Understanding Globalization: Its Process, Actors, And Impact

Introduction to Globalization

Although the term “globalization” is recent, the phenomenon is not. Indeed, we are currently within what could be called “third globalization”, although historians still argue about the actual number of globalizations that have marked our era.Globalization in crude way is the establishment of an inter-connectivity with different nations, markets and the society as a whole. Globalization although is a market oriented term but it has its deep roots embedded in to the politics.Global trade and commerce is not a new subject that raises concerns among the world leaders, because it all started with the advent of the silk road, the spice trade that connected the Asian nations with the European market. It has its origins in the period marked by the “triumph” of liberalism and the financial markets, which corresponds to the 1990s. By globalization, we mean interdependent economies that are characterized by progressive growth of global territories and businesses. But what is the mode of operation of this phenomenon, and what are its main actors?As a first step, we will be interested in the aspects and the process of this globalization, and then we will be interested in the main actors that make this globalization work.

Globalization has many faces and can be seen in various waysforms.Appreciated by some, and denounced by others, it is not everywhere welcome in the same way. It is characterized by an interdependence of economies and a globalization of trade, which corresponds to a global acceleration of trade in goods and services, mainly raw materials, food production, capital and services.After the end of the second world war, political heads of 15 countries in December 1945 begun a talk which was based on the formulation of a custom tariff that will give a boost to the world trade.This later resulted in the formation of General Agreement on Tariff and Trade.After the setup of GATT,aglobalizationof trade resulted in the gradual lifting of trade barriers under the GATT (General Agreement on Tariffs and Trade), then the WTO (the World Trade Organization) since 1995, as well as by the considerable development of the means of transport and communication these last decades.

Between 1975 and 1995, these exchanges have increased five-fold, making the 1990s a new era of globalization, which will be more marked by capital exchanges, particularly with the stock exchanges. Triad (London, Tokyo, and New York essentially), services through transnational corporations (TNCs) such as fast-food chains like Mcdonald’s for example or KFC, or even information exchange using globalized products such as laptops and mobile phones that significantly facilitate global communication, including accelerated by the invention of the Internet in the 1990s.

Technical progress in transport also comestoadd a certain dynamic to this globalization. Indeed, the containerization of the multimodal platforms, process allowed thanks to the impulse of the American entrepreneur Malcom McLean and consisting of generalized the use of the container in the transport of goods, the hubs (porturaires and air) that is to say to say zones (international ports) of concentration and bursting of containers at the level of a country or even of a continent, as well as the rise of telecommunications (NTIC) come to accelerate this process.

The Historical Roots of Globalization

Since it is based on the Western model, it works as follows:

transnational firms, seeking to increase their productivity, will try to reduce their production costs. For this, these firms will then relocate to southern countries, where labor is considerably cheaper, to have their products manufactured while increasing the working time of employees, who are also paid at more than miserable wages, which will have the effect of increasing the productivity of the company, the goal. However, although the manufacturing is done abroad, the design of the product is always done in the countries of the North, where the headquarters of the company is located. Thus, what is called the “Research & Development” of the product is done in the countries of the North, while the countries of the South they serve rather “workshop” to firms: this is what we call the International Division of Productive Processes (IPPD). The marketing of the product, it is done on both sides of the world, although it is the northern countries that benefit the most because they are the majority with nearly 80% of the exchanges that are between them.

On the other hand, the North / South divide is all the more marked since the small producers of the North accuse the countries of the South of resorting to what we call the “Dumping”, which are commercial practices contrary to the spirit of competition. In fact, weakened by the countries of the North, the countries of the South would use this method in various forms: ecological, by imposing on foreign companies only very few restrictive ecological standards, fiscal with few imposed taxes, as in Africa of the South, for example, where corporation tax is imposed only on companies whose head office is in the country and therefore considered as resident and therefore taxable, but also social with countries that do not impose a minimum wage ( minimum wage) and thus presenting a cheap labor and few or no restrictions on standards and working hours, as in China for example.

           This mode of operation also leads to a multiplicity of flows of all kinds. First, it is about trade flows: between 1980 and 2010, the value of trade was multiplied by 4, thanks in particular to the liberalization of trade in 1980, which includes all measures taken to facilitate the development as well as the strengthening of international exchanges. In terms of percentages, nearly 70% of the products marketed are manufactured, 20% of them are energy and mining products, while only 10% of them are agricultural. These flows are essentially organized around the Triad (East Asia, Western Europe and North America) and emerging countries.These countries are considered as rich and developed, and thus their political intervention into the underdeveloped nations often play a major role in shaping the domestic politics of an underdeveloped country.

Other types of flows: intangible flows. Between 1990 and 2010, capital flows, essentially, foreign direct investment (FDI) between major stock exchanges has increased fivefold, while information flows have exploded since the 1990s.Finally, the last type of flow, which corresponds to a flow of person, or human. Heencompasses two categories: the first being migratory movements, which may be legal, particularly economic flows with, for example, the so-called “brain drain”, made possible by the development of means of transport enabling thus everyone has new perspectives, but it can also be illegal through illegal migration which, despite restrictive policies, is constantly increasing. In fact, between 1975 and 2012, the number of migrants increased from 77 million to about 200 million.

