Globalisation – opportunity or thread?

by: Michael Krause

1 Introduction 3

2 Definition: What is globalization?  3

3 History  4

4 Reasons  4

4.1 Economic globalization 4

4.1.1 Flow of money, goods and services  4
4.1.2 Communication  5
4.1.3 Transportation  5

5 Political globalization  6

6 Cultural globalization  8

7 Environmental concerns  9

7.1 Usage of resources  9

7.1.1 Absolute use 9
7.1.2 Relative use 9

7.2 Environmental impact  10

8 Some are going the opposite direction  10

8.1 Governmental constraints 10
8.2 Constraints by companies  11

9 Pros and cons 11

9.1 Pros  12
9.2 Cons  12

10 Globalization in question  13

11 Impact on lesser developed countries 14

11.1 Impact on development countries 14
11.2 Impact on emerging markets  15
11.3 Summary  16

1 Introduction

Stocks are traded worldwide, mails are sent from Australia to Europe and forwarded to the US, the head of the catholic church, Pope Benedict XVI visits Turkey and has a meeting with the head of the Turkish government.¹ Our world has become a so-called “global village” where everyone can interact with everyone else within seconds or even realtime. Links between countries, companies and even individuals are no longer limited to borders, religion or attitudes.

The following essay, written by Michael Krause, Erasmus student at the Dublin Institute of Technology, describes how globalization is affecting nowadays life in different fields of society and shows the positive as well as negative influence this global transformation has on lesser developed nations.

2 Definition: What is globalization?

The term “globalization” describes the growing international network in many different fields of today’s life such as economy, politics, culture, environment, communication etc.

It was first mentioned in the article “The globalization of markets”², published in the Harvard Business Review, written by Theodore Levitt (1925-2006) who, back in 1983, was an professor at the Harvard Business School: “[…] Technology, by proletarianizing communication, transport, and travel drives the world toward a converging commonality. Well-managed companies have moved from emphasis on customizing items to offering globally standardized products that are advanced, functional, reliable, and low priced. They benefit from enormous economies of scale in production, distribution, marketing, and management.”³

3 History

Although many people think that globalization is a phenomenon of the 20th century, its history has old ancestors. Right from the beginning of mankind, when the first tribes moved to another place hoping to find better conditions for hunting, the world has grown increasingly integrated. “One of Britain’s most famous imperial spokesmen, Cecil Rhodes, put the case for the colonialism succintly in the 1890s. “We must find new lands,” he said, “from which we can easily obtain raw materials and at the same time exploit the cheap slave labour that is available from the natives colonies.””⁴ Therefore it’s difficult or maybe even impossible to state an exact date when globalization, either in a positive or negative way, occurred for the first time.

4 Reasons

There are several fields where globalization takes place and which can be seen as the main reasons for this worldwide network.

4.1 Economic globalization

One of them is the globalization in the economy whereas flow of money, goods and services is part of it.

4.1.1 Flow of money, goods and services

Especially for companies in industrialised countries the export has become essential. The demand in their domestic market just isn’t enough to boost their sales figures any further. That’s why they have to search for new markets where customers have enough buying power. That could be other industrialised countries as well as some emerging markets.

On the other hand, emerging markets offer low wages together with highly qualified workforce. Therefore many companies source out their production or services which can lead to wealth and employment in the low wage countries. Compared to that, countries in the so-called “Third World” have huge problems with the ongoing process of worldwide integreation. They can’t keep up with the pace their structure is changing, face problems in infrastructure and some of them have already gotten dependant on the more developed countries. This problem will be discussed more precisly at the end of this essay.

4.1.2 Communication

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1 Available: http://www.foxnews.com/story/0,2933,232058,00.html, 29/11/2006

2 LEVITT, T (1983), The globalization of markets. Harvard Business Review, 20. Edition, Nr. 5, p. 92

3 Available: http://harvardbusinessonline.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=83308, 29/11/2006

4 ELLWOOD, W (2001), The No Nonsense Guide to Globalization, Verso Books, p.13, Oxford