Definition of Globalization

  o  People around the globe are more connected to each other than ever before.
  o  Information and money flow more quickly than ever.
  o  Goods and services produced in one part of the world are increasingly available in all parts of the
world.
  o  International travel is more frequent.
  o  International communication is commonplace.
This phenomenon has been titled "globalization."

Globalization is the process by which the economies of countries around the world
become increasingly integrated over time. This integration occurs as technological
advances expedite the trade of goods and services, the flow of capital, and the
migration of people across international borders. The term has been used in this
context since the 1980s, when computer technology first began making it easier and
faster to conduct business internationally. Globalization can also refer to the efforts
of businesses to expand their operations to new countries and markets.

According to a cover story in Business Week, globalization "has created millions of

jobs from Malaysia to Mexico and a cornucopia of affordable goods for Western
consumers. It has brought phone service to some 300 million households in
developing nations and a transfer of nearly $2 trillion from rich countries to poor
through equity, bond investments, and commercial loans. It's helped topple dictators
by making information available in once sheltered countries. And now the Internet is
poised to narrow the gulf that separates rich nations from poor nations even further
in the decade to come."

Without a doubt, globalization has had a number of positive effects on nations and
businesses around the world. Yet the concept—once regarded as almost universally
positive—has undergone a bit of a reassessment in recent years. In fact, widespread
protests against the World Trade Organization (WTO) and consumer boycotts arising
from the practices of multinational corporations in developing countries have raised
public awareness of the hazards of globalization. "The plain truth is that market
liberalization by itself does not lift all boats, and in some cases, it has caused severe
damage to poor nations," the Business Week article admitted. "What's more, there's
no point denying that multinationals have contributed to labor, environmental, and
human rights abuses as they pursue profit around the globe."

THE CONTROVERSY OVER GLOBALIZATION

Globalization gives companies access to wider markets and consumers access to a
greater variety of goods and services. But the benefits of globalization are not always
shared by all of the parties involved in trade. Unfortunately, developing countries—
which need the potential benefits of globalization the most—are often the losers.
"The downside of global capitalism is the disruption of whole societies, from financial
meltdowns to practices by multinationals that would never be tolerated in the West,"
the Business Week article noted. "Industrialized countries have enacted all sorts of
worker, consumer, and environmental safeguards since the turn of the century, and
civil rights have a strong tradition. But the global economy is pretty much still in the
robber-baron age."

Some people view globalization in positive terms, as a key force in promoting

worldwide economic development. But others believe that unrestricted global trade
will only serve to increase the inequality between developed and developing
countries. In reality, globalization offers both opportunities and risks for developing
countries, and there is a great deal of variation in their experiences with it. Some
regions, like Asia, have integrated into the global economy quickly and achieved
economic growth as a result. But other regions, like Africa, have suffered from
increased political instability, poverty, and environmental degradation since they
became involved in international trade. "The real question isn't whether free markets
are good or bad," the Business Week article stated. "It is why they are producing such
wildly different results in different countries. Figuring out that answer is essential if
businesses, government leaders, and workers are all to realize the benefits of global
markets."

In the late 1990s, there was a great deal of debate about how advanced economies
and multinational corporations could help developing nations to share in the benefits
of globalization. Some experts claim that developing nations need debt relief, an
increased flow of direct financial investment and technology, and unrestricted access
to markets in advanced countries in order to begin catching up. Others claim that
these measures are pointless unless the leaders of the developing nations show a
willingness to establish a stable government and invest in the education of their
citizens. "Before trade and foreign capital can translate into sustainable growth,
governments first must deliver political stability, sound economic management, and
educated workers," the Business Week article argued. Otherwise, foreign investment
would likely lead to government corruption and the exploitation of workers.

The potential problems with globalization are not limited to developing nations,
however. Some workers in advanced economies—particularly those in unskilled jobs
and belonging to labor unions—feel that they are being increasingly displaced by low-
wage competition in developing countries. Some of these workers are unable to make
the transition to skilled jobs and service-oriented industries. Other critics of
globalization claim that integration into a global economy reduces the sovereignty of
nations, especially in regards to economic policy making. They worry that advanced
nations will face limited choices in tax and monetary policies under the rules of world
trade.

The concerns of developed and developing countries overlap to create a complex web
of problems for globalization. Some countries will inevitably be viewed as trying to
impose their values on other countries. "Balancing growth with environmental and
labor regulations is wrenchingly complex in countries where people live on the
margin," according to Business Week. "Many poor nations fiercely resist discussion
of labor or environmental issues in the WTO because they feel the process will be
hijacked by Western protectionists. The feeling is that Western unions will shield
jobs at home by imposing standards that drive up labor costs in emerging markets to
levels where developing nations can't compete."

