What is the Global Phenomenon: Discussion

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As one of the most publicized buzzwords of the Information Age, the term globalization seems to lurk its way towards all aspects of our lives. Globalization is catalyzing important changes in the economic, social, technological, cultural, and political arena, yet the developments it had brought about are superficial because it has numerous negative implications for people in poorer countries. Lindsay and Daalder claim that ″globalization is not just an economic phenomenon, but a political, cultural, military, and environmental one as all″ (144). As a concept, McGrew captured the complexity of the current view of globalization in a concise and balanced way. He defined globalization as:

The multiplicity of linkages and interconnections between the states and societies make up the modern world system. It describes the process by which events, decisions, and activities in one part of the world can come to have significant consequences for individuals and communities in quite distant parts of the globe (McGrew 23).

However, Jubasz exposed that, based upon an unswerving data available, economic globalization consistently ushered in the “dramatic increase in global inequality and poverty in modern history”. Globalization of trade had only benefited the countries with bigger economies to dominate over economically challenged countries. Furthermore, United States Trade Representative Bob Zoellick argued in the Washington Post that economic globalization emphasized how “fragile democracies” are in difficulty in overcoming poverty and building up the opportunity. Thus, policies that govern globalization seemed to be detrimental for Third World countries. When these policies are to be enforced in their full force, countries around the world will find themselves struggling in the future at worst circumstances. In other words, globalization seems to be capitalism in sheep’s clothing.

With economic globalization, policies like liberalization, free trade, deregulation, diminished government spending, and privatization focused their benefits towards nations that fix the rules. This makes Third World governments and communities powerless and they serve as pawns victimized by the unfavorable measures of globalization. Problems like ensuring equity to protect workers, protecting the environment, doling out social services, and instigating sustainable livelihoods will be ignored if they pursue to become globally competitive. Thus, it cannot be denied that economic globalization and its institutions that promote it, like the North American Free Trade Agreement (NAFTA), the World Bank, the International Monetary Fund (IMF), and the World Trade Organization (WTO), only promoted the onslaught of global inequality and global poverty that preyed upon the poorest nations around the world.

Thomas Friedman (1999) in his book “The Lexus and the Olive Tree” has talked about the increase in the world’s prosperity coming into focus through the path technically called globalization. Technologically this entity has got its derivation from US-supported free-market capitalism which in the long run has been the ultimate tool of world integration and creation of a cohesive environment. The changes have been irrevocable with living standards getting raised.

If we look into the news reports, one would find that economic giants from third world Asia namely China and India are expected to grow at the rate of 9.7 and 6.5 percent respectively. The GDP growth rate of these nations is much higher than that of any developed nation. It’s not just the growth rate but also the sheer size of the economies of these nations that have made them an indispensable part of the world economy. It’s not just these two nations that have shown higher growth but many other developing nations which include almost the whole of South East Asia and a few parts of Latin America. Globalization has started giving results. The process which has got its roots right from the beginning of the 20th century with the beginning of economic cooperation between Europe and the United States has now become synonymous with the word development no only in the western world but also in Far East Asian Countries (The World Bank Group, 2000). Similar results get a meaning if we look through the eyes of the theory of comparative advantage.

The theory in the context of international trade explains the benefits of trade between two countries without any barrier even if one is more efficient at producing goods or services needed and produced by the other. The comparative advantage suggests that even in case of a country lacking the absolute advantage of specialization in any good it can produce and trade with other nations, it still has the option of specializing in production and export of those products with which it has the somewhat relative advantage (Bromley, Mackintosh, Brown, and Wuyts, 2004, p. 47). The terms like comparative or relative advantages have often failed to create the same impression as that of absolute advantage and hence this concept of comparative advantage has often been misunderstood. The concept of absolute advantage as described by Adam Smith suggests that a commodity produced cheaper by a foreign nation should rather be bought from that nation and the resources available should be employed in a way in which we have some advantage (Bromley et al., 2004, p. 46). This simplicity of absolute advantage has made the concept very popular and easy to comprehend. Moving on to the concept of a comparative advantage given by David Ricardo; the concept is not at all intuitive at first go and will require explicit numerical examples for better explanation.

