Definition of Globalization
Globalisation is the process by which the world is becoming increasingly interconnected as a result of massively increased trade and cultural exchange. Globalisation has increased the production of goods and services. The biggest companies are no longer national firms but multinational corporations (MNCs) with subsidiaries in many countries.
Globalisation has been taking place for hundreds of years, but has speeded up enormously over the last half-century. Although globalisation is probably helping to create more wealth in developing countries, it is not helping to close the gap between the world’s poorest countries and the world’s richest.
Reasons for globalisation
There are several key factors which have influenced the process of globalisation:
- Improvements in transportation: larger cargo ships mean that the cost of transporting goods between countries has decreased, goods and people can travel more quickly.
- Freedom of trade: organizations like the World Trade Organisation (WTO) promote free trade between countries, which helps to remove barriers between countries.
- Improvements of communications: the Internet and mobile technology have allowed greater communication between people in different countries.
- Labour availabilty and skills: countries such as India have lower labour costs (about a third of that of the UK) and also high skill levels.
Positive impacts of globalisation
Globalisation is having dramatic effect – for good or ill – on world economies and on people’s lives. Some of the positive impacts are:
- Inward investment by MNCs helps countries by providing new jobs and skills for local people.
- MNCs bring wealth and foreign currency to local economies when they buy local resources, products and services. The extra money created by this investment can be spent on education, health and infrastructure.
- The sharing of ideas, experiences and lifestyles of people and cultures. People can experience foods and other products not previously available in their countries.
- Globalisation increases awareness of ecents in faraway parts of the world. For example, the UK was quickly made aware of 2004 tsunami tidal wave and sent help rapidly in response.
- Globalisation may help to make people more aware of global issues such as deforestation and global warming – and alert them to need for sustainable development.
Negative impacts of globalisation
Critics include groups such as environmentalists, anti-poverty campaigners and trade unionists. Some of the negative include:
- Globalisation operates mostly in the interests of the richest countries, which continue to dominate the world trade at the expense of developing countries. The role of LEDCs (less economically developed country [“third world country”] ) in the world market is mostly to provide the North and West with cheap labour and raw materials.
- There are no guarantees that the wealth from inward investment will benefit the local community. Often, profits are sent back to the MEDC (more economically developed countries) where the TNC (transnational corporations) is based. Transnational companies, with their massive economies of scale, may drive local companies out of business. If it becomes cheaper to operate in another country, the TNC might close down the factory and make local people redundant.
- An absence of strictly enforced international laws means that MNCs may operate in LEDCs in a way that would not be allowed in an MEDC. They may pollute the environment, run risks with safety or impose poor working conditions and low wages on local workers.
- Globalisation is viewed by many as a threat to the world’s cultural diversity. It is feared it might drown out local economies, traditions and languages and simply recast the whole world in th emould of the capitalist North and West. An example of this is that Hollywood film is far more likely to be successful worldwide than one made in India or China, which also have thriving film industries.
- Industry may begin to thrive in LEDCs at the expense of jobs in manufacturing in the UK and other MEDCs, especially in textiles
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