Globalization is a general term for economic, political, cultural, and environmental interconnections realized through advanced technologies. Some of these technologies include transportation, internet, and telecommunication (Kofman, 2003). Although the word global has been in existence for the last four hundred years, the term globalization is believed to have been coined in the early 1960s. In the early 21st century, it was estimated that there were millions of virtual and printed spaces referring to globalization (Kofman, 2003).
Classical international trade theories depict the key factors spearheading international specialization and the associated international trade. These theories largely depend on factors of production such as capital, labor, and land. Some of the classical international trade theories that support the concept of globalization include Mercantilism, Heckscher0Ohlin, New Trade, Porters, David Ricardo, and Life Cycle (Kofman, 2003).
Media and economists have identified various drivers of globalization. These drivers of globalization can be categorized into five different categories; technological drivers, political drivers, market drivers, cost drivers, and competitive drivers (Kofman, 2003). Fundamentally, technology has shaped and set the base for modern globalization. In the late 19th century, advancements in freight and aircraft industries were considered as the main drivers of globalization. However, with the inventions in the telecommunication, IT industries, and increased internet connectivity, internet has come to be a major driver of modern globalization. Currently, increased usage of the internet has revolutionized modern information systems (Kofman, 2003). Likewise, liberalized trading rules and deregulated markets are considered as the major political players spearheading globalization. As a result, tariffs have been lowered allowing global direct investments. Correspondingly, international markets have provided more opportunities and customers as the domestic markets saturate. In addition, global marketing channels and advancement in marketing are also the major market drivers of globalization (Kofman, 2003). Due to firms being lured to establish in countries or regions considered source and cost efficient, globalization has thrived well in those countries. Consequently, global inter-firm competition has forced most of the organizations and business to adopt international cultures, and as a result enhanced globalization (Kofman, 2003).
With the accelerating pace of globalization, life in poor and rich countries is equally affected (Stiglitz, 2002). Currently, globalization is acknowledged as the most powerful force for economic and social good in the world. In most countries, that have gained from globalization, the main factors that have spurred economic growth, include low labor cost and large flow of foreign direct investments. Far beyond economic arena, there have been remarkable changes attributed to globalization. For instance, in the 21st century, globalization has resulted in adoption of democratic and participatory governance by most political organizations (Stiglitz, 2002).
Although globalization has helped reduce poverty level in most developing countries through stimulating economic growth, it should be noted that not all developing countries have benefitted. In the year 2001, the World Bank released a report indicating that only 24 developing countries had managed to achieve a stable economic growth because of globalization (Stiglitz, 2002). In this regard, globalization has not only left many of the worlds developing countries poor, but also endangered their environment (Stiglitz, 2002). Due to the expansion of international companies, domestic companies have become endangered, as they cannot sustain the competition from international companies. Similarly, most developing countries have found themselves abusing and overusing their natural resources to meet the ever-growing demands in production of goods and services (Stiglitz, 2002).
References
Kofman, E. (2003). Globalization: Theory and practice. (2. ed.). London: Continuum International Publishing Group.
Stiglitz, J. E. (2002). Globalization and its discontents. New York: W.W. Norton.
Globalization is a process of international linkages between countries in the world in terms of cultural, political, and economic networks. Various parts of the world find themselves not only affected by events happening many miles away, but they also tend to intervene in those events where they can, to avoid such negative effects. Globalization of the international economy is the linking of international markets through social and infrastructural networks that make it operate as one big market. The process involves the cutback and elimination of controls between national and regional borders to simplify the movement of goods, capital, services, and labor. This enables mutual trade between countries in diverse regions to go on in increased intensity and higher volumes being traded.
Globalization during 1800-1914 involved the search for raw materials for industries in Europe and other parts of the world. This leads to the transfer of capital, knowledge, people in form of migration and slave trade, and transfer of commodities. During this period, the flow of goods, services people and capital moved from continent to continent and lead to integration. In 1914, the First World War broke out undermining globalization.
Trade- The main utilities of this international trade enhancement are improved physical infrastructure and transport systems such as shipping, air transport, and road and rail networks. Between 1800 and 1914, trades among continent, s grew and was supported by the construction of Suez Canal and the successful usage of steam ship. The steam ships helped to reduce the transportation costs. There was a construction of railway especially in Europe and their colonies.
Capital flowEurope was a source of capital during these periods. Most regions, which had access with a Europe capitals developed quickly. Countries like Australia, Japan, Canada, USA, Argentina and Brazil had great development because capital from Europe. Continents like Africa experienced capital inflow from Europe especially in the construction of communication and transport networks. Britain was the largest exporter of capital followed by German respectively. It is estimated that the three countries had 75% of total capital outflow. Britain exported 42% of the total capital (Maddison 1995: 65).
MigrationDuring this period people migrated between continents and this period there was no restriction of movement of from various continents. Movement took place as slave trade immigration. People from Africa were taken to Americas as slaves while people from Europe, Americas, and Asia moved to other parts of the world to settle, look for raw materials, and offer labour. Those who moved were looking for a greener pastures. Though colonialism and slavery have long since been abandoned as social systems, Christianity continued to play a role in driving forward mostly western capitalist ideals despite the fact that it was originally a Middle East religion.
Trade in knowledge- In the United kingdom there was a law for forbidding the emigration of skilled people. However, this was to repealed and skilled people moved to different parts of the world. Though it is not necessarily a new phenomenon, Globalization has been intensified with the improvement in technology. Currently it is very difficult to live in one part of the world without gaining access to goods, services, and information from other parts of the world. This is mainly due to the cultural load of advertisements than influence people to accept cultural items such as foodstuffs, medicines, and dressing as the best or the most modern. A desire is created for such items, which results in a vacuum calling for satisfaction. In this way the wheels of international trade grind on without inhibition.
Christianity has become a primary component of both globalization and capitalism. The spread of Christianity during the 18th century and 19th centuries by various missionaries was in many cases a precursor of colonial occupation mainly driven capitalist ideals. The spread was christened the bible on one hand and the gun on the other. This clearly depicts the manner in which the gun was used to lure new converts while the colonists using guns soon enough coerced those who did not adapt to the new religion. Though colonialism and slavery have long since been abandoned as social systems, Christianity continued to play a role in driving forward mostly western capitalist ideals despite the fact that it was originally a Middle East religion.
Reference
Maddison, A., (1995). Monitoring the World Economy 1820 1992. Paris : OECD.
Globalization is a very contentious subject all over the world, starting from the definition of its impact on the economy. Alan Rugman defines globalization as a process through which the world is unified into one society and function1. Globalization is multifaceted since it is a mixture of economic, technological, social, cultural, and political aspects. Globalization is enhanced through economic integration (both regional and international)2.
Globalization is a contentious subject since different people understand it in different ways. For instance, those who oppose it believe that globalization is a major threat to the world. They argue that globalization increases the dominance of multinational corporations, erodes local cultures, and threatens the global environment. However, the proponents believe that free movement of goods and people between nations enhances economic growth and development3.
Due to increased demand and international trading systems in the modern world where international trade is no longer a treat but a necessity, regional integration is very important. Regional integration has become a necessity for the survival of many economies around the globe. This can be observed in the Middles East and Asian Pacific, where a considerable number of regional plans are in progress. Regional integration, as a significant policy to increase competitiveness, adds a new dimension to the existing business environment.
