Globalisation Challenges

Introduction

Globalisation is the tendency of the public and economies to move towards greater economic, cultural, political, and technological interdependence. It is a phenomenon that is characterised by denationalisation, (the lessening of relevance of national boundaries) and is different from internationalisation, (entities cooperating across national boundaries). The greater interdependence caused by globalisation is resulting in an increasingly freer flow of goods, services, money, people, and ideas across national borders (Catalogue.pearsoned.co.uk, 2012).

Entrepreneurs, especially multinational corporations, are taking full advantage of the opportunities offered by more open markets, (duly aided by technological innovations and greater economic liberalisation), to establish production processes in almost all the countries of the world.

The processes and effects of globalisation are however inconsistent to a great degree (Hans-Henrik & Sørensen, 1995). Concentrations and scarcities often arise due to globalisation. When considered in combination, these developments give rise to increasingly well-defined global power structures (Lerche, 1998).

The values of globalisation values have invaded the lives of people across nations through the agency of the Internet, satellite television and the distribution of global publications. Global marketing, worldwide stock markets, and the accessibility of roaming international venture capital are essential elements of the global market value approach. Steingard & Fitzgibbons, (1997), state that not a single society is protected by topography, practice or just plain indifference from the influence of globalisation. Nobody is out of reach of its extended influence.

Consequences of Globalisation

Market integration is an important and prominent feature of globalisation. Certain examples of such market integration can be seen in financial markets, insurance markets, and commodity markets. Funds now flow freely from one country to another and global price movements of commodities have an impact on all national economies (Economics Online, 2007).

International integration in various economic areas started growing in the 1980s when a number of national governments, especially in the emerging world, started bringing in economic liberalisation. Deregulation and reduced government monitoring are the main tenets of globalisation. Financial sector deregulation, the elimination of foreign exchange controls and greater freedom of trade formed part of the various deregulation measures undertaken by liberalising governments. Financial deregulation resulted in the liberal abolition of capital controls, and interest rates controls, even as traditional barriers to access into banking and financial services were lifted in a continuous manner (Cable, 1995).

The characteristics of economic globalisation are the rapid expansion of international trade, foreign direct investment and capital market flows (WTO, 1999). Globalisation increased rapidly due to the interplay and reinforcement of a number of factors, namely (a) advances in the transport and communication industries, (b) cost-effectiveness of communications via the internet, webcam, computer based and latest mobile-based applications, (c) containerisation, which enabled the transportation of bulk quantities of goods and commodities across the world cost effectively and thereby boosted trade between countries, (d) free capital mobility, free trade and development of complex financial products like derivatives, and (e) the growth of multinational companies and international brands (Economics Online, 2007).

Globalisation, however, has also resulted in several social and economic challenges. Small and medium enterprises in the domestic market find it extremely difficult to enter, trade, and compete with globally branded and standardised products, which in turn hurt the self-reliance of national economies. Globalisation has provided immensely increased power and authority to multinationals, which also creates obstacles for small businesses. Multinational companies are now able to utilise such enhanced power to their advantage within countries by bypassing regulatory regimes, monopolising labour markets, and influencing wages.

Domestic employment is getting affected in many countries on account of the availability of goods at competitive prices in standardised packing, thereby reducing the need for local manufacture of such goods. This leads to the possibility of growth in the pace of deindustrialisation, due to the slow erosion of the manufacturing base in the economy. The gap between rich and poor within nations is widening due to structural changes, which arise from globalisation and result in structural unemployment. Globalisation also appears to be increasing the inequality between nations, with richer nations gaining more from it than the poorer nations. An increase in trade also increases pollution, contributes to carbon emissions and global warming and facilitates the decrease of non-renewable resources, such as oil (Economics Online, 2007).

Neo-liberal economists and proponents of globalisation argue that the basic modus operandi of the economy should be market-based. Such a market-based system however leads to a point where markets, instead of being vehicles for serving the community, inevitably end as the central part of the community (Paul & Manfred, 2014).. Any problem or hindrance in the economy in such circumstances thus has a strong bearing on the community and results in the loss of assets and wealth of a number of people. The recent failures of large corporations, due to the financial greed of corporate executives and the exercise of malpractices for increasing corporate wealth at the expense of society at large, are accepted to be offshoots of globalisation. It is ironic that corporations that wished to work with lesser government intervention now want the same government to intervene and bail them out during downturns (Paul & Manfred, 2014).

An increase in income disparity is one of the social failures, which appears to have arisen from the success of globalisation. Environmental destruction is also being aggravated by the success of globalisation. Increasingly greater freedom of capital is making it increasingly challenging for members of political units to come together and force their government to compel regulations on polluting firms (MacEwan, 1994). Social heterogeneity is also becoming stronger on account of rising globalisation. Racial, Ethnic, Religious and other groups, whose character and solidarity are based on language, have become progressively more vocal and constantly express their discontent in the global media (Lerche, 1998).

Uneven Economic Success

The economic prosperity that has stemmed from globalisation, with specific regard to the United Kingdom, has been uneven, as illustrated hereunder:

Growth

Assuming the maintenance of competitiveness, globalisation will increase growth in the long term on account of an increase in aggregate demand. Such growth in demand arises through increases in exports and in turn induces greater levels of investment, both local and foreign, in the country.