Impact of GATT and WTO on Global Trade

But there is also another very important human flow that constitutes the dynamics of the economy of several countries such as Morocco for example: it is about tourist flows. Indeed, thanks to the lowering of the cost of transport especially due to the appearance of new companies say “Low-cost”, the number of tourists went from 20millions in 1950 to 1 billion today, that is to say nearly one seventh of the world population. This increase in tourist flow is also due to the increase in our standard of living in general. 

But this globalization has not been done alone: ??many actors arecome into play to make it possible.First, transnational firms that have an implementation strategy based on the international division of labor (DIT), as well as their economic weight. Indeed, the 80 000 FTN alone account for nearly two thirds of global trade, 25% of global GDP but employ only 4% of the world’s workforce, which is excessively low when we associate the latter percentage to both previous estimates.

Second, there are regional and inter-governmental organizations such as NAFTA (North American Free Trade Agreement), the G8 grouping the 8 world economic powers (United States, Canada, France, United Kingdom, Germany, Japan). , Italy and Russia) which is a discussion and economic partnership group, which will initiate the creation of the G20 in 1999 with the integration in addition to the 8 first powers of 12 new countries considered as emerging (Brazil, China, South Africa, Argentina, Saudi Arabia …). These organizations are all based on the same liberalization policy.While, these trade agreements apparently seem to be beneficial for the whole group, but it is aimed to benefit only the developed nations within the group.

 Then, there are non-governmental organizations (NGOs) such as the World Bank, created in July 1944, the International Monetary Fund (IMF), created in December 1945, the World Trade Organization created in 1995 and which revived, the same year, the free trade agreements, and of course the United Nations (UN), recognized on a much larger scale than the others and founded in 1945. These bodies are both regulators since they control these exchanges, but also accelerating as they allow their diffusion. On the other hand, they contribute to the formation of some form of international public opinion.With the creation of World Bank, International Monetary Fund that basically provides monetary support to the debt countries that either need finances for their infrastructure buildup or when the foreign exchange reserves are reducing at a faster rate. Such countries become debt and the economic condition deteriorates. While on assessment these countries do receive the necessary fun to pull them out of the debt, but certain conditions are often imposed on the debt ridden country. Such conditions often range from opening the market for foreign direct investment or deprecating the currency in comparison to the foreign currencies. However, hidden politics of the developed countries come into play. These politics play a major role benefiting the developed nation, that otherwise find it difficult to enter into a country’s market. Hence, when the debt ridden country accepts the conditions, the strategies framed by these developed nations play a big role in the spread of globalization.

Process of Globalization and Its Different Types of Flows

To highlight the fact how developed nations, use politics over the under-developed third world countries. WTO was setup with a sole motive to monitor and regulate the trade tariffs of several countries. However, several developed nations like USA often use politics to alter the trade tariffs that benefit them. This very act result in the reduction of the foreign exchange reserves of the under developed third world countries.

Then, like other actors, we find the states. They use theirpowers to attract investors by “self-promotion”, and intervene in WTO negotiations. However, they seem weakened by the relocation strategies of the FTNs, which they seem unable to hinder. But they still retain a real weight: by the law, by the policy of regional planning as well as by their regulatory role through aids or taxes for example. Moreover, many inter-state associations aiming to create regulated markets or protected markets are likely to emerge, and the European Union is the most successful example.And finally, we must not forget the diasporas who also intervene in thisglobalization process. These correspond to all the foreign populations that will be established in a country in order to make their culture a trade. Indeed, globalization has allowed the creation of new traffic conditions. Whether information, beliefs, goods or people, everything flows more freely than in the past. One can emigrate easily without having to cut oneself completely from one’s family left in one’s native land. The phone becomes more and more accessible as the means of transport become more extensive and cheaper.

Among the most established populations on a planetary scale is the Chinese diaspora, mainly located in the big cities, in southeast Asia, as well as in Europe. 

In conclusion, the functioning of this globalization relies on many actors as well as flows of all kinds, and is based on the financial logics driving these exchanges, benefiting more the TNCs than the population, which has the effect of creating a certain “financial elite”, further accentuating this gap of ‘inequality. A new economic map of the world has thus been generated thanks to the growing interdependence of economies between them. But even though it allows for significant economic and social growth, globalization remains at the root of many inequalities around the world.This brings groups, initially called anti-globalist then anti-globalization, to challenge this mode of development, denouncing these inequalities and advocating for a fairer and more equitable globalization, but also more respectful of globalization environment. Even the politics played a major role in the spread of globalization because the developed nations consider their national interests above any other international concern. Therefore, it shapes its interest that best suits its development and progress in the international market. These developed nations often find it difficult to enter into another country’s domestic market. Hence, they impose tariffs and trade embargoes that best suit their national interests. To summarize, globalization is the cause of economic inequality across the globe that needs to be curbed at the earliest. Since politics drives globalization, it can be stated that political power is the root cause of such inequality at the fundamental level. 

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