Most countries in the Middle East and Asian pacific are members of more than one regional organization, and therefore, it important for businesses in these countries to understand the rationale behind such integrations. This enables them to effectively take part in the integration process to promote and defend their interests. The underlying principle behind regional blocks in the Gulf region is the widening of the market for local goods and increased competition among companies4. Besides competition and market expansion, globalization and regional integration have affected diffusion of technology, macroeconomic policies, and product quality and quantity, among others.
An overview of the Petrochemical Cluster in UAE
Oil and gas still remain the backbone of the UAE economy. Abu Dhabi alone boosts about 7.5 percent and 3 percent of the global reserve in oil and gas, respectively. However, the petrochemical industry is still at the infancy stage. Borouge, which is the leading petrochemical company in Abu Dhabi, is only ten years of age, unlike the oil and gas industry, which have been in existence for more than four decades5.
In 2006, the Abu Dhabi government initiated a number of reforms in the oil and gas sector. These reforms led to the approval of the Abu Dhabi policy and endorsement of Abu Dhabi Vision 2030. The two policy documents aimed at creating a stable, diversified, and sustainable economy. This was to minimize over-reliance in oil and gas and to expand the export basket. Non-oil and gas sector by then only contributed less than 16 percent of the total revenue6. Petrochemical industry provided an opportunity for diversification of the economy.
Petrochemical companies have continued to expand in the United Arab Emirates especially in Abu Dhabi. This is largely attributed to the fast growing Asian Market. The UAE companies have joined other Gulf States in fronting for highly integrated mammoth projects. However, experts warn that lack of diversification on their products is likely to slow their margins. As a result, UAE is striving to overcome over-reliance on chemical products by venturing into innovative plastic solutions7.
Ethylene is the main raw material for the petrochemical companies and therefore, is the main determinant of cost and margins. Naphtha is another building block for petrochemical companies and produces other products such as propylene, butadiene, and benzene (benzene is extracted from butadiene). The two by products are mainly produced in Abu Dhabi. Another raw material used in petrochemical industry is ethylene which is derived from the natural gas (for instance, ethane, propane, and butane) which is also produced in large quantities by other gulf states besides UAE8.
Borouge
Borouge is a petrochemical company offering state of the art plastic solutions for different sectors of the economy. The company is a joint venture between Abu Dhabi National Oil Company (ADNOC) based in UAE and Borealis Company from Austria. ADNOC is a global supplier of oil and gas, while Borealis is among the worlds top providers of chemical and ground breaking plastic solutions9. Being a product of two global successful companies, Borouge is in the forefront of next generation plastic solutions. The company is based in Abu Dhabi and Singapore. The company also have subsidiaries in over fifty countries across Middle East, Asian Pacific, America, Europe, and Africa. At the moment, the company has employed approximately 1700 workers globally10.
Building from the success of its parents companys, Borouges provides state of the art technology and products for different sectors of the economy. The company projects an output of about 6 million tones per annum in 2014 which will make it the largest single producer of polyolefins products. The company is also investing in more plants and subsidiaries both locally and internationally11.
Borouge is expected to finish the construction of its complex in Ruwais and Abu Dhabi by 2014. The two complexes are expected to add to the companys capacity in the production of ethylene, polythene and polypropylene. Borouges planned Chemaweyaat complex, also in Abu Dhabi is expected to be the largest petrochemical unit in the world. The complex will host olefins plant, aromatic complex and numerous chemical and polymer plants. The Chemaweyaat complex is expected to be completed by 2016. The complex will consume large quantities of heavy naphtha in their aromatic units and light naphtha to produce about two million tonnes of ethylene and 700000 million tonnes of propylene per annum12.
The company also expect to increase its ethylene capacity from 3.5 million tonnes to 5 million tonnes by 2012. Generally, the company expect to increase their production capacity by 170 percent by the end of 2016. The driving force behind these expansions is the growth and strength of the Chinese market. Heavy use of naphtha in the Borouges Abu Dhabi plants will enhance the position of UAE in the Asian market (ahead of Saudi Arabia and Qatar). According to BMIs Middle East index, United Arab Emirates (UAE) has remained behind Kuwait and Saudi Arabia. Luckily, UAE is ahead of Qatar with a slim margin. Their position is also under threat from other regional states13.
SWOT Analysis of Borouge Company
Strengths
The company is co-owned by two giant companies which are among the global leaders in their trade. Abu Dhabi National Oil (one of the co-owner) provides cheap feedstock/ raw materials used in the company. On the other hand, Borealis offers advanced technological knowhow to the company having over 50 years experience in the same. Borouge also enjoy strong logistical, fiscal, and edifying facilities available in the Abu Dhabi14. The growth of the petrochemical industry in general is strongly supported by the strong macroeconomic policies in the country. Experts predicts that the industry will largely contribute to the countrys surplus in 2015 (15 percent) from the current 5.1 percent15.
Borouge is a major player in UAEs petrochemical industry and is in fact an extension of the oil and gas industry. Borouge receives its raw material suppliers mostly from numerous oil and gas companies owned by ADNOC (one of the parent company). The contractual relationship between these two leading companies has helped to front UAE in the global stage and to protect the countrys energy sector. ADNOCs direct control of Borouges raw material suppliers means that the company is guaranteed cheap and steady supply16.
According to the World Bank index, UAE is ranked the highest among all Arab states in the Middle East and North Africa in terms of good governance. In addition, the countrys well developed infrastructure (transport and telecommunication) eases the companys operations. The companys active participation and dominant position in the regional and global economic market also provides an added advantage especially in negotiating better terms of trade17.
Weaknesses
The demand for petrochemical products in UAE is relatively low evidenced by the low number of converter industries. Limited number of converter industries is also attributed to the limitation imposed on foreign ownership. In addition, the demand for petrochemical products is still short in UAE compared to western economies. United Arab Emirates is a member of the OPEC (Organization of the Petroleum Exporting Companies). OPEC dictates the policies of the member states and as a result limits their oil production capacity. This also limits the production of the associated gases which are building blocks in the petrochemical companies including Borouge. The potential capacity of the petrochemical industry is additionally limited by the high ethane consumption in the power generation plants in the region18.
The general unemployment rate in UAE is relatively low (less than 3.9 percent). However, this rate is much higher for the locals and stands at two digits. This is mainly attributed to attractive remunerations in the public sector which makes it harder for the private sector to attract the local labour. Majority of the local labour is dominated by unskilled work force. Therefore, private entities including Borouge Petrochemical Company are forced to part with higher remunerations to attract the locals and to employ expatriates from other countries19.
Opportunities
Despite of the increase in non oil and gas product (approximately 23 percent in 2011), experts still predicts dominance of oil and gas in the near future. The countrys macroeconomic policies mostly apply to the city of Abu Dhabi. This is the reason why Abu Dhabi is not only the richest city in UAE, but also in the entire gulf region. Abu Dhabi being the main producer of UAEs oil and gas, its products is less diversified than the country in overall. Therefore, increased pressure to diversify products in Abu Dhabi presents an opportunity for the development of petrochemical companies20.
UAE business environment is conducive compared to other gulf states. One of its principle strength is the complimentary tax policy. The countrys corporate tax or income tax is argued to be among the lowest in the world. This is a major incentive to petrochemical companies including Borouge. UAE used the tax incentive to attract foreign investors regardless of its limit on foreign ownership of local firms/companies (not more than 50 percent). The limit to foreign ownership is meant to ensure that locals remain the principle stakeholders in the countys economy21.
