The word ‘globalisation’ is almost interchangeable with the term ‘economic liberalization’. Standing almost at the end of the 21st century, a question may arise in our mind –whether this open economy, a direct product of globalisation, has actually been a boon to the world’s economy including the social and economic scenario. Careful thought brings out the consequences like recession, global financial crisis and other related impacts. However just like every problem has a solution this issue is also addressable. We have come too far to look back at the time of conquests and colonization. Hence globalisation cannot be abandoned for sure, but a multidimensional approach might help in dealing with the economic problems associated with globalisation. Due to the enhancement of the technology and globalisation the countries are able to increase the production basket in their economy. In addition to these the benefits that have been reaped from it are improved consumption choices, employment opportunities, and enhanced lifestyle patterns. (Thorsby, 2001, pp 155-156) However a more analytical view may be provided regarding the effect of globalisation on the economy. To support this analysis the paper has focused on extensive secondary research and two primary sources.
The basic advantages that globalisation brings in are the improvement in the labour forces, the efficient structuring of organizations and the exchanges that takes place between workers from various cultures. Since labour forces are the human resources and sometimes the intellectual capital of the organization we need to assess its impact on the organization as a whole. Globalisation has caused workers to associate with other workers across vast geographical distances. In addition to these the constantly changing needs of consumers across the globe is a big issue. Organizations have to utilize their human resources in a meaningful way to get the optimum productivity and efficiency. Only this will enhance the competitive advantage of an organization in the dynamic global market. In relation to this the socio demography plays a very important role. People who belong from different communities do have certain mannerisms. Language and culture also play a very vital role in it. All the three elements (labor force, organization and social demography) are correlated to one other. Absence of any one of them can prove to be fatal for each. Sometimes lack of linguistic proficiency among workers from various geographies acts as a barrier to the smooth functioning of an organization. Hence organizations depend on knowledge acquired firsthand with regards to understanding the mutual likes and dislikes of an employee from a certain socio-cultural background. The advantage that firsthand experience brings is that it cultivates both direct and reflected knowledge. (Mortensen, 2009; Beyene, 2009)
With globalisation the demand for various products have increased excepting for financial services. Now the crucial question is whether financial services across the world are of high standards? The answer is no, as is suggested by the fact that demand for financial services continues to be low in emerging markets. The reason that has been projected is the lack of financial literacy and imagination towards the field of financial services. This has restrained the growth in demand for financial services. There has been another justification which states that demand for financial services are low due to two factors. First is the expensive nature of the services and secondly it does not add much value to an extremely poor society. However if we analyze rigorously we will find that financial services can be improved if the financial literacy programs are developed in these societies. An instance can be viewed in this light where the development of financial literacy programs has helped the uneducated and illiterate to open savings bank account. But on the contrary the cost associated with the financial training program is very high. (Cole, 2009; Sampson, 2009; Zia, 2009)
Globalisation has become ubiquitous in the new neo-liberal world order of the last few decades. However, all too often, the flaws inherent in this system have caused distress to populations negatively affected by it. Moreover, the loopholes of international business law allow Multinational Enterprises (MNEs) to go Scot-free and evade accountability toward the citizens of the countries in which they operate on. While the activities of Multinational Enterprises in developing countries can either be beneficial or disadvantageous to a country, recent evidence suggests that there are more cases of the latter than the former. The primary criticism leveled against economic globalisation is that it perpetuates lack of accountability and irresponsibility on part if its practitioners. While global financiers and speculators can accurately evaluate the values of tangible assets, more often than not the measure of intangible consequences of an MNE’s operations are not accounted. In other words, certain ‘externalities’ such as pollution of water sources, global warming, internal displacement of people are not accounted for. (Smith & Debrah, 2002)
‘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.
The research in this paper finally points out that globalisation has seriously affected the financial markets across the world and the banks and financial agencies were most affected apart from the common people. However the world is full of complexities and hence multidimensional model can create problems. This problem has to be undertaken with tactfulness and existing machineries of the government will not be sufficient in this. G7 which involves managing differences and solve problems may not be the right choice and a better group must be evolved in place of this. World Bank, IMF and WTO are the new groups which can support the steering group. The core function of this group will be to recover the economy from down sliding and suggest suitable reforms for the financial system. Since the global energy markets are at a mess a bargaining may be done between the producers and the consumers. The bargain will include sharing plans which will ultimately affect the supply of these energy resources. (Zoellick, 2008) The basic idea is to improve efficiency in these energy sectors. Thus a multidimensional corrective approach should be adopted.
In conclusion, it is quite clear that much of the criticism directed at global capitalism is justifiable, especially in the context of the developing world. The objections related to this economic system are part of a broader critique of contemporary industrial societies. These criticisms include deceptive mass advertisements, over-population, environment damage, toxic dumping, corporate greed, etc. The global capitalists, who are essentially based in Western democracies, can virtually dictate terms of trade for the rest of the world due to their military and economic superiority. And being the torch bearers of unfettered laissez faire capitalism, the powerful business interests often dictate local government policies (Kukec, 2007). This heady mix of wealth and power has so far led to outcomes that have harmed communities at large and the environment in which they live. The poor people in developing nations are especially badly hit by this phenomenon. Seen in this context, the adoption of a multidimensional remedial approach to globalisation is much needed, so that its benefits reach all sections of society while also preserving the environment.
References
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