Defining Globalization

Globalization and the Public Sector

The phenomenon of globalization has attracted significant opposition, which is often expressed as resistance to the interdependency between regions and nations that is fostered by the process. Globalization transcends cultures as trade is conducted on a worldwide basis, across continents and outside national boundaries (Keohane & Nye, 2000). The speed of globalization in the early twenty-first century is constantly increasing as the result of the growing capacity for computerized transfer of information. Although information is an important commodity that is transmitted through globalization, products, money, intellectual capital, people and medical phenomena such as illnesses are also exchanged as a result of the process (Keohane & Nye, 2000). The result is the blurring of national boundaries, melding of cultures, and the rise of international institutions that serve almost as governmental proxies.

The United States is often perceived to be a primary driver of globalization. Yet history shows that dominance of world markets by one nation is never permanent, and no matter how complete a nation’s success may appear to be, the competitive advantage eventually transfers to others (Rivoli, 2009, p. 5). American consumers are currently witnessing this process. For example, since the mid-twentieth century, the primary market dominance for manufacturing of electronic products has changed not less than five times, from the United States to Japan, to Hong Kong and Taiwan, and recently to mainland China. Likewise, clothing manufacturing has transferred from factories located in the southern United States, to Southeast Asia, to the Caribbean, and back to Asia (Rivoli, 2009, p. 5). A similar globalization process has occurred in the steel industry. In all of these situations, the cost of labor has been the cause for transfer of manufacturing from the United States to other locations, ending in Asia (Rivoli, 2009, p. 5).

Globalization has resulted in increased prosperity for residents of some regions, while for others, the process has widened pre-existing gaps between the rich and poor (Keohane & Nye, 2000). In 1992, U.S. presidential candidate Bill Clinton stated that international institutions could act as instruments to balance inequities between nations, and ameliorate tensions between nations (Mearshimer 1995). Advocates of globalization assert that individual governments can benefit from the support of institutions such as the United Nations and the World Bank, which provide assistance with making globalization a process that can alleviate poverty. Other international organizations that work to coordinate the process of globalization include political entities such as the European Union and the North Atlantic Treaty Organization. Highly influential financial entities include the International Monetary Fund and the Federal Reserve as well as other central banking bodies.

Critics assert that these institutions do not act in the interest of the public sector, since an organization such as the United Nations exercises power through national entities, and does not have the authority for political influence beyond the agenda that is established by great powers. Yet others assert that international institutions such as the World Bank and the United Nations can influence state preferences, and support peace and economic initiatives (Mearshimer, 1995). Other international institutions such as the International Federation of the Red Cross and the Red Crescent act to support the governments in assisting the public sector in compassionate measures.

The activities of a multinational corporation such as the American oil company Aramco provide an illustration of the potential of globalization for destructive influence. During the early twentieth century, Aramco was instrumental in financing the creation of Saudi Arabia as a nation, as a way to gain control of the petroleum resources located in the region. Gaining control of the petroleum was critical, since the American economy relied on a consistent supply of inexpensive oil (Citino, 2002). Multinational corporations also sometimes act to support specific political models. Since the mid-1970s, multinational corporations have acted to support neoliberal governmental initiatives. Neoliberalism is a political model based on the belief that promoting the dissemination of a capitalist economic model supports economic self-determination, and will result in the growth of democracy. “Enormous financial resources have been devoted to this effort” (Bieler & Morton, 2008).

The overall increase in the rate of globalization can largely be defined by economics. Many international economic markets are dependent on knowledge-intensive activities, involving alliances between participants from numerous countries. Frequently, these alliances include foreign direct investment FDI in a receiving economy, such as investment by U.S. in India. The economic theory of the “Washington Consensus” assumes that investment by the U.S. in foreign countries inevitably results in growth of the receiving economy (Moran, 2005). Frequently, a receiving economy undergoes a “multiplier effect” as a result of receiving FDI, where national GDP and other economic indicators rise, along with creation of jobs and inflows to the national capital accounts (Economics Online n.d.). This trickle-down effect serves to support the “Washington Consensus” that U.S.-based FDI is supportive to developing economies.