Experts hint at the use of Naphtha as a substitute for ethane. This is likely to offer an opportunity for the government to review its policy on direct foreign investment to expand oil and gas industry. The country has been increasing investment in the development of human capital. UAE government expanded the Petroleum Institute in Abu Dhabi into a world class institution offering engineering courses and other research courses related to oil, gas and petrochemical industries. Petroleum Institute in Abu Dhabi is also affiliated with numerous Universities in Europe and Asia (for instance, University of Maryland and China University of Petroleum)22.
Petroleum Institute offers courses such as mechanical and petroleum engineering, metallurgical and polymer science, chemical engineering among others. To supplement the government efforts Abu Dhabi National Oil and Borealis Company have set up a competency assurance management system among its affiliate companies including Borouge to develop new and existing man power. This is aimed at equipping the new and existing workers with skills necessary to tackle the current challenges23.
Generally, the innovative capacity of UAE and Abu Dhabi lower than a number of Gulf States and European nations. However, the local institutions have tried to avert this situation by undertaking joint research projects with foreign institutions especially from the west to enhance the innovative capacity of the petroleum industry. Petroleum Institute in collaboration with Maryland University and Colorado School of Mines has direct research contracts with local petrochemical companies. This provides a great opportunity to improve their innovative capacity. Borouge on the other hand, has been enjoying the services of Borealis (parent company) innovative centres based in Australia, Finland, and Sweden. In addition, the company is looking forward to establishing its own centre in Abu Dhabi in the near future24.
Abu Dhabi government has created Specialized Economic Zones and Khalifa Industrial Zones targeting mostly metallurgic and petrochemical industries. These industrial zones have been developed along with state of the art sea port which will be operational before the end of 2012. Companies operating in these zones are exempted from custom duty, other tax exemptions, and long-term land leases. This provides a great opportunity for the local petrochemical companies including Borouge25.
Threats
The anticipated instability in Iran provides a major threat to the oil, gas and petrochemical industries in UAE. Iran is one of the UAEs main trading partners and any disruption in Hormuz strait, UAEs strategic maritime channel, passing through Iran could have massive impact on the economy. However, the country is trying to explore an alternative route through the gulf of Oman. Nonetheless, instability in Iran could mean opportunity for other gulf states to market their petroleum products26.
Impact of Regional Integration on the company
UAE is a member of numerous regional blocks including Gulf Cooperation Council (GCC), Organization of the Petroleum Exporting Companies (OPEC), and Gulf Petrochemical and Chemical Association (GPCA) among others. These regional blocks have provided an avenue for harmonizing policies relating to the petroleum industry27. GPCA provides an avenue for media collaboration among the petrochemical companies in the gulf region. GPCA was founded by eight members from the gulf region. Its main objective was to offer technological assistance and resources required for the development of the petrochemical and chemical industry. GPCA was speedily formed and was right away accepted by the member states. At the moment it is the main trade association, revered and accepted by petrochemical and chemical industries as their voice in the region and world at large. GPCA provides trusted data on the regions petrochemical and chemical industries and has gone ahead to provide all members with a platform to network and share ideas28.
Initially, petrochemical industries in Europe and North America dominated the global market. However, emergence of Petrochemical and Chemical Association (GPCA) has completely changed the competitive landscape of the global petrochemical and chemical market. Even though Borouge has a relatively low market share in the international arena, its global expansion hints at a brighter future. Regional integration has enabled the petrochemical companies in the gulf region to effectively compete in the global market. Borouge has been able to form global partnership with well established global companies, for instance, Dow Chemical to take advantage of the growing Asian market and to increase it global market share29.
Petrochemical industry being a capital intensive sector, it is very significant for the company to have a global presence. Borouge has managed to achieve these using two approaches: geographical expansion and product segmentation. A lot of attention is being put on the polymer markets in Asia. Over the recent past, the company took advantage of the stringent measures adopted by European and American petrochemical companies like Dow Chemicals to enhance its status in the global market30.
One of the most important aspects of the petrochemical industry is research and development. Most GPCA members have been carrying out research and development together and sharing best practices. This has relatively reduced the companys cost on the same. The leading research centres on oil, gas and petrochemical products are in Europe and U.S. Globalization and joint partnerships have enabled the company to acquire innovative and value creating plastic solutions. The European and American petrochemical industry spends more than 3 percent of their revenues in research and development. Meanwhile Borouge spends less than 0.4 percent of its revenue in research and development. Therefore, globalization/joint partnership has enabled the company to cut cost on research and development while maintaining its global presence31.
The demand for petrochemical products in Abu Dhabi and UAE is relatively low and is estimated to be less than 20 kilogram per individual per year compared to European countries which register more than 75 kilograms per individual per year. Therefore, regional and global economic blocks provide a great opportunity for the company to expand its market. Especially for polyethylene and propylene products whose demand is almost negligible in the local market32. The global petrochemical market has grown beyond oil and gas and is currently estimated to be 3 trillion dollars. However, the markets for these products are concentrated in Europe, Asia and America33.
United Arab Emirates is a member of the OPEC (Organization of the Petroleum Exporting Companies). OPEC dictates the policies of the member states and as a result limits their oil production capacity. This also limits the production of the associated gases which are building blocks in the petrochemical companies including Borouge. The adoption of Capture Technology by the oil companies to recover the large volumes of fleeing associated gases has really been relatively successful. However, this has not been able to meet the current gas demand. The potential capacity of the petrochemical industry is additionally limited by the high ethane consumption in the power generation plants34. Regional economic blocks have significantly influenced the countrys macroeconomic policies. These policies tend to favour local petrochemical companies, mainly Borouge to enable it to compete in the region and world at large. These policies include tax waivers, expansion of research institutions and training facilities to develop skilled labour, government acquisition among other.
Conclusion
UAEs petrochemical industry has considerably grown over the past 10 years. The industry was an extension of oil and gas sector. Globalization and regional integration have had considerable impact on the petrochemical cluster in UAE. Essentially, globalization and regional integration have increased competition and widened the market for petrochemical products. They have influenced the adoption of cutting edge technologies and global expansion by the local companies35. They have also enhanced sharing of ideas and best practices among different stakeholders. Regional blocks have significantly influenced the countrys macroeconomic policies in oil, gas, and petrochemical sector. Globalization and regional integration have even influenced the level of output and product differentiation in UAEs petrochemical sector36.
Bibliography
Alan, Rugman, The Regional Multinationals: MNEs and Global Strategic Management. Cambridge, UK: Cambridge University Press, 2005.
Alan, Rugman, Globalization and Regional Business Strategy, Oxford: Oxford University Press, 2000.
Borealis AG. Annual report 2011. Web.
Borouge. Shaping the World with Plastics, Web.
Business Monitor. United Arab Emirates Petrochemical Report 2011. Web.
Saudi Basic Industries Corporation. Annual report 2011. Web.
The Dow Chemical Company. Annual report 2011. Web.
Footnotes
1 Alan, Rugman, Globalization, and Regional Business Strategy, 2.
2 Alan, Rugman, Globalization, and Regional Business Strategy, 3.
3 Alan, Rugman, The Regional Multinationals: MNEs and Global Strategic Management, 6.
4 The Dow Chemical Company. Annual report 2011, 2.
5 of Business Monitor. United Arab Emirates Petrochemical Report 2011, 4.
