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Globalization

The term globalization refers to the integration which takes place at the international level involving the sharing of products, ideas, world opinions and many other cultural or social aspects. The process of globalization has been marked by different changes which have taken place in recent times. This includes advances in telecommunication and transportation infrastructure. It also includes availability of internet services which have helped in simplifying the integration process. Consequently, these factors have played a great role in enhancing interdependence of the world economies.

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Shanghai has benefited from globalization and become one of the most modern cities in the world.

Globalization is the concept of a beneficial relationship between nations around the globe, fostered by greater integration and inter-dependence, with an increased economic, social, cultural and political interaction among them, ideally uniting the nations of the globe into “one world”. It means greater economic integration between countries through free trade, open market policies, deregulation, and investment opportunities. It also means a simultaneous social, cultural or political inter-connectedness, ushered by the free movement of human capital/information, and the exchange of financial capital, products and services, across fluid geographical borders. The World Wide Web revolution has acted as a catalyst, in accelerating the process of globalization, by facilitating instant and affordable interaction between people and businesses, where the global citizens reap the benefits of knowledge/technology dissemination, along with information about events happening in every part of the globe. Such a degree of inter-connectedness also means that an occurrence in one part of the globe has a corresponding effect, or reaction, in another part of the globe. Therefore, authorities need to be careful about the production processes, healthcare systems, disease control, and nuclear proliferation, for they may have significant ramifications on global pollution levels, climate change, rapid spread of infectious diseases and hostility between nations, and impeding economic growth and social development.

Overview

The word globalization has generated diverse views about its origin. However, there are those who trace its origin back to the age of discovery which happened in Europe or the coming of the ‘‘New World’’. Some studies show that globalization started way back in the third millennium BCE. The interdependence of the global economies and cultural aspects grew at a high rate between the end of the 19th century and the beginning of the 20th century. According to the International Monetary Fund (IMF), globalization consists of four basic aspects which include; the movement of capital and investments, transaction and trade, sharing of knowledge and the general movement of people. Other aspects which are connected to globalization include environmental challenges such as over fishing, air pollution and climate change.

The History of Globalization

Rudimentary forms of globalization have been witnessed to exist in human history, through trade between ancient civilizations. There is evidence of a trade route, instrumental in connecting continents around the world. As early as 18th century, the noted economist, Adam Smith, related the concepts of market integration, division of labor and the practice of exchange of specialized goods among villages, in the primitive times. The triangular trade between Europe, Africa and the New World, consisted of an exchange of raw materials, manufactured goods, and slaves. Imperialism, involving political and economic hegemony of various trading companies of Europe, over the colonies of Asia and Africa, also meant connection between continents, though the nature of relationship between the continents and the geographical extent of such inter-connectedness was different or limited, as compared to modern day globalization. Industrialization, in the 19th century, also facilitated commercial relationships between countries and continents, by heralding the revolution in transportation. These forms of inter-connection between geographical regions, were the precursors of modern day globalization.

The economic reorganization, following the Second World War, led to the formation of international monetary and trade organizations, to revitalize the financial sector and rebuild the shattered economy. Such initiatives resulted in the establishment of global bodies to facilitate international trade and commerce, (the International Monetary Fund and Global Agreement on Tariffs and Trade), by removing the impediments to trade. The late twentieth century witnessed the integration of national economies with the global economy. The economic reforms in China and soviet Russia completed the integration of the erstwhile socialist block with the capitalist and liberal philosophy of globalization. The popularity of internet and aviation, resulting from drastic innovations in these domains, have played a crucial role in bridging the geographical divide among different regions of the globe, connecting people and nations through economic, socio-cultural and political linkages.

Phases of Globalization

There are three phases considered in the historical emergence of globalization. These include the Archaic, Early Modern, and Modern globalization phases.

The Archaic Phase

Archaic globalization is the period which saw major developments and events that took place until the 1600s. The term Archaic is used to refer to the changes in the relationship of states and communities, enhanced by the geographical distribution and social cultural norms at all levels of the society. In this phase there are three main aspects which are considered for the process of globalization to take place. One of these is the Eastern origin ideas. This refers to the fact that most of the Western nations have learned and adopted globalization principles from the Eastern states. It goes ahead to explain that globalization process of Western nations took place because of the ideas of the East, which were traditional by then. Distance is another aspect under the Archaic phase of globalization. Early globalization processes made it difficult for nations to interact, especially with long distances to be covered, which were due to transportation challenges and other social cultural factors. This was to change later with the advances of technology, which made it easier for states to study each other and what they had to offer in terms of business. This would later mark the emergence of another phase of globalization.

