“Globalization refers to all those processes by which the ...



Globalization: Its definition, concepts and Periodization

“Globalization refers to all those processes by which the peoples of the world are incorporated into a single world society, global society.” (Albrow, 1990)

“The inexorable integration of markets, transportation systems, and communication systems to a degree never witnessed before—in a way that is enabling corporations, countries, and individuals to reach around the world farther, faster, deeper, and cheaper than ever before, and in a way that is enabling the world to reach into corporations, countries, and individuals farther, faster, deeper, and cheaper than ever before.”(Friedman, 2005)

"Globalization is the closer integration of the countries and peoples of the world, brought about by the enormous reduction of costs of transportation and communication, and the breaking down of artificial barriers to the flows of goods, services, capital, knowledge, and people across borders." (Stiglitz, 2004)

“The worldwide integration of humanity and the compression of both the temporal and spatial dimensions of planet wide human interaction. It has aggravated many of the region’s most chronic problems—such as the pronounced degree of economic exploitation and social inequality that have characterized Latin America since it came under European colonial domination in the sixteenth century.(Hariss, 2008)

These are the few definitions of Globalization from different authors from different contexts and countries. So from above definitions we can summarize globalization into four parts. It is essential for globalization to have the following four components.(Scholte, 2000)

a) Globalisation is Internationalization

b) Globalisation is Universalization

c) Globalisation is Liberalization

d) Globalisation is Deterritorialization

Internationalization: Internationalization is planning and implementing products and services so that they can easily be localized for specific languages and cultures. This concept is no only limited to products and services but also people from different countries. Eg: International Flights

Universalization: Dictionary meaning of Universalization is generalization. All over the world slowly and gradually the products and services are beginning to generalize. Universalization occurs when all the products and services are uniform all across the world. Eg: McDonald burgers across the world

Liberalization: Liberalization refers to a relaxation of previous government restrictions, usually in areas of social or economic policy. Eg: coca Cola a US based company allowed to operate in New Zealand.

Deterritorialization: It is dynamic change of interconnected entities with unclear individual boundaries. The physical boundries begin to diminish. Eg: IBM, a trans national corporation having its offices all over the world.

Thus from the above definitions and meanings of the components of Globalization we can conclude that Globalization term has no specific and definitive definition. Its meaning can change from context to context and situation to situation.

Before discussing the origin and history of Globalization, we must understand that there are two different schools of thoughts regarding the history of Globalization namely: (Scholte, 2000)

a) Globalisation is a “new” concept

b) Globalisation is continuity from the past.

The first school thinks that globalisation is a new concept and is result of the modern world. The inter linkage between the modern world has resulted in origin of globalisation.

The second school of thought has argued that globalisation is not a new concept but is continuation of the past. Globalisation has existed throughout the human history and instances can be seen from nomadic tribes travelling and settling in foreign locations.

Thus considering the two schools of thoughts, history and origin of globalization varies from different authors.

Thus according to the second school of thought the following rough outline of origin of globalization can be drawn from the events and incidents occurring in human history()

1. 325 BC: Chandragupta Maurya becomes a Buddhist and combines the expansive powers of a world religion.

2. 1 AD: the expansion of Buddhism in Asia -- makes its first major appearance in China under the Han dynasty, and consolidates cultural links across the Eurasian Steppe into India -- the foundation of the silk road.

3. 650-850: the expansion of Islam from the western Mediterranean to India

4. 960-1279: the Song Dynasty in China (and contemporary regimes in India) which produced the economic output, instruments (financial), technologies, and impetus for the medieval world economy. It linked Asia and Europe for the first time by sea.

5. 1100: The Rise of Mongolian Empire where Genghis Khan first got military on horsebacks and enhanced its boundaries

6. 1300: the creation of the Ottoman Empire The rise of trade in Europe at the cost of Asian countries

7. 1492 and 1498: Columbus and Vasco da Gama travel west and east to the Indies, inaugurating an age of European seaborne empires.

8. 1650: the expansion of the slave trade across the Atlantic Ocean. Africa was invaded by Europeans.

9. 1776/1789: US and French Revolutions the first wave of Industrial revolution where corporations were formed into governments.

10. 1885: Treaties of Berlin mark a diplomatic watershed in the age modern imperial expansion by European and American overseas empires, beginning the age of "high imperialism" with the legalization of the Partition of Africa.

11. 1929: the great depression hits all parts of the world at the same time The after effects of the world war I were felt all across the globe and the world economy was at its lowest.

12. 1950: decolonization of European empires in Asia and Africa produces world of national states for the first time and world of legal-representative-economic institutions in the UN system and Bretton Woods.

13. The Cold War: Post world War II the two trends significant were —the sharp increase of intrastate conflicts and the challenge to the sanctity of national sovereignty by the international community—constitute developments that have had, and continue to exert, significant influence on the conduct, nature, and understanding of international relations in the post–Cold War world. (Horowitz, 2004)

According to the first school of thought the origin of Globalization can be routed through the following developments in the world economics: ()

• the integration of world markets into national economies;

• the transition from a "high volume economy" into a "high value economy" (this is due to the growing number of knowledge intensive products and services);

• the end of bipolarity and traditional prize-fight between capitalism and socialism;

• And finally the configuration of new trade blocs.

According to a recent Organization for Economic Cooperation and Development (OECD) publication, the term globalization was first coined in 1985, by Theodre Levitt - 'The Globalization of Markets’, Levitt used the expression to characterize the vast changes that have taken place over the past two decades in the international economy - the rapid and pervasive diffusion around the world of production, consumption and investment of goods, services, capital and technology.