Some governments place tight restrictions on the receipt of FDI, out of concern that foreign entities will gain too much control of national resources. Governmental restriction of FDI by a receiving economy can have adverse effects on a receiving economy. Although India formerly had such restrictions on FDI, these restrictions have been relaxed in recent years, resulting in a favorable response from foreign companies intending to gain access to India’s fast-growing economy and large labor force. In acknowledgement of this change in policy, U.S. Secretary of State Hillary Clinton established the U.S.-India Trade Policy Forum (TPF) to encourage trade between the two nations (Office of the United States Trade Representative n.d.). When participating in globalized trade, companies must integrate relevant cultural factors Neglecting to understand these factors can result in failure of trade initiatives, since the resentment that may arise within the receiving economy may harm relations.

For example, when engaging in international market relations with India, cultural factors that must be considered include Indian accounting standards, which are specific to that country. In addition, the Indian judicial system is based on the English common law, yet also strongly relies on Hindu religious law (Beilak, Henriquez, McNeil, Ogozaly, Rubino, & Sullivan, 2011). Conducting business in a country such as India, which has a fundamentally Western legal system, combined with numerous features that are non-Western, calls for accommodation in order to support commerce.

While opponents of globalization cite harsh labor conditions as a negative outcome, a recent analysis of the lives of garment factory workers revealed that most of the workers preferred their factory jobs to their former existence working the land on farms (Rivoli, 2009, p. 110). They stated that factory work “beats hell out of life on the farm”, and the study concluded that “global capitalism and global activism are not enemies but instead cooperators, however unwitting, in improving the human condition” (Rivoli, 2009, p. 121). Although workers such as those in the study work in conditions that appear harsh to Western eyes, global labor activism and Internet-based reports regarding factory conditions serve to foster better working conditions (Rivoli, 2009, p. 253).

Globalization is currently driven by the Internet and advancements in technology that provide instantaneous worldwide communication. International markets for products can be developed on the Internet, and these markets are outside the control of particular governments. Factors such as the blurring of national boundaries, instant communication between continents, and melding of cultures via social media such as Facebook, YouTube, and Twitter will play a strong role in the erosion of the dominance of any particular nation or government. These economic considerations will shape public sector policies for nations worldwide.

From this perspective, international institutions such as central banks, the United Nations, and the World Bank can be expected to gain power, as nations rely on these organizations to implement policy initiatives that must accommodate global audiences and markets. For instance, during the worldwide economic crisis that began in 2008, individual nations were not able to contain the contagion that spread through financial markets. International institutions such as the European Union, the World Bank, and the Federal Reserve were compelled to act to support the economies of nations that would have collapsed without assistance (Gougis, Bileisis, & Kacevicius, 2010, p. 55). The result of globalization and the blurring of national boundaries is the rise of international institutions that will increasingly serve as proxies for governmental bodies.

References

Ahmad, N.M. (2011). The economic globalization and its threat to human rights. International Journal of Business and Social Science, 2(19), 273-282.

Andreas, B., & Morton, A. (2008). The deficits of discourse in IPE: Turning base metal into gold? International Studies Quarterly, 52, 103-128.

Barnett, M., & Finnemore, M. (1999). The politics, power, and pathologies of international organizations. International Organization, 53(4), 699-732.

Beilak, M., Henriquez, W., McNeil, S., Ogozaly, A., Rubino, E., Sullivan, K. (2011). Apple Inc.

http://www.boydassociates.net/Stonehill/bus336/BUS336%20grp%20projects/Apple%20 -%20India.pdf

Citino, N.J. (2002). From Arab nationalism to OPEC: Eisenhower, King Saud, and the making of U.S.-Saudi relations. Mumbai, India: IndianUniversity Press.

Economics Online.co.uk. (n.d.). FDI. Retrieved from

http://economicsonline.co.uk/Global_economics/Foreign_Direct_Investment.html

Gougis, A., Bileisis, M., & Kacevicius, R. (2010). The contradictions of globalization: The threats to public and private sector development in the world after 2008. Tiltai, 3.

Keohane, R.O., & Nye, J.S. (2000). Globalization: What’s New? What’s Not? (And So What?). Foreign Policy, 118 (2000), 104-119.

Mearshimer, J. (1995). The false promise of international institutions. International Security, 19(3), 5-49.

Moran, T.H. (2005). How does FDI affect host country development? Using industry case studies to make reliable generalizations. Retrieved from

http://iie.com/publications/chapters_preview/3810/11iie3810.pdf

Office of the United States Trade Representative. (n.d.). India: bilateral investment. Retrieved from http://www.ustr.gov/countries-regions/south-central-asia/india

Rivoli, P. (2009). The travels of a t-shirt in the global economy: An economist examines the markets, power, and the politics of world trade. Indianapolis, IN: Wiley.

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