The next concept involved the start of interdependence among states, regularity and stability. The world states started affecting each other due to the interdependence that emerged over time. The interdependence concept is one of the main drivers of globalization processes in the world. It has allowed countries and unions to share their resources and production on a wider scale. It is one of the most debated concepts in the early globalization forces. Globalization did not take place at a higher rate as it was seen in later years because there were still some limitations of interdependence process among states. A multi-pillar nature concept is also taken as one of the concepts of archaic globalization. This idea refers to the involvement and non-Europeans’ active participation, in the globalization process. The Archaic globalization process was seen to be driven by European states and also by other nations such as Bengal, Gujarat, coastal cities of Japan and China. These regions were considered as having greater economic development than other areas. The Archaic process of globalization witnessed great development of major Western European states, which saw them grow at a faster rate than many others in the world.

The Early Modern Phase

Early modern phase is also known as proto-globalization phase. It is believed to have started in the 1600s. It covered two centuries until the 1800s. This concept, also known as proto-globalization, was brought forward by early historians - Christopher Badly and G. Hopkins. It refers to the period which saw the increase of international relations in form of trade and culture, which took place at the end of the 19th century. The proto-globalization phase saw a high rate increase of maritime trade in the European empires, between the 16th and 17th centuries. The trade links involved the Spanish and the Portuguese empires at the first stages, but the British and Dutch empires followed later. It was in the early 17th century that there was high growth rate in the world trade. This was necessitated by the establishment of chartered companies such as British East India Company which was started in 1600, and also Dutch East India Company which was established in 1602. The latter was termed by many as the single most multinational company where business people could be offered stocks. There are some factors that make the phase of early modern globalization to be different from the modern globalization phase. Some of these include how the method of managing the world trade took place, and the basis in which the links of trade expanded in that particular period of time.

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Another aspect of globalization is the way in which the information is shared among global states and more so the level of exchange of the same. The period of early modern phase of globalization was perpetuated by different trade arrangements. Globalization was further enhanced by the increase in the war and conflict among some of the most powerful nations in the world. There was also the introduction of some new commodities in the world trade such as the slave trade, which enhanced the relations among nations. Furthermore, European countries took advantage of resources in the western hemisphere due to the existence of triangular trade among states.

The Modern Phase

It was during 19th century that globalization process started to take form, which was due to industrial revolution. The process of industrialization helped in the standardization of household commodities as a result of economies of scale. The demand for the produced commodities was high due to the increase in population. The imperialism of the 19th century played a great role in enhancing globalization.

The transportation process was eased by the introduction of steamships and the railroad system, which helped to minimize the cost of doing international trade and transportation cost respectively. This took place between the early 1800’s and the 1850s. International trade was also enhanced by the introduction of shipping containers in the early 1950s. It was after the Second World War that efforts were made by politician which bore fruits with the organization of the Bretton Woods’s conference. In this conference, there was an agreement by several major states to come up with a framework capturing some of the international aspects that affected global trade. Some of these included finance and commerce and monetary policies.

It also involved the establishment of a number of international institutions whose aim was to catalyze economic growth while simplifying and reducing international trade barriers. Consequently some trade restrictions were abolished after the commencement of General Agreement on Tariffs and Trade (GATT). After the establishment of GATT, an institution by the name of World Trade Organization was formed for the management of international system. The formation of this institution saw the rise in gross world product from 8.5% in 1970 to about 16.2% in 2001. There was a concern in the scale of international institutions and agreements in pushing the process of globalization especially due to the backlash of trade negotiations which took place in Doha. This impact saw many states changing to bilateral business relationship and smaller agreements. A good example is the bilateral relations under Free Trade Agreement between South Korea and United States.

Air transportation has been improved with the introduction of affordable services to the middle class population, particularly in advanced countries during the early 1970s. It has also been facilitated by the inclusion of low cost carriers and the open skies policies. These two have increased competition in this industry, reducing the charges to the customers. The cost of communication and exchanging information among nations was also reduced in 1990s which was due to the development of communication networks which charged low tariffs to the public. The impact of interrelationship among world economies has also seen international business grow very rapidly since early 20th centuries. There were adverse effects on globalization in the first half of 20th century as a result of the first and second world wars, and also the cold war which came later on.