6 Borealis AG. Annual report 2011, 1.
7 Business Monitor, United Arab Emirates Petrochemical Report 2011, 4.
8 Borealis AG. Annual report 2011, 3.
9 Borouge. Shaping the World with Plastics, 1.
10 Business Monitor, United Arab Emirates Petrochemical Report 2011, 3.
11 Business Monitor, United Arab Emirates Petrochemical Report 2011, 5.
12 Borouge. Shaping the World with Plastics.
13 Saudi Basic Industries Corporation. Annual report 2011, 2.
14 Borouge. Shaping the World with Plastics.
15 Business Monitor. United Arab Emirates Petrochemical Report 2011, 4.
16 Borealis AG. Annual report 2011, 3.
17 Business Monitor. United Arab Emirates Petrochemical Report 2011, 5.
18 Borouge. Shaping the World with Plastics.
19 Business Monitor. United Arab Emirates Petrochemical Report 2011, 6.
20 Saudi Basic Industries Corporation. Annual report 2011, 4.
21 Business Monitor. United Arab Emirates Petrochemical Report 2011, 6.
22 Business Monitor. United Arab Emirates Petrochemical Report 2011, 5.
23 Business Monitor. United Arab Emirates Petrochemical Report 2011, 7.
24 Borealis AG. Annual report 2011, 8.
25 Business Monitor. United Arab Emirates Petrochemical Report 2011, 10.
26 Business Monitor. United Arab Emirates Petrochemical Report 2011, 11.
27 Borouge. Shaping the World with Plastics.
28 Business Monitor. United Arab Emirates Petrochemical Report 2011, 13.
29 Business Monitor. United Arab Emirates Petrochemical Report 2011, 14.
30 Borouge. Shaping the World with Plastics.
31 Business Monitor. United Arab Emirates Petrochemical Report 2011, 15.
32 Borouge. Shaping the World with Plastics.
33Borealis AG. Annual report 2011. 7.
34 Borealis AG. Annual report 2011, 8.
35 Business Monitor. United Arab Emirates Petrochemical Report 2011, 16.
36 Saudi Basic Industries Corporation. Annual report 2011, 4.
The development of the human community is dynamic, which means that current social agendas and patterns may not have been relevant to society until a few decades ago. One of the most obvious manifestations of these dynamics is the fact of globalization, which has led to the close integration of virtually all cultures and socio-ethnic units. Globalization, nevertheless, should not be seen as a purely unambiguous process but instead is to be critically evaluated when placed under the prism of the natural evolutionary development of society. In this analysis, it becomes clear that these integration processes have, in combination with their profound benefits, significant adverse effects, among them the formation of the foundations for international crises. Thus, globalization is held responsible for the global financial crisis of 2008. This essay aims to argue the justification of this thesis.
In examining the geopolitical structure of the contemporary arena of countries, it becomes evident that globalization processes have become inextricably linked to politics. In fact, globalization is not an academically unambiguous term, and various sources tend to interpret its meaning in peculiar ways. For the purposes of this paper, globalization is the close unification of states and cultures realized in political, social, economic, technological, and scientific contexts. To put it another way, globalization binds and unites countries at the current level of internationalization of society. As a consequence, this process has several important manifestations, including cultural integration and the consolidation of a single world market.
It is the formation of the world market as a product of active globalization processes that can be seen as the cause of the development of the global financial crisis. It is necessary to emphasize further the meaning that is put into the term GFC. Such a phase, it is argued, means the abrupt onset of crisis conditions in most countries of the world or in the world market as a whole in the period from 2008 to 2013. It was a challenging and stressful time for nations, the result of which was an intensification of the imbalance of resources between social classes and a dramatic weakening of the positions of the middle classes.
It is not uncommon to cite the bursting of the real estate bubble in the U.S. market as the leading cause of the global crisis. In reality, the sharp decline in housing values, accompanied by an increase in active credit among citizens, created a high-risk environment in which the number of defaults, or crises, increased. In focusing on this cause, many researchers have overlooked an essential causal link based on the profound globalization processes that had developed by that time.
Strong dependence on the U.S. economy and political decisions of several advanced countries of the European Union, including Great Britain, naturally adopted the default experience of America. Thus, by 2008, Iceland, Greece, and Britain were experiencing mortgage crises, in which local residents did not have enough savings to cover the cost of real estate. In turn, such problems triggered an erosion of trust in government, and in Iceland, for example, the government was forced to resign. In reality, the range of real negative consequences of GCF is much more comprehensive and includes imbalances in international supply chains, domestic socio-economic crises, and strained relations between countries in difficult times.
Emphasizing the above, it should be summarized that globalization processes in the world have created a context in which economic forces have had a priority influence on all the backwardness of life. The commitment to international market relations has thrown states into strict dependence on one another, and as a result, when the economic system of one of them collapses, the others suffer. At the same time, globalization is directly responsible for shaping the world crisis since it creates a cultural environment in which the whole world seeks unification.
Indirectly speaking, the observation by residents of one country of their relatives, friends, or colleagues from other countries may have catalyzed risky and reckless lending, resulting in a significant increase in demand for banking services with an inability to repay obligations effectively. Thus, it can be postulated that integration processes made possible the spread of crisis influence from the U.S. around the world and, as a result, led to the formation of the global crisis in 2008.
In conclusion, globalization is a natural pattern of civilizational development in which cultures tend to integrate. One can think about the positive aspects of such integration, but one cannot notice that the manifestations of globalization also have negative consequences for the world. In particular, the deep commitment of the world economy and the development of international trade exacerbated the crisis in the U.S. in 2006-2008 and, consequently, transferred this agenda to European countries. Confidence crises and economic defaults have become actual facts for Iceland, Greece, and the U.K., which still have not reached the speed of economic growth that they had before the crisis. To summarize the above, globalization is indeed responsible for shaping the global crisis.
One of the most crucial missions of the World Bank is poverty alleviation among the developing economies. The World Bank has since focused on six strategic themes to support their missions, in so doing, they have offered financial, technical and other forms of assistance in promoting economic growth in the developing economies. The themes of the World Bank squarely focus on the middle income, fragile and countries affected by post-conflict consequences. In addition, the bank has heavily invested in the production of global public goods, education, and agriculture in promoting economic growth in potential and promising economies. This paper highlights the methods I deem effective in promoting economic growth and development among the newly industrialized nations such as Hong Kong and Singapore in response to the request by the World Bank to provide appropriate advice.
Methods currently being used for Economic Growth
To begin with, Hong Kong and Singapore served as potential and newly industrialized nations by the early 80s because of their economic measurement scales compared to the rest of the world. The current methods applicable in promoting economic growth for typical firms in both Singapore and Hong Kong include the division of labor system where the prices of commodities were determined by the market forces in achieving industrial stability. In addition, the two countries have formulated a taxation system that makes trade possible for small firms to penetrate into the global scene. More importantly, the use of modern technology in the production processes offers the most effective method of production because it enables typical firms in both countries to increase their productivity while minimizing costs. Secondly, the current taxation systems in both countries allow for capital accumulation because they promote direct foreign investments in both countries. Consequently, low taxes encourage savings and investments among the firms, increased productive capacity, creation of more employment opportunities, and improved purchasing power (Collier, Dollar, & World Bank, 2002). Finally, the establishment of property rights by both governments has encouraged innovation, efficient stock market operation, and monetary freedoms in the stock market. Considering the current strategies in promoting economic growth for typical firms in both Singapore and Hong Kong, I would advise the World Bank to finance the adoption of new technologies in the production process as this would increase productivity and cost minimization for the typical firms in both countries.