Globalization as a whole might have a single definition but in reality, it has multiple faces. In the beginning, it was as simple as a trade agreement and associations. Later it got itself transformed into collaborations between firms of different nations not only for trade but for technological development also. The case of man-made fiber is a very good example of cooperation between firms in the US and Europe. But after Second World War, globalization started to spread across third world nations of Asia and Latin America. The Latin American nations of Mexico, Brazil, and others were more or less became one of the fastest developing regions of the world with annual growth of the countries lied between 6 to 9 percent with Brazil termed as a miracle economy leading the race with 9% economic growth in the period 1965 to 1980. The other South American giant Mexico continued to grow at a pace of 6 % over the three decades from1950 to 1980. But the region could not sustain its growth and had to face an economic slump in the 1980s due to the debt crisis.

Though it has been argued that it’s the internal factors like corruption, wrong policy, and microeconomic failure which had caused the failure of the South American economy but in reality, the globalization of the region despite giving good results for three decades failed in the long run. Conditions in Asia were different from the beginning. The Middle East region of Asia saw many western firms building establishments to gain control of the world’s most important commodity i.e., oil, and hence the first wave of Asian globalization post World War II was for oil though it was not absolute rather an attempt of the west to maintain an uninterrupted supply of oil. The actual Asian Globalization began with the countries of Southeast Asia who were termed Asian tigers.

South Korea along with Taiwan was leading the pack and was only behind Japan. With a strategy of export-oriented economic integration, the degree of integration was not uniform rather varied in different spheres and changed over a phase of time. For almost 30 years these countries maintained import control to provide the cushion of the domestic market and hence competitive edge in international pricing. Though in the 1990s some countries of South East Asia faced economic crisis they continued to grow with a crisis not extending to a very long period. Some of the major currencies of the region saw unprecedented fall due to the withdrawal of money by western investors who lost their interest in the securities of East Asian nations. But it was the support from IMF and World Bank which helped these nations in getting over the problem and again the region is showing high economic growth (Panelver, 2002).

Looking at the income gap “between the fifth of the world’s people living in the richest countries and the fifth in the poorest doubled from 1960 to 1990, from thirty to one to sixty to one” (Jubasz, par.3). This outrageous phenomenon of widening gaps in world incomes came to worsen more in 1998 when it amounted to seventy-eight times wider for richer nations, as poor nations are still in limbo how to help their poverty-stricken people. Together with the widening income gaps, poverty trends tend to go directly proportional with it as there are “100 million more poor people in developing countries today than a decade ago”. The discrepancy is so great that when you combine the assets of the world’s top 3 richest persons you will come up with a greater amount when someone compares it to the 48 least developed nations’ Gross National Product (GNP) (Jubasz, par.3). In realization of these unbelievable facts, the richer nations and people appear to be the wolves who will feast on the meat, while Third World nations will just have the scraps of the benefits of globalization. A flagrant example of the two sides of globalization would be obvious when we scrutinize the outcome of the North American Free Trade Agreement (NAFTA).

Indeed, an undeniable circumstance that NAFTA has brought about is the sharp expansion of regional trade and investment in the region. For example, throughout 1993 towards 2004, “US merchandise exports to and imports from Mexico have increased by 166 and 290 percent, respectively” (Hufbauer, 37). As Mexico is burdened with gargantuan debt, their government regarded a trade bloc with the United States as an essential step in achieving economic development. The United States desired to maintain stability in Mexico and saw abundant and inexpensive Mexican labor as beneficial to U.S. companies that were anxious to gain a competitive advantage over the Japanese and Europeans. Canada, wanting to retain its favorable trading relationship with the United States, viewed economic integration in North America as a way of countering U.S. dominance of the Americas (Vega-Canovas 230). More specifically, NAFTA has been accused to have caused environmental degradation in Mexico. Gallagher observed that “rises in income (in Mexico) have been small and environmental degradation has been large” since NAFTA was established (190). Costly environmental degradation is slowly eating away the natural resources “because the proper mechanisms were not put in place to help Mexico manage its economic growth in an environmentally sustainable manner”. To keep at pace with NAFTA, “Mexico doubled spending on environmental protection and started a much-needed industrial environmental inspection program” (Gallagher 190). However, upon the implementation of NAFTA, “fiscal and financial woes set in” and prioritizing the care for the environment are ignored.