It was until early 1980s, where there was introduction of neoliberal policies which helped to revamp the globalization process. There was also a further opening of the eastern bloc to the western countries after the introduction of Chinese economic reforms of Deng Xiaoping and also Perestroika reforms. Most of the great world economies were hit by recession in early 2000’s. Consequently the process of globalization was slowed down, but only for a short period of time. In recent years international trade has grown at a high rate which has contributed to globalization. The process of globalization has provided an integrated networks that have brought together cultures, beliefs, people and practices into the closest point possible over time.

Characteristic Features of Globalization

Globalization marks the growth and development of free trade, along with freedom of enterprise. Free trade signifies, minimum governmental interference in issues of trade and commerce, promoting unhindered global trade by removing/reducing the barriers, pertaining to tariffs and customs duties. Freedom of enterprise signifies the latitude enjoyed by entrepreneurs and companies to invest in business ventures, both within the country and across the globe. Free trade and freedom of enterprise denote unimpeded movements of products, services, knowledge, technology, human and financial capital, across national borders, advancing trade and commerce between different parts of the globe, integrating them and augmenting economic inter-dependence, through expansion of global imports and exports. Deregulation also encourages foreign direct investment in sectors like, information technology, telecommunication, retail, energy, hospitality and more. Globalization entails a global division of labor. With globalization, businesses operate through the creation of multinational corporations, conspicuous by their presence, all across the globe. The multinational companies are vital to knowledge/ technology transfers, whereby their standard business practices are replicated all across the globe, weaving a pattern of uniformity. Multinational corporations also facilitate the flow and exchange of skilled personnel between various parts of the globe. The movement of human capital, plus global trade and global tourism play a crucial role in socio-cultural exchange, through transmission of information about customs, beliefs, and practices, prevalent in different parts of the world. Internet and social media are key players in the process of globalization, disseminating information about lifestyle, social changes, political events and facets of cultures, around the world, strengthening global inter-connectedness. Politically, globalization signifies a progressive movement towards a democratic global order, marked by greater co-operation, and socio-economic inter-dependence. Globalization brings in its wake, global cities, as urban hotpots for economic and socio-cultural exchange, with English as the vehicular language for a multicultural global society.

Business Organization Globally

One of the factors that saw rapid growth of international trade in the early 20th century is the development that took place in the communication and transportation sectors. International business refers to all transactions based on trade that involved more than two regions, nations or countries that cuts across political boundaries of these nations or regions. These transactions may include among others, investments, private sales, transport and logistics. In most cases private firms engage in these kinds of commercial transactions with an aim of making profit. These international business transactions involve massive investment of natural, capital and human resources. These resources are used in the production of goods and services internationally. Some of the international activities involved in this process include banking, insurance, construction and finance, among other activities. In this concern, there have been international arrangements on how businesses should be carried out which have resulted in the establishment of Multinational Enterprises (MNE). These firms approach international markets world wide, while operating in more than one country. Multinational corporations engage in multiple international markets in order to diversify their services or to dominate the world markets.

International Trade

There are many factors which impact international trade, such as industrialization, multinational corporations, transportation, outsourcing and off shoring. International trade is one of the major elements of globalization. In this concern, a country could be enjoying a competitive advantage if the production cost of its products or services, is less compared to other nations or trading partners. The importation of products or services to a country is based on whether it has absolute disadvantage on those commodities. Despite the fact that a country may benefit from international trade if it enjoys an absolute advantage, comparative advantage widens the scale of trade exchanges, based on mutual benefit between the countries involved. Comparative advantage refers to the country’s ability of producing products at a lower opportunity and marginal costs. There has been discussion amongst multinational companies, that for them to remain competitive in the market, they must embrace this aspect of comparative advantage.

Tax Havens

Tax havens in a country, state or territory, refers to a place where business people take advantage of the low taxes charged when doing business. It also refers to those countries or territories where there is no tax charged on business transactions. Business people can avoid taxes in such areas due to beneficial tax policies or incentives , while multinational companies establish subsidiaries or enter into any other business arrangements to benefit from reduced or no taxation. In such circumstances, there is often tax competition involving several governments. This is because any sovereign country or state can change its tax laws, provided it does not breach any international laws. It can however be limited by the international treaties that the territory might have signed with other governments. One of the main features of tax havens is that the laws formed can be used by the parties or stakeholders involved to avoid or evade paying taxes in other countries.