The rationale for my choice
Due to the widespread need to undertake adjustments in national policies, I would encourage the World Bank to support investments in technology and social stability in attaining a more sustainable economy for these firms in Singapore and Hong Kong. Boosting the economic growth of the typical firm in both Hong Kong and Singapore calls for the implementation of modern technology in all lines of production. With proper investments in modern technology, the typical firms in these countries aim at improved global governance and remarkable progress in the fight against the ever-increasing competition in the world. Technological advancement would ensure the identification of talents leading to increased innovation in the manufacturing sector among the developing firms. As Reinalda (2009) denotes, dramatic technological transformation among the newly industrialized countries enables the firms operating in such countries to produce complex and unique products leading to an increased competitive edge in the market.
In summary, it would be prudent to follow the economic strategies discussed in this paper in promoting economic growth because these items work towards the realization of the World Bank mission for developing economies. The implementation of new technology, effective taxation laws, and conglomerations are vital factors in promoting economic growth for any developing firm or economy because of the economies of scale benefits associated with such practices.
References
Collier, P., Dollar, D., & World Bank. (2002). Globalization, growth, and poverty: Building an inclusive world economy. Washington, DC: World Bank
Reinalda, B. (2009). Routledge history of international organizations: From 1815 to the present day. London: Routledge
The concept of globalization has attracted attention of many professionals, economists, and government leaders across the globe. Tortajada identifies it as the process through which actors speedup exchanges, movements, and consumption of capital, goods, cultural practices, and factors of productions across the globe.1 OCallaghan goes further to describe the concept as a unique approach whereby business entities, governments, and institutions develop influences that are global in nature.2
Using the lens of international trade, globalization presents specific benefits or advantages that all stakeholders need to take seriously. The outstanding one is that the process of globalizing trade makes it possible for existing and emerging companies and state agencies to intensity their innovative tendencies and produce superior goods and services. Notions of research and development (R&D) become the norm in an effort to offer items that can compete successfully at the international arena. These developments maximize revenues for the producers while transforming the experiences of the involved players through increased profits or access to foreign goods or services.
Similarly, globalization is a process that remains useful when focusing on the financial sector. Specifically, the model supports the introduction of financial institutions that maximizes the availability of financial resources to many participants at the global level. Consequently, this development results in strong financial structures that ensure that more underdeveloped countries achieve their economic goals.3 The example of many African nations shows conclusively the wave of globalization is making it possible for them to compete at the international arena.
On the other hand, globalization continues to attract unique criticisms that analysts and decision-makers should not ignore. First, the model is implemented in such a way that it only benefits companies and nations that are powerful.4 For instance, they will establish bilateral international trade patterns that allow them to achieve their maximum potential at the expense of smaller and upcoming economies. The second criticism that emerges from the lens of finance is that it is pursued using a top-down model.5 This strategy means that a sense of non-democracy emerges whereby poorer countries find it hard to achieve their social, economic, and political goals. For instance, smaller and emerging countries find it hard to compete at the international level since they lack the influence and resources. The end result is that the forces of globalization will remain imbalanced and affect their gains. These issues explain why many people continue to advocate for superior measures and approaches to ensure that all countries operate at a leveled ground if they are to achieve their potential.
International Economic Development
The global society has seen the proliferation of economic development organizations and institutions that are designed to transform the idea or meaning of globalization. May state leaders have been focusing on the humanitarian aspect by promoting various organizations, such as the United Nations Human Development project, non-governmental organizations (NGOs), and USAID.6 Several justifications have emerged to explain why some of these international economic agencies could be studied as legitimate components of globalization. A proper understanding of such organizations and their goals could shed more light about the true intentions of their models.
The first outstanding justification is that the institutions and agencies are designed in such a way that they help emerging countries develop competitive private and public sectors. For example, USAID has been helping many emerging nations in different parts of the world commercialize and maximize their potential and become successful. The model helps the targeted beneficiaries receive the relevant guidance, support, and economic empowerment. The end result is that the targeted countries are brought to a level ground whereby they can compete directly with established economies.7 The second possible justification is that the functions of various international NGOs and UN human development activities are designed in such a way that they support the goals of many countries across the globe. Investments and support systems are designed and implemented in countries that are in need of more support. For example, the UN launches projects in countries affected by a wide range of challenges, such as poverty and droughts.8 These efforts have helped more people in South Sudan and Yemen.
On the other hand, some skeptics acknowledge that promotion of most of the international economic agencies is a pretext that attracts numerous criticisms. First, most of the countries funding these NGOs and state agencies do so with specific hidden interests.9 For example, USAID is one of the international organizations that operates and provides donations in emerging nations. While the intent is to improve peoples experiences and economic gains, the country is usually keen to ensure that it benefits in the long run. This happens to be the case because the expansion and involvement of the beneficiary governments will allow them to start purchasing American goods and exports. The end result is that the United States will eventually continue to dominate global power.
The second criticism associated with the promotion of various projects and NGOs within the realm of globalization is that the model does not help most of the countries pursue their goals. With the leading global powers entangled in supremacy battles, the American government has been focusing on the donor-based institutions and the concept of globalization to settle scores in countries that are threatened by the wave of communism.10 For example, the west has been introducing a wide range of NGOs in many countries across Africa and Asia to influence political discourse and ensure that friendly leaders win elections. This outcome means that the promotion of these humanitarian organizations might not be envisioned to achieve the real objectives of globalization.
Christian Worldview
The Christian worldview emerges as a powerful model for guiding believers to get closer to their God and eventually become part of His kingdom. Under this worldview, God is all knowing and purposeful. He is ordering things in the universe in such a way that the world remains sustainable as it awaits His kingdom.11 It describes how people should be aware of the reason they live and transform the experiences for others. By focusing on the teachings and prophesies of Christ, believers understand what is right and the best approaches to transform their experiences.
Using the notions of the Christian worldview, it would be agreeable that a unique form of command is necessary that is capable of guiding and empowering all people to lead better lives and achieve their potential. From this understanding, it is agreeable that a consistent worldview requires human beings to support the increasing level of economic integration at the international level.12 For instance, God confused human beings in such a way that they were unable to communicate using the same language. This Biblical message becomes the foundation for religious actions and models that can be implemented to transform the lives of more people. A coordinated approach is, therefore, necessary for promoting economic integration at the global level.
The emergent practices will make it possible for the less disadvantaged to benefits from the global forces of production and economic sustainability. They will also promote humanitarian development in such a way that emerging actions and decisions can transform the lives of the less privileged. The involvement of the global community would also be essential to ensure that the recorded goals are sustainable and capable of delivering balanced outcomes.13 The Christian worldview would help people to globalize and identify the existing problems affecting them. They will also consider the best ways to conserve the natural environment and prepare it for posterity.
While focusing on these aspects, it is agreeable that the validity of the Christian worldview needs to be contingent upon specific behaviors and ideas. Specifically, the promoted international economic development agencies should be fair and capable of helping countries and societies in need. Hidden agendas and motives need to be ignored because they are not in accordance with a Christian worldview. Additionally, global economic integration is essential to alleviate poverty and reduce most of the problems affecting the world today. The consideration of this worldview will help minimize the problems many people encounter today and present solutions that are sustainable in nature.14 These conditions are essential to mitigate possible challenges and unfair advantages that some populations might have over others. From this evident, it is necessary that true Christians would promote a worldview that guides global integration and humanitarian support that is fair, acceptable, and capable of fulfilling Gods intentions for the universe.
