Professional Documents
Culture Documents
1 - Globalization
1 - Globalization
Learning Objectives:
In this topic, it is expected that you will be able to:
1. Differentiate the competing conceptions of globalization.
2. Identify the underlying philosophies of globalization.
3. Agree on a working definition of globalization for the course.
Effects of Globalization
1. More goods at lower prices. Globalization encourages each country to specialize in
what it produces best using the least number of resources, known as comparative advantage.
This concept makes production more efficient, promotes economic growth, and lowers prices
of goods and services, making them more affordable especially for lower-income households.
2. Scaled up businesses. Larger markets enable companies to reach more customers
and get a higher return on the fixed costs of doing business, like building factories or
conducting research. Technology firms have taken special advantage of their innovations this
way.
3. Better quality and variety. Competition from abroad drives US firms to improve their
products. Consumers have better products and more choices as a result.
4. Innovation. Expanded trade spurs the spread of technology, innovation, and the
communication of ideas. The best ideas from market leaders spread more easily.
5. Job churn. Globalization supports new job opportunities but also contributes to job
displacement. It does not significantly change the total number of positions in the economy, as
job numbers are primarily driven by business cycles and Federal Reserve and fiscal policies.
Nevertheless, a Peterson Institute study finds 156,250 US manufacturing jobs were lost on net
each year between 2001 and 2016 from expanded trade in manufactured goods, which
represents less than 1 percent of the workers laid off in a typical year. Low-wage workers in
certain regions are most affected. Many of them also face lower earnings or have dropped out
of the workforce. Bigger factors than trade driving job displacements are labor-saving
technologies, like automated machines and artificial intelligence. Better-paying positions have
opened up in manufactured exports—especially in high-tech areas, such as computers,
chemicals, and transportation equipment—and other high-skill work, notably in business
services, such as finance and real estate (see Jobs section).
6. Decline in gap between rich and poor globally, but wider inequality. Globalization
has helped narrow inequality between the poorest and richest people in the world, with the
number living in extreme poverty cut by half since 1990. But within many countries, including
the United States, inequality is rising. A consensus of scholarly work holds that globalization has
contributed marginally to rising US wage inequality, putting this factor at 10 to 20 percent. A
leading explanation for rising US inequality is that technology is reducing demand for certain
low- and middle-wage workers and increasing demand for high-skilled, higher-paid workers.
Wages have also stagnated, though economists are still debating the exact causes. Countries
exposed to globalization have alleviated inequality to different degrees through tax and welfare
systems. The United States has done the least among advanced economies to mobilize
government policies to reduce inequality.
7. Globalization has displaced some workers, while supporting high-skill jobs.
Globalization changes the types of jobs available but has little effect on the overall number of
jobs in the labor market. That being said, some workers have directly benefited from expanding
global commerce, while others have not. Certain manufacturing and industry workers in specific
geographic regions lost out, such as those in furniture, apparel, steel, auto parts, and electrical
equipment industries in Tennessee, Michigan, and the mid-Atlantic states. A widely cited study
shows that between 1991 and 2007, lower-wage manufacturing workers within industries that
faced import competition experienced large and lasting earnings losses, while higher-wage
workers in these industries did not. The lower-wage workers may have lacked the skills and
mobility to transition to other lines of work, whereas higher-wage workers relocated to
companies outside manufacturing. Studies show that globalization has also diminished US
worker bargaining leverage to demand higher wages. Because US firms often beat international
competitors at supplying high-skill services—like engineering, legal, consulting, research,
management, and information technology—workers in these fields have benefited the most
from globalization.
Business-service employment expanded more than 20 percent between 2006 and 2016.
These jobs pay more than 20 percent higher wages than the average manufacturing job.
Foreign-owned companies that do business in the United States have hired Americans at a
faster rate than US private employers between 2007 and 2015. They also pay better, do more
research and development, export more, and invest more than the average US firm. The same
is true, by comparison with local averages, of US firms that invest abroad. One in five American
manufacturing workers is now employed by a foreign-owned company operating in the United
States.
Demand will likely increase for more highly-skilled manufacturing workers, in areas such
as engineering, management, finance, computer and mathematical occupations, and sales. The
greatest areas of job growth now in the United States are in professional and business services,
health care and social assistance, and educational services. More job training and education is
needed to prepare workers for these jobs.
Benefits of Globalization
Globalization has benefits that cover many different areas. It reciprocally developed
economies all over the world and increased cultural exchanges. It also allowed financial
exchanges between companies, changing the paradigm of work. Many people are nowadays
citizens of the world. The origin of goods became secondary and geographic distance is no
longer a barrier for many services to happen. Let’s dig deeper.
Economic benefit. The most visible impact of globalization is definitely the ones
affecting the economic world. Globalization has led to a sharp increase in trade and economic
exchanges, but also to a multiplication of financial exchanges. In the 1970s world economies
opened up and the development of free trade policies accelerated the globalization
phenomenon. Between 1950 and 2010, world exports increased 33-fold. This significantly
contributed to increasing the interactions between different regions of the world. This
acceleration of economic exchanges has led to strong global economic growth. It fostered as
well a rapid global industrial development that allowed the rapid development of many of the
technologies and commodities, we have available nowadays.
Knowledge became easily shared and international cooperation among the brightest
minds speeded things up. According to some analysts, globalization has also contributed to
improving global economic conditions, creating much economic wealth (that was, nevertheless,
unequally distributed – more information ahead).
Financial benefit. At the same time, finance also became globalized. From the 1980s,
driven by neo-liberal policies, the world of finance gradually opened. Many states, particularly
the US under Ronald Reagan and the UK under Margaret Thatcher introduced the famous “3D
Policy”: Disintermediation, Decommissioning, Deregulation.
The idea was to simplify finance regulations, eliminate mediators and break down the
barriers between the world’s financial centers. And the goal was to make it easier to exchange
capital between the world’s financial players. This financial globalization has contributed to the
rise of a global financial market in which contracts and capital exchanges have multiplied.
Cultural benefit. Together with economic and financial globalization, there has
obviously also been cultural globalization. Indeed, the multiplication of economic and financial
exchanges has been followed by an increase in human exchanges such as migration,
expatriation or traveling. These human exchanges have contributed to the development of
cultural exchanges. This means that different customs and habits shared among local
communities have been shared among communities that (used to) have different procedures
and even different beliefs.
Good examples of cultural globalization are, for instance, the trading of commodities
such as coffee or avocados. Coffee is said to be originally from Ethiopia and consumed in the
Arabic region. Nonetheless, due to commercial trades after the 11th century, it is nowadays
known as a globally consumed commodity. Avocados, for instance, grown mostly under the
tropical temperatures of Mexico, the Dominican Republic or Peru. They started by being
produced in small quantities to supply the local populations but today guacamole or avocado
toasts are common in meals all over the world.
At the same time, books, movies, and music are now instantaneously available all
around the world thanks to the development of the digital world and the power of the internet.
These are perhaps the greatest contributors to the speed at which cultural exchanges and
globalization are happening. There are also other examples of globalization regarding traditions
like Black Friday in the US, the Brazilian Carnival or the Indian Holi Festival. They all were
originally created following their countries’ local traditions and beliefs but as the world got to
know them, they are now common traditions in other countries too.