THE ROLE OF THE WTO

In the late 1990s, much of the controversy over globalization focused on the World
Trade Organization (WTO). The WTO was established in 1995 to facilitate world
trade and resolve disputes between nations. Headquartered in Geneva, Switzerland,
the WTO had 134 member nations in 1999, three-quarters of which were developing
nations. According to Simon J. Evenett in an article for Finance and Development,
the WTO "serves the developing countries' interests by facilitating trade reform,
providing a mechanism for settling disputes, strengthening the credibility of trade
reforms, and promoting transparent trade regimes that lower transaction costs."

Shortly after it was established, the WTO became a lightning rod for controversy over
globalization. "Seen through one lens, the World Trade Organization is a benevolent
United Nations of trade, with just enough enforcement powers to help nations work
out their differences," Steve Wilhelm wrote in the Puget Sound Business Journal.
"Seen through another lens, the WTO is a menacing, corporate-dominated world
government of trade in which the legislative body and the courts operate outside the
scrutiny of anyone who's not a government leader or corporate lawyer. From this
viewpoint, the organization's power to adjudicate trade disputes also gives it the
power to override national laws, including environmental protections. In a sense, it
compromises the sovereignty of its member nations."

The two main issues embraced by anti-WTO activists are the rights of laborers and
protection of the environment. "As production and consumption grow around the
world, many impacts fall on the people who supply labor to produce things, and the
environment that supplies the raw materials and absorbs the effluent," Wilhelm
noted. Those who oppose the WTO worry that global free trade will threaten hard-
fought labor and environmental victories in the United States and other developed
nations. For example, activists protested that—under WTO rules—the United States
could not prevent the import of shrimp caught in nets that also caught an
endangered species of sea turtle.

Protesters were also concerned about the loss of American jobs overseas and the poor
social and environmental records of multinational corporations operating in
developing countries. "The heady, unrealistic days of globalization appear to be
over," Business Week noted. "Where once it was promised that the simple spread of
markets would melt poverty, dissolve dictatorships, and integrate diverse cultures,
today the mere mention of globalization generates anger, discord, and accusations."

FOUR LEVELS OF GLOBALIZATION

Globalization most often refers to the increasing degree of connection between

various countries and their economies. But another definition involves the efforts of
businesses to expand their operations into foreign markets. This definition has
gained importance with the advent of the Internet, which gives all companies the
potential to achieve global reach in their operations.

As Jennifer Derryberry wrote in Sales and Marketing Management, businesses

generally operate at one of four basic levels of globalization. The first level is a
multidomestic company. At this level, the business consists of several independent
units that operate in different countries, with little communication between them.
The second level, an international company, maintains a headquarters in one country
and operates branches in other countries. At this level, the company is likely to
impose its home country bias on other markets rather than making a true effort to
integrate into the global economy.

The third level of globalization, a transnational company, consists of loosely

integrated business units in several countries. At this level, the company makes a
greater effort to address the local needs of operations in each country. The fourth
level of globalization is a truly global company. This type of business views the world
as a single market, develops an overall strategy for its various operations around the
world, and applies the lessons of each country to ensure its global success.
Derryberry noted that this is the ideal level for a globalizing organization, but that it
is not easy to achieve.

Advantages and Disadvantages of Globalization

Some Advantages Some Disadvantages

 Increased free trade between nations  Increased flow of skilled and non-
 Increased liquidity of capital allowing skilled jobs from developed to
investors in developed nations to developing nations as corporations
invest in developing nations seek out the cheapest labor
 Corporations have greater flexibility  Increased likelihood of economic
to operate across borders disruptions in one nation effecting
 Global mass media ties the world all nations
together  Corporate influence of nation-states
 Increased flow of communications far exceeds that of civil society
organizations and average
allows vital information to be shared
individuals
between individuals and corporations
around the world  Threat that control of world media
 Greater ease and speed of by a handful of corporations will
limit cultural expression
transportation for goods and people
 Reduction of cultural barriers
 Greater chance of reactions for
globalization being violent in an
increases the global village effect
attempt to preserve cultural
 Spread of democratic ideals to
heritage
developed nations
 Greater risk of diseases being
 Greater interdependence of nation- transported unintentionally between
states nations
 Reduction of likelihood of war  Spread of a materialistic lifestyle
between developed nations and attitude that sees consumption
as the path to prosperity
 Increases in environmental protection  International bodies like the World
in developed nations Trade Organization infringe on
national and individual sovereignty
 Increase in the chances of civil war
within developing countries and
open war between developing
countries as they vie for resources
 Decreases in environmental
integrity as polluting corporations
take advantage of weak regulatory
rules in developing countries