Bibliography
Chen, Fan, Sen Liu and Andea Appolloni. Horizontal Coordination of I-LNGOs in the Humanitarian Supply Chain: An Evolutionary Game Approach. Sustainability 12, no. 15 (2020): 5953-5972.
Cuervo-Cazurra, Alvaro, Yves Doz and Ajai Gaur. Skepticism of Globalization and Global Strategy: Increasing Regulations and Countervailing Strategies. Global Strategy Journal 10, no. 1 (2020): 3-31.
Heist, Dan, and Ram A. Cnaan. Faith-Based International Development Work: A Review. Religions 7, no. 3 (2016): 19-35.
OCallaghan, Paul. Cultural Challenges to Faith: A Reflection on the Dynamics of Modernity. Church, Communication and Culture 2, no. 1 (2017): 25-40.
Petricevic, Olga, and David J. Teece. The Structural Reshaping of Globalization: Implications for Strategic Sectors, Profiting from Innovation, and the Multinational Enterprise. Journal of International Business Studies 50, no. 1 (2019): 1487-1512.
Randhir, Timothy O. Globalization Impacts on Local Commons: Multiscale Strategies for Socioeconomic and Ecological Resilience. International Journal of the Commons 10, no. 1 (2016): 387-404.
Tortajada, Cecilia. Nongovernmental Organizations and Influence on Global Public Policy. Asia & the Pacific Policy Studies 3, no. 2 (2016): 266-274.
Footnotes
Cecilia Tortajada, Nongovernmental Organizations and Influence on Global Public Policy, Asia & the Pacific Policy Studies 3, no. 2 (2016): 269.
Paul OCallaghan, Cultural Challenges to Faith: A Reflection on the Dynamics of Modernity, Church, Communication and Culture 2, no. 1 (2017): 28.
OCallaghan, Cultural Challenges , 29.
Fan Chen, Sen Liu and Andea Appolloni, Horizontal Coordination of I-LNGOs in the Humanitarian Supply Chain: An Evolutionary Game Approach, Sustainability 12, no. 15 (2020): 5959.
Olga Petricevic and David J. Teece, The Structural Reshaping of Globalization: Implications for Strategic Sectors, Profiting from Innovation, and the Multinational Enterprise, Journal of International Business Studies 50, no. 1 (2019): 1492.
Timothy O. Randhir, Globalization Impacts on Local Commons: Multiscale Strategies for Socioeconomic and Ecological Resilience, International Journal of the Commons 10, no. 1 (2016): 392.
Alvaro Cuervo-Cazurra, Yves Doz and Ajai Gaur, Skepticism of Globalization and Global Strategy: Increasing Regulations and Countervailing Strategies, Global Strategy Journal 10, no. 1 (2020): 12.
Dan Heist and Ram A. Cnaan, Faith-Based International Development Work: A Review, Religions 7, no. 3 (2016): 25.
Heist and Cnaan, Faith-Based International , 28.
Timothy O. Randhir, Globalization Impacts on Local Commons: Multiscale Strategies for Socioeconomic and Ecological Resilience, International Journal of the Commons 10, no. 1 (2016): 389.
The essay is a summary of a video by Thomas Friedman titled The world is flat. It is important to note from the onset that the video entails the contents of Thomas Friedman bestselling book titled The World is Flat: A Brief History of the Twenty-First Century a publication of 2005. In the video, Friedman talks about his perception of globalization. It is believed by many that the concept of globalization has turned the world into a global village characterized by the free movement of capital, goods, services, and human resources. The author contrasts globalization 3.0 from 1.0 and 2.0. The former is where the governments of the respective countries were the protagonist pushing for interconnectedness among countries. The later is where multinational companies actively engaged in expanding their operations to other countries.
According to the author, the concept of globalization was heightened by the efforts of governments breaking the walls which blocked free movement of cash, human capital, goods, and services. This coupled with improvements in technology has led to a high level of interconnectedness in the world. From the video, Friedman had a total of 10 factors she believed contributed to globalization 3.0. These factors include the following; the collapse of the Berlin wall which he equates to government efforts to pass laws that encourage globalization, other factors include Netscape, workflow software, uploading, outsourcing, offshore, supply chaining, informing, and the steroids.
According to the author, all these factors including tremendous improvement in technology have enabled sharing of knowledge as well as work; irrespective of time, distance, geographical locations as well as differences in language. This allowed the majority of citizens to act to contribute to the global economy. From the video, I agree with the authors assertion that globalization has indeed gone through several steps. However, he fails to closely link them and to let the readers know that the three steps are an integral part of enhancing future globalization. For instance, with improvement in technology which allows sharing of information instantly, failure of governments to develop an enabling environment where there will be free movement of human capital, cash, goods, and services will jeopardize globalization.
Although the world is not yet very flat as asserted, globalization has indeed helped individuals who could not engage in any meaningful businesses to contribute enormously to the global economy. A typical example outside the book is doing business online. Most of these businesses do not call for huge capital investment. Individuals can engage in the online business if they have a computer and reliable internet connection.
One negative thing the author asserts concerning globalization is competition. Friedman states that American citizens will have to up their game to remain competitive and a force to reckon in the world of competitive business. From the video, the best solution to the problem will be to continuously improve their skills and knowledge; this will make them employable even in the wake of a fierce and competitive business world.
From the video, it is evident that globalization has been presented to be good and without flaws. The author failed to acknowledge that there are some negative consequences associated with globalization. For instance, it is asserted that the world has turned out to be peaceful. However, free movement of people, cash, goods, and services has threatened the national security of several countries. Those who have not read the book should take time to watch the video since it gives more insight into modern globalization.
International trade is important because it encourages the production of goods and services through multinational corporations (MNCs) or transnational corporations (TNCs). By definition, MNCs or TNCs are those commercial entities that are characterized by international production of goods and services, overseas investment, addition to income and asset management in various nations (Isaac et al, 2020). MNCs contribute immensely to the creation of employment opportunities in the host countries. In the past decade, for instance, MNCs have been responsible for the millions of employees working in developing nations (Isaac et al, 2020). Moreover, the enterprises are crucial in channeling financial and physical wealth through to those counties with declining capital and infrastructural shortages (Isaac et al, 2020). As a result, wealth is created which then generates employment opportunities. Therefore, MNCs are good because they essentially improve the economic activities of developing nations through sustainable wealth production through the exploitation of the available natural resources.
Globalization and Its Impacts on the Improvement of Living Standards
In connection with international trade is globalization in the twenty-first century. Globalization has led to improved living conditions in many nations in the world. As there is increased usage of science and technology across the world, many businesses are thriving through the application of the innovations and therefore making them more efficient (Isaac et al, 2020). Additionally, new markets have been opened up as a result of globalization because of new customers and diverse profit sources. The acquisition of products is made easy and therefore encourages competition between the firms which offer the same services, therefore the quality of the products made is also improved (Isaac et al, 2020). Also, globalization has enabled companies to establish lower-cost ways to produce goods and services at lower prices; as such the nationals of less developed nations can live more comfortably for less money. Undoubtedly, globalism is a prime factor in the improved living conditions in the current world.
Radical change is rapidly taking place across the globe in the contemporary society. This change has indeed posed myriads of challenges in regards to the enlightenment-based modernity. The society is now resorting to unconventional means of doing things. In other words, the socio-political arena has been significantly modified. The author describes the first modernity as the territorial understanding of communities, networks and social relations. The first modernity also represents the collective patterns of life. The human desire has often been to explore the deeper meaning of life. Nonetheless, it is pertinent to understand that the first and second modernity are closely related to each other. The author describes the world as a risky platform where both the western and non-western states share a common platform and the related challenges. The main differences between the western nations and the non-western states are the cultural perceptions, time and geography.
