‘Recession’ is one such negative effect which has decimated the growth of developing nations as well as the developed nations. Henceforth a question arises whether free markets are to be blamed for this? If a particular process brings lots of benefits for markets would it be justifiable to blame it when it is not doing too well? The governmental issues and regulations can also be questioned in this regard. However the blame game needs to stop and ways must be found out as the process of globalisation cannot be held up due to one slip. The remedy lies in the development of the multidimensional model for markets which will give rise to a new global economy. The process must begin by involving new economic powers which are on the rise. The other key growth driver is the private financial market which will continue to be the strongest component in the worldwide development. The need for the multidimensional system arises as it is the best at this point of time through which the down-slide of the economy can be countered. Some adjustments need to be made on this. The system should be of a flexible one and not a fixed one. A network must be built which will maximize the strengths of interconnections. It means that the system must be built based on political and economic factors. The traditional mode of thinking must be avoided and newer concepts such as energy and climatic changes must be prioritized.
As pointed out by Jeffry A. Frieden in his book Global Capitalism: Its Fall and Rise in the Twentieth Century, globalisation has led to the practice of exploitation of cheap labor offered by Third World nations. A highly publicized recent case is the operations of sportswear maker Nike in countries such as Indonesia and Philippines. Documentary filmmakers have recorded the inhuman working conditions offered to laborers in Nike plants in these countries. Moreover, these workers were never offered medical insurance or prescribed minimum wages. As a consequence of this negative publicity, many consumers in the West have refused to consume products that were manufactured through exploitation of labor in developing nations. While the condition in manufacturing hubs of Taiwan, Thailand and China are not as harsh as in Indonesia and Philippines, they only barely adhere to international human rights standards. So, while global capitalism is further developing the length and breadth of its reach, it benefits certain sections of people while disadvantaging others. (Frieden, 2003)
As part of researching for this essay, I interviewed a few people working in the financial system, one of whom is Harry Santyoso who is into stock market and I instantly wanted to know how globalisation affects the capital markets? He told me that listing of foreign companies’ stocks in the stock exchanges of other countries is defined as the globalisation of stock markets. Now secondly I wanted to know that why stocks are traded in other countries? Harry replied that the basic reason behind such listing is the minimization of costs and the free flow of promotion for that particularly stock in the other country. Also it allows the country to invest its stocks internationally. He also told me that due to globalisation markets are deregulated. The basic advantage from this is that it includes elimination of foreign exchange controls, reduction of taxes imposed on foreigners, relaxing norms for the foreigners to buy domestic securities, issuance of bonds by foreign borrowers and the involvement of the foreign investment banks in underwriting bonds and stocks in domestic stock markets. Finally I wanted to know the effect of recession on globalisation from him. Harry told me that all the factors in the economy are closely related to one another. He gave me examples to justify his answer. He told me that if there are job cuts or reduction in the pay scale then general public will not be in the mood to make expenditure on purchase of products. Now if they do not buy products the demand for a particular product will not be there, the revenues of that particular company will hence fall which again will cause the reduction of pay scale or job cuts.
I also had the privilege of interacting with Peter who is working in the wells Fargo for the past 3 years. I wanted to know the effect of globalisation on the overall banking system. He told me that due to globalisation banks have been the heavily affected sector. He says so because the availability of deposits and granting of loans and advances have increased due to this process. It has now become easy for corporate houses to take loans from the banks at their convenient rate. A fair competition has evolved between the several banks and everyone is willing to woo its consumers by providing them loan at a cheaper rate. The foreign reserves of the banks have grown largely due to globalisation. He also told me that if a bank in US is granting loan at say 5% while the same is available at Switzerland at 4% then corporate will move to Switzerland. However the corporate companies have to a bit careful with the fluctuation of the exchange rates so that they can draw the benefit from such borrowings.