From a modernist point of view, the origin of globalization can be routed back in mid nineteenth century. The period during which the intensity of globalization increased rapidly was the end of 18th Century and beginning of 19th century. Industrial Revolution played a big role in increasing the intensity of globalization throughout the world. The first wave covering the period 1870-1914 was characterized by high level of imports of firms and companies, formation of joint stock companies and financial trusts. These companies operated as oligopolies within the more industrialized countries and established their trade relationships.

During the second half of 20th Century the dominance of trans-national corporations began to increase. The manufacturing sector started increasing and exploring the foreign markets and foreign investments.

Background factors affecting the emergence of Globalization (Park, 2003)

* GATT and the WTO

* Structural shift in the world economy

* Integration and operational velocity of financial markets

* Diffusion of computer-based technologies and information systems

* The “agile” corporation

* Competitiveness based on supply chains

GATT and the WTO

The formation of GATT and WTO reduced the physical and administrative barriers to international trade. It affected the free movement of factors of production most important being labor. GATT and WTO were also important in preventing any further social and political disruptions that could affect the free markets.

Structural shift in the world economy

The structural shift in the world economy can be described in two factors affects the shift:

(a) Increasingly integrated economic institutions that characterise late capitalism and

(b) Greater interactivity found in supply chains.

The organizations are multinational and hence are connected to several economies at the same time.

Markets do not work consistently but due to the interconnectedness the economies face a ripple effect of major changes in one economy.

Integration and operational velocity of financial markets:

Almost all of the transnational corporations operate in real time. The real time operations keep these organizations operating 24 hours. The distance and the geographical location don’t matter anymore.

Financial markets are dependen on foreign currency and hence exposed to the risk of foreign exchanges. The speed of human connection has taken a quantum leap as compared to the earlier century.

Diffusion of computer-based technologies and information systems

The advent of affordable computing power, previously available only to organisations with lots of money and strong cash flow, has helped to level the playing field. The concept of a “leading” company is changing.

The question of price differentiation based on operation and technological factors no longer exists. Information can be passed on in few seconds all across the world and has become an important and perhaps the only point of differentiation between two rival organizations.

The development in Technology has given companies an easy way to see and measure the true value in its functioning. It also helps in better resource utilization

The “agile” corporation

As a direct result of the development of affordable computing capacity, a whole new range of organisational forms has become available. From the fixed, asset-based form we are observing more activity completed on the basis of “web” or “network” organisations. These have been termed “virtual” or “extended” companies: the more significant form is the “agile corporation”.

In the previous decades manufacturing was the most valuable source in supply chain. But in recent years the value of the product has reduced but the value of “service” has increased.

The organizations have become virtually connected all over the world. Hence the competition has increased and the organization has to provide good product at a cheaper cost. This has resulted in agile corporations.

Competitiveness based on supply chains

As discussed above, globalization has increased the competition. The supply chain has also changed drastically because of globalization. Also stated earlier the only way to offer product differentiation is by differentiating not the product bt the service, which through supply chain can be managed.

Globalization helps outsource the functions and services. It helps to reduce operational costs.

Hence, though globalization has an unclear definition and meaning, we understand from the above discussion that it refers to a cross boundary interaction and relates to the latest Information Technology developments.

Along with the positive sides of globalization, negative side has also emerged. Some of the negatives of globalization are: (Lieberman, 2004).

• It is true that Europeans are losing jobs and that is posing a problem for them since the companies are outsourcing work to the Asian countries since the cost of labor is low and profits the company considerably.

• There is immense pressure on the employed Europeans who are always under the threat of the business being outsourced.

• Corporates are building up units in other countries equally well equipped as they have done at their own country, thus transferring the quality to other countries.

• There are some experts who think that globalization; along with the positive aspects is also leading to the incursion of negatives like communicable diseases and social degeneration.

• There is also a threat of corporates ruling the world because there is a lot of power, which is invested in them due to globalization.

• For nations that are at the receiver’s end are also giving up the reins in the ends of a foreign company which might again lead to a sophisticated form of colonization

The recent economic collapse of United States and its effect on the rest of the world has been tremendous. The effect on rest of the world was due to globalization and the interconnected economies. Hence analyzing globalization the negative effects seem to overshadow the positive effects in terms of scale and intensity.

Conclusion:

But having said that, those who aspire to see the end of the age of globalisation should reflect on the fact that everything upon which the Information Age is based is derived from the same drivers that created globalisation. The Information Age will encourage those same drivers to shape the future. The countries that continue to liberalise, that seek to integrate their economies with others, that foster adoption of the technologies and processes of the Information Age are those that will have the best opportunity of raising the standards of living of their people in the Information Age. (Farell, 2007)

References:

1) Albrow, M. (1990). Globalization Knowledge and Soceity. London: Sage.

2) Friedman, T. (2005) World is Flat. USA: Picador

3) Harris, R. (1995) "The Global Context of Contemporary Latin American Affairs," in Capital, Power, and Inequality in Latin America, Boulder: Westview Press www2.truman.edu/~marc/resources/terms.html

4) Kantrow, A M (1985) Sunrise...Sunset: Challenging the Myth of Industrial Obsolescence; New York: John Wiley & Sons

5) Lieberman, Victor (2003) Strange Parallels: Vol. 1: Integration of the Mainland: Southeast Asiain Global Context, c. 800-1830. Cambridge: Cambridge University Press

6) Park, D. (2003) “Differentiation: Are Product, Brand and Service Still Enough?” B2B International Ltd White Paper,

7) Stiglitz, J. (2004) Globalization and its Discontents. London:Norton

8) Scholte, J. (2000) Globalization: A Critical Introduction. London: Macmillan.

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