Employment

Globalisation can lead to deindustrialisation in the United Kingdom in the long term, because of the moving out of the manufacturing sector to developing countries from developed countries. Whilst jobs may be destroyed in the manufacturing sector, they are likely to get structured in the service sector.

Prices

UK manufacturers and traders can opt for global sourcing on cost-effective terms and conditions and pass on the cost benefits to domestic and export customers.

Trade

Trade will increase as a ratio to Gross Domestic Product since the volume of exports and imports will grow on account of globalisation. The effect of the balance of payments being dependent upon relative growth rates, the impact of globalisation on inflation, competitiveness and the exchange rate is uncertain (Economics Online, 2007). Globalisation has given a boost to specific sectors, especially the automotive sector in the United Kingdom. Britain has become a focus in the global web of car and engine production, mostly for exports (Hutton, 2012).

Globalisation gives rise to higher research and development and to efforts by corporates that are directed towards acquiring specialisation and becoming leaders in the sunshine sectors. National economies may also provide industry and sector-wise tax concessions and government funding to achieve their objective of increased economic prosperity. Developing economies generally promote their labour-intensive, manpower-skilled labour utilisation skills to increase their presence in the global economy. South Asian economies like India and China promote their low-cost computer technology skills and their manufacturing sector, (with cheap labour skills), to derive economic success.

Correlation between Economic Success and Weakness of Globalisation

A new economic system, which rewards competitive cost-effective and mass standardisation of goods and services, has come into existence on account of globalisation. This economic success, as a criterion, by itself, leads to the weaknesses of globalisation (Hutton, 2012). Uncertainty is being created by countries like Germany, China, India and Japan. These countries provide most of the goods in the new global supply chains and build up regular trade surpluses, whilst other countries continue to have deficits. There is no mechanism to make manufacturing countries and consuming countries change the format of globalisation, due to compelling factors such as cost, availability of necessary labour, and technologies (Hutton, 2012). This in turn not only compels the banking system to reutilise the surpluses but may also result in abuse of the many existing ambiguities and gaps and lead to an uncontrolled shadow system, which could lead to the collapse of the system (Hutton, 2012). Concerns have been expressed of monopolistic organisations penetrating into banking and energy sectors, thereby providing powerful multinationals with opportunities to control and manage primary and critical infrastructure and use the same to their advantage.

A number of factors can be correlated between the economic success and weakness of globalisation. Commodity prices and labour costs vary due to the ever-changing fast pace at which globalisation is taking place. This results in temporary shocks and creates uncertainties in economies. The emergence of Far East Asian economies, such as Indonesia, Malaysia, the Philippines and Vietnam as new labour and cost-effective economies, is for example impacting other fast-growing and developing economies like those of India and Brazil. This shifts the focus of most of the developed nations at an unusually rapid pace from one economy to another.

The rise in oil prices is giving rise to the emergence of a new set of industries. The motor vehicle industry is gradually shifting its base to diesel-based and natural gas-based automobile manufacturing and to a carbon-neutral approach to vehicle design in order to reduce dependence on oil. Even the central banks of economies are influenced by globalisation. They may direct their capital inflow by increasing or reducing the interest rates depending on nation’s need and political climate.

Most of the budgetary policies are made in light of prevailing global economic conditions. All nations need to succeed economically and exploit global weaknesses by channelizing public and individual focus and energies and by forming suitable policies to achieve their objectives in these general economic conditions.

Conclusions

Globalisation is a key driver for the economies of most countries. Whilst the extent of future global economic integration is unknown, the process of negotiation and renegotiation between multinationals, governments and economies to gain the advantages of globalisation is an ongoing one. Labour dislocations both for unskilled and skilled categories have become a feature of globalisation.

Economic globalisation is always readjusting since the extent of globalisation has a different impact and is understood differently by all those who are involved in the process. The free flow of capital, trade in goods and services, and free movement of labour are based on the political climate. The free movement of workers and deindustrialisation is especially creating chronic uncertainty and political stress in developed countries, such as the United Kingdom and the USA. Economic globalisation is also causing significant discontent amongst the general public.

UK citizens are becoming increasingly cynical about the effects of globalisation on their country and are shaping a more protectionist political stance. The impact on outsourcing policies and migration policies can be seen to be a consequence of such hardening of political opinion. The experience of higher unemployment and the decline in traditional industries, on account of the shifting of manufacturing bases from the UK to other countries has led to the need to restrict imports. There is remarkably little public support for globalisation from the middle class and highly skilled employees in service sectors.

Globalisation does, however, bring end consumers directly in contact with manufacturers with the use of diverse technologies and modern communications. This is evident from the use of the internet and telephone, which enables Western consumers to directly purchase from Asian manufacturers. Developing countries likewise take advantage of the technological knowledge of developed countries through the way of knowledge transfers.
Economic instability in certain parts of the world is not going to impede the progress of globalisation, which is expected to contribute to solutions to the global food crisis, progress in the medical sciences and advancement of technologies. Whilst the process will continue to have inadequacies and face criticism and barriers, nations will hopefully get together to reduce the adverse impact of globalisation and benefit from its economic advantages.

References

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