Globalization refers to the process by which concepts, beliefs, information, products, and services spread around the world. It also indicates a trend in market openness, significant expansion of world trade and interdependence of countries, regions, businesses, and communities.
Nowadays companies take advantage of globalization in different spheres. They can cut down operating expenses by relocating production facilities to another country, purchase materials for the primary production at reduced prices due to the tariff reduction or removal of trade barriers, and expand the target market.
Globalization is defined as a social, cultural, political, and legal phenomenon:
- The concept of global society (the idea that all citizens of our planet build a world community and are integrated with each other) is becoming increasingly popular and more people interact with each other on the Internet and in the real world.
- International concert tours take place, some national cultures and works of art are spreading around the world.
- Globalization causes integration of individual cultures into a global culture.
- To avoid different conflicts, countries decided to establish international organizations and institutions. A perfect example is the United Nations (UN) that not only regulates interaction of countries, but also protects human rights.
- It has changed how international law is created and enforced.
Although, due to globalization, employment increased and there is a growth in the value of an economy's goods and services, it can be seen only in particular countries. Some industries can be severely affected by increasing global competition.
Multinational companies have a significant impact on the process of globalization. By operating in the market, they contribute to the economic development of countries and regions, as they are the main source of foreign investment in new and existing industries. Consequently, they determine the structure of the world market of goods and services and affect the level of its competitiveness. Globalization influences both positively and negatively small companies, workers, and cultures.
Guide to History of Globalization
The process of globalization started many years ago. When traders began to travel to other regions to buy goods that were rare and expensive and then sell them in their local area, international trade started. The Industrial Revolution in the UK had a great impact on the first wave of globalization as steamships and trains were able to transport goods over thousands of kilometers.
Some experts claim that globalization stopped developing after World War I. Countries closed the borders and imposed tax on imports of goods to protect their industries. After the Great Depression and World War II the US brought international trade back to life.
Among the reasons for the acceleration of globalization were public policy changes and the development of communications and information technology.
In addition to this, the signing of the North American Free Trade Agreement contributed to globalization as auto manufacturers from the US were encouraged to move their manufacturing facilities to Mexico. There they could reduce labor costs.
In the last years there has been a growth of the free-market economies due to the numerous trade agreements and the use of fiscal policies.
Pros and Cons of Globalization
The benefits of globalization are:
- Countries of the Third World are capable of catching up to the developed countries due to the increasing production capacity and rising living standards.
- The use of outsourcing in international relations has led to reduction of manufacturing costs and finding new markets, as well as to the creation of new jobs in developing countries.
- People from around the world began to join forces to solve global problems and pay careful attention to human rights.
The negative effects of globalization are:
- Dependance of particular countries on their trade partners: a recession in one country can influence the economic situation of their partners.
- Globalization can cause a concentration of a large amount of money in the hands of a small corporate elite and they are able to control the market.
- Middle-class households are being under economic pressure as industries are relocated abroad.
- There is cultural homogenization that implies the reduction in cultural diversity through the popularization of a wide range of cultural symbols. The US has a great impact on other cultures and the popularity of such brands as Starbucks, Nike in global markets proves it.