Moreover, labor issues had rocked NAFTA in the 1990s. It had been an issue during Ross Perot’s presidential bid against Clinton and the famous claim of an impending “giant sucking sound” helped frame the political debate, but also alluded to important economic trends that affected them all. The fact is that Mexicans complain of the devastating impact it has had on small farmers in Mexico after being integrated into NAFTA. Dugger reported that the Carnegie Endowment for International Peace, a research institute in Washington, D.C. filed a report concluding that NAFTA “failed to generate substantial job growth in Mexico, hurt hundreds of thousands of subsistence farmers there” (A9). The net effects on jobs in the United States were not that substantial. Income inequalities in the region have widened and illegal immigration still plagues the region (Dugger A9). The World Bank, on the other hand, found that NAFTA ushered in beneficial economic and social effects to Mexico and argued: “that Mexico would have been worse off without the agreement” (Dugger A9).

Yes, globalization can promote growth when it is fully executed. But when we study carefully the claim that growth benefits everyone around the world we will realize that this “claim” hides the essence of globalization as a concept that it would alleviate world poverty. Yes, there is growth and development as in the case of Mexico, yet we should ask — for whom and growth at what cost? Indeed, the present productive systems themselves have become increasingly multinational and automated. Post-industrial production systems are highly technologized, require little labor, and involve numerous steps, components, and processes that are scattered across a transnational web of technological specialization. Much of the shift represented the enormous growth of transportation and communication facilities. This development characterizes the process of the globalization of production. Whether a mature industry moves to a Third World country or becomes mechanized or automated, the results are the same: a loss of jobs in that industry.

This has become evident in developed countries for over a decade. In the meantime, there have emerged new kinds of industries (chemicals, pharmaceuticals, electronics, computers, etc.), which are characterized by the following features: they are knowledge-based, highly technologized, multinational, and require only a small labor force. The fact is that Third World economies persist and inequality is still dividing widely the world into two: the rich and poor nations. When you look at newspapers and magazines, one can experience guilt at seeing pictures of starving children in Africa as one could blatantly compare them with the luxurious and extravagant lives of people living in the US or Europe. Globalization might yet to fulfill its promise of transforming backward economies, but then again there is no clear-cut indication that these countries would take a straight route towards the liberal democratic model of Europe and the Americas. Through time maybe, in the distant future democracy would be as worldwide as McDonald’s and Coke but then again, the homogeneity might result in the basic classification of countries. Third World countries will always be dominated by richer countries through globalization. If there will be no win-win policies that would be drafted to counteract the inequities of globalization, then it will remain to have negative impacts against Third World nations.

Works Cited

Friedman, T. L (1999). The Lexus & the Olive: Understanding Globalization, Farrar, Straus & Giroux 394.

Penalver, M. (2002). Globalization, FDI and Growth: A Regional and Country Perspective, United Nations Department of Economic and Social Affairs.

S. Bromley, M. Mackintosh, W. Brown & M. Wuyts (2004). Making the International: Economic Interdependence and political Order. Pluto Press.

The World Bank Group (2000), Assessing Globalization, Economic Policy Group and Development Economics Group.

Dugger, Celia W. “Report Finds Few Benefits for Mexico in NAFTA”, New York Times, 2003, A9.

Gallagher, Kevin P. “In Mexico, Free Trade Has Led to Large-Scale Environmental Degradation”. In Miller, D. (Ed). Current Controversies: Globalization. Detroit: Greenhaven Press, 2007. Opposing Viewpoints Resource Center. Gale. Apollo Library. Web.

Hufbauer, Gary Clyde. NAFTA Revisited : Achievements and Challenges, Washington, DC: Peterson Institute for International Economics, 2005.

Jubasz, Antonia. “Globalization Is Making World Poverty Worse.” In Balkin, K. (ed.), Opposing Viewpoints: Poverty. San Diego: Greenhaven Press, 2004. Opposing Viewpoints Resource Center. Gale. 2008. Web.

Lindsay, James M. and Daalder, Ivo H. ” The Globalization of Politics: American Foreign Policy for a New Century.” Rpt. International Views: America and the Rest of the World. Ed. Keith Gumery. New York: Pearson Education, 2007. 141-151.

McGrew, A.G. “Conceptualizing Global Politics”. In A.G. McGrew, and P.G. Lewis (eds), Global Politics: Globalization and the Nation-State. Cambridge: Polity Press, 1992, 1-28.

Vega-Canovas, Gustavo. “NAFTA and the EU: Toward Convergence?”, in Yeung et al. (eds.). Regional Trading Blocks in the Global Economy, Cheltenham, UK: Edward Elgar, 1999.

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What is the Global Phenomenon: Discussion

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