International Tourism

Tourism is a type of travel that one can go on for leisure, business or recreational purposes. According to the World Tourism Organization, a tourist is a person who consecutively travels for not more than a year and stays in a place which is outside his usual environment, for a business, leisure or other reasons. International tourism comes in different forms which include among others, agri-tourism, eco-tourism, geo-tourism, nautical tourism, birth tourism, war tourism, religious tourism, wildlife tourism, extreme tourism, medical tourism, cultural tourism, tourism, heritage and pop-culture tourism. Tourism has been enhanced the world over due to globalization.

International Sports

It is evident that international sports have become big business ventures, with considerable ability to influence the economic, political and cultural aspects of society. It has become a great force in international travel and globalization. International sports can determine many aspects of countries, including their identities, and also influence a country’s global image. There are many international sports, one of them being the Olympic Games. The impact of hosting these games is usually felt for a long period of time, and it provides opportunities for the hosting cities to influence investment in different sectors. The impact of sports in the international business is enormous, this not only includes the money collected from watching games, but also the massive infrastructural investments which are done in preparation for these events.

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Illicit International Trade and Globalization

Drug Trade: Globalization has played a great role in increasing the illegal drug trade. This is one of the lucrative business which impacts almost every part of the world in varying degrees. According to the United Nations Office on Drugs and Crime (UNODC), in 2010, over US$320 billion was generated globally by the drug trade. There are around 50 million people around the globe who use cocaine, heroin and synthetic drugs on a regular basis.

Wild Life Business: The illegal trade on animal products has grown tremendously. These include trading in rhinoceros horns, seahorses, saga antelope horns amongst other. These products have led to the introduction of a black market for poachers around the globe.

Human Smuggling and Trafficking: This involves trading in humans with varying reasons, such as forced labor or sexual slavery. In some instances human trafficking is done in order to extract body organs or parts. It is also a highly lucrative illegal business which has spread all over the globe. According to the statistics, this business generates about US$32 billion per annum. The human trafficking business is a worldwide problem, which is characterized by cultures, laws, economic problems and immigration policies. According to the United Nations report, in 2008, it was estimated that there were about 2.5 million people who were trafficked. These people came from around 127 countries and were being taken into 137 countries worldwide. People smuggling is different from the human trafficking. People smuggling refers to a situation where people get entry to a country through illegal means where the legal entries may be denied to them. It involves voluntary request, where an individual (smuggler) is hired to transport people illegally into a country. The individual(s) smuggled, are free to do what they intended to do after reaching their country of destination. Human trafficking is considered as an illegal trade since it violates the immigration laws and to some extent the rights of those people being smuggled.

Advantages of Globalization

The unhindered global trade, with enormous volumes of imports and exports, generally translates into growth of Gross Domestic Product - an indicator of favorable economic performance of a country. The profits are rolled back into further investments in trade and businesses, perpetuating the development of nations. By facilitating economic integration of the national economies with the global economy, globalization creates a relationship of mutually beneficial economic inter-dependence, whereby the countries with capital resources invest in countries with rich natural resources/ raw materials. Similarly, countries with sufficient capital resources can also invest in countries with cost-effective human resources, reaping the comparative benefits offered by each other. With globalization, it is possible for companies to outsource segments of their production processes to contractors outside the country, so as to maintain higher profits, by employing a cost-effective back office workforce, while creating employment opportunities in the foreign country. The proponents of globalization believe that the process of global economic integration/ inter- dependence improves the economic condition of developing countries by creating opportunities for investment and employment. The ideological foundation of globalization, based on liberalism and individualism, encourages the growth of individual liberty and self-worth, motivating people to work towards attaining their highest potential. By upholding democratic values, globalization advances the cause of social justice and equality. Also, the free movement of people around the globe for tourism and trade, or temporary migration of people for work/educational purposes, creates a confluence of cultures, promoting the human values of understanding, tolerance and respect. The movement of people across countries and continents also creates favorable socio-cultural exchange and assimilation, with the potential to improve diplomatic relations between nations. The social media promotes solidarity between nations of the globe on socio-cultural or political issues, by the rapid transmission of news and world events, across the globe. Economic growth promotes improvement in healthcare and education, in developing countries.