Transnational independence has been accelerated by socioeconomic, cultural and political discourses. In fact, globalization emerged as an outstanding phenomenon during the second modernity. The emerging global society should be included in the analysis of the challenges presented by the second modernity.
Risk definition is also a vital concept in a society that faces a multitude of risks. Political mobilization has been significantly boosted by risks. Hence, disparities that emerge within gender, race or class are gradually being replaced with several political mobilizations across the world. For example, the free market economics emerged as a formidable force during the late years of the past Millennium.
A close relationship exists between risk and responsibility. Most of the modern political conflicts in society have worsened due to the inability of political leaders to interconnect risk and responsibility. It may not just be enough to take political risks without taking the full responsibility of the political effects that emerge thereafter. Another interesting concept from the readings is the me society as pointed out by the author. It appears that the rest of the world is gradually embracing capitalistic systems. As a result, the narcissism culture, decline in values and weak solidarity have dominated most societies.
Cultural institutions are an important part of the national culture. Besides, symbols and representations are equally vital parameters of a national culture. Identities are constructed by national cultures. Perceptions coupled with imagination are critical in shaping the differences that exist among nations. Apparently, the perceived differences are mere imaginations and not realities.
Timelessness, tradition, continuity, and origins assist in identifying a nation. The invention of tradition and the folklores are also used to define national identities. This implies that the national culture can be deconstructed by both the identities and differences. Social classes, ethnic groups and gender also make up a nation as witnessed in the neo-imperial spheres of the western nations.
In regards to modernization, the author asserts that modernity has been dominated by national cultures and modern history. However, the identity of national cultures is being dislocated by the strong influence of globalization. The latter presents complex and powerful forces of change that cannot be easily ignored or eluded. Globalization transcends national boundaries and cultures. The classical sociological ideas are gradually being eradicated across several cultures. Globalization is also responsible for the sharp decline in the state of national identities. The modern society is characterized and strongly influenced by a global network. The new economy also heavily relies on the state of the current global network. In addition, the transformations of both space and time have been expedited with the elements of globalization. The artificial revival of nature is equally an interesting attribute associated with the impacts of globalization.
Discussion and examples
From the above summaries, it is pertinent to mention that the element of the second modernity has been expedited largely through globalization. The world has become a global village by design because there are key players who desire to control the planet. For example, globalization has brought about similar political systems across the board. In particular, democracy has emerged as a formidable political culture in the modern age in spite of its several setbacks. In any case, the worst political conflicts in Africa have taken place in the presence of democratic cultures. The political turmoil in the Democratic Republic of Congo and Sothern Sudan which ceded itself from the Arab north are critical examples to this effect.
The aspect of the free market economy has also aggravated the state of several political economies. The past few decades have witnessed an increased number of regional and continental trade agreements. Tariff elimination and the creation of a favorable business environment have been cited as some of the core benefits of these agreements. The North American Free Trade Agreement (NAFTA) is one of the trade pacts. In spite of the intended goals, the quota system and the purported tariff elimination have only benefitted stable economies. The key domestic sectors in weaker economies have missed out the opportunities arising from such trade deals. Worse still, globalization has interfered with the socioeconomic and political economies of poor states.
Many countries have adapted to various established approaches when it comes to employment relations as a response to globalisation. In the book International and Comparative Employment Relations: Globalisation and the Developed Market Economies (Bamber, Lansbury, and Wailes, 2004), it was suggested that the development in employment relations may be connected to the high interest in scholarly comparative relations due to globalisation. International and national or local settings, however, takes a deeper understanding and analysis on the complex reality of industrial relations.
Already, linkages are established as to the differences and uniqueness a country deals with its employment relations such as the evolution of convergence as against divergence, simple globalisation, institutionalist forms and integrated forms of globalisation. In the book, Bamber, et al (2004) noted the introduction of major parties such as unions, employers and governments, and movement of international arrangements such as legislation, collective bargaining, dispute resolution mechanisms, among other things. The aspects of change and innovation in the field of employment relations is also notable as globalisation brought intensive competition.
The trend in globalisation has always been to signify a cheap labour market with dedicated, skilled and well-disciplined workers the better of which is to attract foreign investment. This will usually translate into a competitive advantage in international markets. However, it was also observed that labour laws were not enforced while modern industrial relations is discouraged. While this system results to realization on the necessity of transforming labour markets, potential customers from democratic countries and their agencies like the World Trade Organization (WTO) and International Labour Organization (ILO) demand changes in the area.
This paper will try to critically assess the usefulness of the varieties of capitalism approach for understanding employment relations by examining the extent to which it can capture key features of employment relations in New Zealand.
Discussion
Government Role
New Zealand began the biggest programme of free market reform through the elected Labour government by 1984 under the Organisation for Economic Co-operation and Development or OECD. It aimed at improving the economys competitiveness, increase productivity and reduce New Zealands debt burden. The Labour government was able to free prices, wages and interest rates, float the exchange rate, progressive removal of subsidies and reduced tariffs, deregulated the financial system, slashed income tax rates as well as adopted monetary and fiscal policies that encouraged overseas investment (Powell and Spicer, 1994).
Major structural reforms in the management of the public sector was also introduced as supported by the State-Owned Enterprises Act of 1986, State Sector Act 1988, and the Public Finance Act 1989 which directly and indirectly addressed concerns of the statutory corporations and trading activities of government department and reading enterprises. The main objective was to improve the efficiency and effectiveness of activities carried out by these entities addressing concerns on spending, poor policy, and lack of accountability (Douglas and Callen, 1987). The Employment Contracts Act 1991 replaced the Labour Relations Act 1987 and changed the operation of New Zealands labour market.
Trading entities were commercialised to ease the faltering economy and the countrys burgeoning deficit. Cowen (1993) suggested that through the creation of a regime based on freedom of association, the Act transformed the basis for bargaining that led to greatly increased flexibility and heterogeneity in employment contracts. Nevertheless, the Act fell short of establishing a framework for free contracting in the labour market. It mandated a range of minimum standards for employment contracts that reflected a primary concern of legislators in freeing up bargaining processes, instead of reviewing the overall case for prescriptive regulation of employment contracts.
Pay Equity and Equal Employment Opportunity
The department of Labour the Pay and Employment Equity Unit was established in 2004 covering development tools and guidelines as well as training for:
Pay and employment equity reviews followed by response plans.
Job investigations.
Pay evaluation (Hyman, 2007, pp 18-19).
The Unit was able to distinguish in 2006 that, &the core of the approach adopted is that sustainable change depends on active engagement in partnerships of employers, employees and unions in workplaces in identifying equity issues and agreeing on response plans to address them, (Hall, 2006). In addition, it also assisted organisations in gathering evidence for equitable policies and practices on gender, ethnicity, age or disability. The Units Factsheet 2 states that employers and unions can negotiate the solutions through collective bargaining and that claims for additional funding for remedial pay settlements that resulted from pay and employment equity reviews will be considered within existing budget processes through the advise of the tripartite process. The claims must be supported with clear evidence of pay inequity based on a rigorous investigation and whether the organisation has the capacity to fund the claim through reprioritisation.
The Unit, however was deemed slow with the low representation of women in varying areas from apprenticeship to directorship as carers and cleaners had to fight for a living wage. Effect to the private sector was also seen to be minimal.
