technology, luxury goods and media. It is a network of national economies that are regionally linked over many sectors. The nation state is still very much economically relevant as many people still live in the very same nation that they are born. This makes their economic fortune to be dependent on consumption levels and wage within their country and society. This story applies for capital as well as money stays where people stay. If people stay in their national country they spend there. Although with the advance in technology the concept of liquid capital is about money being transferred around the world in a flash. But it is only a small fraction that is only ten percent according to a research. Many of the non-human capital like the infrastructure, real estate and financial capital do not flow very much. (Jones, 2006)This helps in tying the output capital to some nations. Therefore the abolition of the nation state is not visible in the near future. The question that we do not need to answer in some years is that may be some day it will. But we do not need to worry about it for many years to come. Phrases like “borderless world”, “flat world” and “the shrinking world” do not accurately describe the current economy, political reality and current trade. The users of these phrases are unthinking and are unhooking the leaders off their hooks.

References

Baldwin, R. a. (2008). “Restoring the G20s credibility on trade: Plan B and the WTO trade talks,”. The Collapse of Global trade , 39-46.

Cameron, A. a. (2004). The Imagined Economics of Globalization. London: Sage.

Crang, P. D. (2003). ‘Transnationalism and the spaces of commodity culture’. Progress in Human Geography , 438–56.

Dicken, P. (2007). Global Shift. London: Sage.

Jones, A. (2006). Dictionary of Globalization. Cambridge: Polity Press.

Parker, B. (2005). Introduction to Globalization and Business. London: Sage.