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Abstract
Globalization can be defined as the reduction of trade barriers so that to enable trade amongst countries. Other enabling factors like technological advancement especially in the IT sector and implementation of certain policies so that a ready market is available are some of the requirements that have to be fulfilled. Globalization aims to create one huge global village where both commodities and the world citizens can move freely with minimal border restrictions.
Whether this is a good thing for everyone has been a subject of debate because it seems like it is the multi-national companies especially in the 1st World countries that have benefited the most with globalization. Even the virgin industries in these countries are complaining that the playing field is not level. These huge conglomerates can afford to lower the prices of their commodities to almost critical levels hence forcing out their competition. (Kennet, 2008, 125)
In the developing and 3rd World countries, human rights activists complain that their markets are dumping grounds for commodities from the west. Despite these strong opinions, globalization has been beneficial in some parts of the world.
Cheap labor in some countries like India and China has led to the outsourcing of jobs to these countries where employment has been created. The emerging industrial countries like China, India and Brazil have been able to sustain their record growth because there is a ready market for their goods in the global economy. Even though multi-national countries have been rightly criticized for shipping jobs overseas from their home countries due to the increasing labor costs, the cost cutting measures plus increased profit margins has resulted in higher tax returns going back to the government. Whether the increase in tax revenue justifies rendering thousands of workers jobless is a moral dilemma every government grapples with. (Kennet 2008)
Causes of Globalization
Today’s world is commonly referred to as being in the digital age. The technological advancements have revolutionized the way we communicate and conduct business. The internet enables one to connect to almost every foreign market in the world. It has solved a communication barrier that used to exist in the world market 40 to 50 years ago. While the telephone and fax lines could fill this void, the advent of the internet enabled files and data to be moved more swiftly.
Businessmen in Hong Kong or Tokyo can now connect to their database in New York just by using their cell phones. The internet drastically reduced the amount of time taken to conduct a transaction which enabled the various companies to expand their branches to almost every corner of the world without worrying about breakdown in management due to lack of communication
The World Trade Organization is a body that was formed to encourage trading amongst its members by freeing up access to markets. The consensus was and has always been if a country could be allowed to trade its commodities in another country and likewise opening up its market to commodities from another country, then every party stands to benefit since there is no country in the world that is entirely self-sustaining. The trade is supposed to be guided by the WTO articles in that issues like tariffs and licensing of foreign businesses have been clearly defined. After agreeing to the terms of this body, some countries are complaining that they got a raw deal.
Cases of countries massively subsidizing their commodities hence making them cheaper to import have been widely reported. Some countries like Japan have been criticized by US traders if imposing high tariffs and quotas on imported commodities so that they can protect their home industries. The WTO agreements have certainly increased the volume of trade in the world market but there have been winners and losers. Changing this status quo has proved difficult with both sides wanting to dictate policy which is obviously impossible. (Kennet 2008)
Effects of Globalization
The search for cheaper labor by companies has created massive unemployment in countries like the United States. The best example is the US auto industry. Even before the global credit crunch hit, car factories were moving jobs overseas to countries like China where labor was much cheaper. The question that comes to mind is why then was the demand for American-made cars reducing which in turn dented the profit margins of these companies hence they started looking for ways to cut costs? For decades, Japanese and European made cars have been flooding the US auto market and providing serious competition to the local auto industry.
Arguing that the foreign cars were much cheaper does not fly because the US government has certain trade policies that prohibit the flooding of its market with massively subsidized commodities at the expense of its home industry. The answer is quality. Japanese cars have built a reputation of being fuel efficient unlike the V8 guzzlers from Ford and General Motors. Furthermore, even if the European made cars were slightly more expensive, the quality and comfort they provided was unmatched.
In short, the major effect of globalization is that consumers are nowadays exposed to a wide variety of commodities of different qualities and they have the freedom to choose. If the companies that are shipping jobs overseas were still able to monopolize their home market, they will still open factories overseas but they will not shut down production at home. Another point that has been raised by companies like IBM is the major reason for shipping jobs overseas is to target levels of skill that are not available in their home market.
All these are determined by how many professionals are available and how much do I have to pay them to do this task. With globalization, the world economy has become one huge employment agency. (Spring 2001)
Thomas Friedman’s Opinion
He lamented that “too many Americans Have become lazy”. I do not agree with him. The fact is millions of American workers are working harder than before for the same amount if not lesser pay especially in these hard economic times. I don’t think companies like IBM are cutting 13000 jobs in the US and Europe, and creating 14000 jobs in India because “Americans are Lazy”. Instead of calling them lazy, Friedman should have stated that the skills the population is being equipped cannot cope with the demands of today’s world market.
America’s education system has been rightly criticized for not moving at par with the changes that are occurring in the American market. Most of it was crafted during the boom years of mass production when huge factories employing thousands of workers were the norm. A lot less emphasis was placed on innovation with all the efforts being focused on producing a worker who will fit into the system instead of designing the system. (Kennet 2008)
This system hasn’t changed much and studies’ showing American students continuously lagging behind their Scandinavian and Hong Kong counterparts in math and science skills only speaks volumes.
The world economy is changing and the American worker has to equip himself with the necessary skills to keep up with the changes. The labor costs especially in the skilled sectors are high in the US most probably because the demand for these jobs is high but the number of workers is still low. The situation in India and China is the exact opposite. Universities and training institutes are churning out students faster than the market can create jobs; hence the lower labor costs. (Spring 2001)
References
Kennett Patricia (2008) Governance, Globalization and Public Policy, Edward Elgar Publishing, pp 125-128.
Price Sean, 2005, “Globalization and you: your generation will have to compete for jobs with people all over the world: Will you be ready?” Web.
Spring Joel H (2001) Globalization and Education Rights, Lawrence Erlbaum Associates, pp 51- 53.
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