Disadvantages of Globalization

There is a widespread concern among the educated youth in developed countries that globalization is, in effect, depriving them of employment opportunities by draining out the skilled jobs to a cheaper workforce from the less developed countries, for meeting the business objective of higher profit margins . Similarly, the free movement of skilled personnel/research scholars, facilitated by globalization, also creates doubts of brain-drain in nations, where people aim to work in other countries, offering more lucrative jobs. As globalization connects the nations, the adverse impact of economic slump/ recession is experienced all across the globe, creating varying degrees of unemployment and economic depravity. Opponents of globalization maintain that it breeds inequality and use mathematical calculations to substantiate their argument. The International Monetary Fund corroborates evidences of global inequality, as a possible outcome of globalization. Globalization is also believed to create an urban/rural divide, because the growth it advances is centered on urban areas and industrial enterprises. With globalization, the risks of spread of infectious diseases across the globe, has also increased. There are evidences of spread of diseases such as, AIDS, through unrestricted and unscreened human movements. The illegal activities of drug dealership, smuggling in rare commodities and human trafficking have received a spurt, as a result of globalization. Less restrictions on cross-border travel has made the global community more vulnerable to terrorist attacks. Globalization has created a widespread concern among environmentalists, for they believe that global division of labor is wrecking havoc on the planet, by elevating pollution levels and accelerating climate change. Such a conclusion follows from the logic that developing countries have weaker environmental restrictions. Therefore, their production processes may be fraught with potential for more damage to the environment. Also, the intensified socio-cultural exchange suppresses local/regional artistic forms/genres, replacing it with a global brand of amalgamated music, art, and literature.

Conclusion

Globalization promotes economic integration, facilitates socio-cultural interaction and strengthens co-operation and connection between different nations, making the harmonious co-existence of diverse cultures, communities, religions and ethnicities, an attainable dream. Globalization bestows on inhabitants of the globe, the responsibility to make conscientious choices in all aspects of their conduct. In an inter-connected world, any hasty action or decision may have serious repercussions on the entire globe. Economic reforms, environmental policies, production/consumption processes, diplomatic dialogues, social reforms, nuclear testing and proliferation, may have significant impact on global prosperity, climate change, peace and justice. The multiple players in the process of globalization, such as political authorities, civil societies, multi-national corporations, media, and all other global citizens, have the potential to shape the globe with their choices and endeavors. The shared objective of promoting a just, peaceful, egalitarian global order, while maintaining regional cultural traditions and identities, would establish globalization as the ideal instrument for international co-operation and development.

References

1. Al-Rodham, R.F. Nayef and Gérard Stoudmann. (2006). Definitions of Globalization: A Comprehensive Overview and a Proposed Definition.

2. Albrow, Martin and Elizabeth King (eds.) (1990). Globalization, Knowledge and Society London: Sage. ISBN 978-0803983243 3. Stever, H. Guyford (1972). “Science, Systems, and Society.” Journal of Cybernetics, 2(3):1–3. doi:10.1080/01969727208542909

4. Bakari, Mohamed El-Kamel. “Globalization and Sustainable Development: False Twins?” New Global Studies 7 (3): 23–56. ISSN 1940-0004.

5. Robertson, Roland (1992). Globalization : social theory and global culture (Reprint. ed.). London: Sage. ISBN 0803981872.

6. Fotopoulos, Takis. (2001). “Globalization, the reformist Left and the Anti-Globalization 'Movement.'” Democracy & Nature: The International Journal of Inclusive Democracy, 7:(2) (July 2001).

7. Globalization http://en.wikipedia.org/wiki/Globalization Wikipedia CC BY-SA 3.0.

8. A brief history of globalization http://economictimes.indiatimes.com/opinion/guest-writer/a-brief-history-of-globalisation/articleshow/3276531.cms

9. Characteristic features of globalization http://www.unido.org/fileadmin/import/userfiles/puffk/mrak.pdf

10. Advantages of globalization http://www.economywatch.com/economics-theory/globalization/advantages.html

11. Disadvantages of globalization http://disadvantagesofglobalization.wordpress.com/

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