Another feature of the New Zealand labour market is the rising public sector wage bill that reflected and saw the growth and improvement of the remuneration for public sector workers. The Quarterly Employment Survey indicated that the 2005 average private sector wages were at least 75% below public sector wages.
In the World Justice Forum, it was emphasised that the rule of law as applied to business and labour is obviously critical and of utmost importance [&] it is through the workplace that the wealth of the nation is created, (OReilly, 2008, p 1). The speech eventually acknowledged that while laws need to be fit for purpose, they are manifested as too partisan and cannot be implemented.
At the Employees End
While researchers find phenomenal pressure for reform due to globalisation at the same time increasing casualisation of employment, declining employment levels, and reasserting managerial control over work (Turnbull, 2000), New Zealand has its union influence decline. There were defeats of unionists after the introduction of the Employment Contracts Act (ECA) in 1991. This was seen to have eroded the external legitimacy of trade unions (Harbridge and Honeybone, 1996).
Generally, the act reduced the ability of unions to control labour supply while essential services limited the threat of employee-initiated industrial action. The introduction of the ECA enabled the employers to accelerate a process of reforms that commenced in 1989with major reductions in employment.
The Employment Relations Act 2000 (ERA) repealed the ECA designed to redress the perceived inherent inequality of bargaining power between employers and employees which promoted unions and collective bargaining. Barry and Reveley (2002) however, suggested that instead of strengthening the unions power, the ERA has eroded the genuine unionism through heightened tension in contradictory union rights that gave employers an upper hand.
Under the ECA, more that 75% of New Zealands workers had individual employment agreements as an impact of the design to promote freedom of association and labour market flexibility (Kelsey, 1997). With this, vulnerable employment groups such as young and low-skilled employees felt the hardest as they lost bargaining power and employment benefits such as penalty rates for weekend or overtime work. Freedom of association became synonymous with freedom of contract as bargaining arrangements became a matter of choice. It was seen as take it or leave it proposition totally discarding the union. This was reflected I the Alliance Textiles case Eketone v Alliance Textiles 1993 (Haworth and Hughes, 1995). The decision and ECA provided that the employer may not be union neutral and may engage in direct communication with employees about seeking representation, that employee organisations must establish authority to represent before access to workplace, and employers may demand written authority from employees aside from control of time access and scope of activities within the workplace (Nolan and Walsh, 1994).
The ERA was believed to formally encourage unionisation and collective bargaining as it enabled union access o the workplace for legitimate purposes of representing their members to conduct business and recruit mew members embodied in a clause of its rules covering an employee normally working at the enterprise. However, the ERA provided little support for established unions as it has the same freedom of association provided by ECA allowing unions to compete for members without coverage restrictions (Barry and Reveley, 2002).
Societal ills of youth and long-term unemployment and welfare dependency have also been identified as consequence throughout QECD member states. In consideration of the above mentioned problems in employer relations, the following job-guarantee initiatives were enumerated to address issues:
Job guarantee for long-term unemployment.
Youth guarantee comprising opportunities for education, technical training and place in the job guarantee program.
Active labour market policy interventions in order to reduce barriers.
Job preparation that will guarantee a long-term employment for those who are skilled.
Utilising of buffer stock employment and local partnerships such as using local government for employing local target groups.
Utilising of shadow economy as an employment opportunity beyond baby-sitters and window cleaners which has emerged as too large and too important to ignore (Lange, 2007, p 76).
As earlier suggested, job guarantee initiative may negatively affect price stability, balance of payment, economic efficiency, work incentives and national competition principles but this will not disturb the private sector wage structure (Mitchell, 1998). This led to Lange (2007) suggesting other alternatives:
Persuade employers to employ and shoulder additional training.
Inclusion of those under 18 years old, with disabilities, care leavers and young offenders.
Start of training at school.
Inclusion of the private sector in enabling jobs.
Inclusion of part-time options.
Reduction of cherry-picking or use of employability schemes.
Consideration of added-value and net employment growth.
Tailoring of the guarantee to geography.
Extension to the shadow economy.
Consider employment demands.
Evaluation
Certain precedents are needed to be addressed in order for capital investors to fully gauge the advantages and disadvantages of doing business in free market economies like New Zealand. Already, globalisation has outlined certain written and unwritten rules that organisations and governments must follow in order maintain a competitive edge of which challenges and limitations are consistently changing and remain constantly undefined.
For New Zealand, the need to address diversity of ethnicities, skills, gender and even disability of possible employees are outlined by the government in order to protect its citizens from possible inequality. However, the government through the ERA and ECA are acting on behalf of employers as it has given enough privilege to set limitations as well as provide competition for unions to recruit and authorise these agents to represent the employees.
More pressing issues that need to be addressed include the pressing demands of WTO and international trade organisations, the rising competence of emerging economies like India, China and Brazil that provides records low labour wages thus attracting bulks of foreign investors, as well as the diversity of global needs which may not be in synchronisation with the available local products and services.
New Zealand is considered a modern, prosperous, and developed economy dependent on free trade. It has an estimated nominal gross domestic product (GDP) of US$128.1 billion (2008) with a relatively high standard of living, their GDP per capita is US$30,234 in 2008 already comparable to Southern Europes Spain US$33,385, and slightly lower than the United States at US$46,820 (IMF, 2008). New Zealand has escaped the early 2000s recession that affected most other Western countries. The service sector representing 68.8% of GDP is the largest sector in the economy, followed by manufacturing and construction at 26.9%, and the farming/raw materials extraction at 4.3% (The Economist, 2005). Its export account for about 24% of New Zealands output, thus, vulnerable to international commodity prices or global slowdowns. Its export industries include agriculture, horticulture, fishing and forestry with major partners Australia, Japan, China and the United Kingdom. Tourism also contributes about $12.8 billion or 8.9% of its GDP and supports about 200,000 full-time equivalent jobs increasing at 4% rate annually.
The above scenario may show a robust economy but dependent on global market on changes as well as economic progress or development that both affect employment and investment.
Conclusion
Globalisation is a direct result of free market economics. New Zealand is well-placed considering its market structure as well as its governance, citizens, products, services and natural resources. While external investors may not be exactly in demand for its economy and labour market, it is best to have the internal or employment relations in sync with trends and current practices in order to maintain a competitive standing in a borderless globalisation.
As discussed, there are minimal concerns when it comes to New Zealands labour and employment relations: equality is foremost although women equality with regards to gender issues has been pointed out amongst the higher concerns at the level of long-term and youth employment.
In the point of view of employers or investors, challenges with regards to policy and employment relations will remain a continuing issue as much as quality production will. As competitive democratic or free markets have already shown, there is no direct or straight path towards addressing the issue. Local levels of concerns will adapt to the external trends and pressures but it will in the end concern most the employee and the employer deciding for themselves which is best in their working relations. The presence of international governing bodies may at one point provide a relief to global workers including those based in New Zealand but it does not guarantee a closed relationship with other international bodies such as the WTO or the IMF which usually funds and mandates governments and businesses in the form of assistance.
A closer view may show the independence of New Zealands employment relations but in reality, global trends towards establishing and joining an international or multinational corporations or putting up your own to avoid or minimise employment relations problems will continue prevailing and in the case of the former, mandatory adjustment to prevailing trends will become inevitable. This will entail rate of salaries, benefits, contractual trends, among other things. At most, the employee will either help strengthen a union that represents him or suffer the consequence of silence and domination.
Reference
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