The economic integration or interdependence in the world economy

The phenomenon
called globalisation is not a new term, but it has shown development in the
past decades and therefore companies and countries are facing the consequences
of a globalised world. Not only has it been favourable to the economies of many
companies and sectors, but it has also played a major role for the economy of
various countries. This essay explains the meaning of globalisation and its
effects by using the three competing views on globalisation, as summarised by Wetherly and Otter
(2014). Real life examples are provided in order to support each perspective.
This essay will start by explaining the term globalization, thus it will
clarify the 3 perspectives on the theme and finally concluding on the main
facts.

 

The definition of globalisation may vary depending
on the viewpoint and therefore the definition of globalisation is complex.
However, it can be defined as: “a spatial concept signifying a set of social
processes that transform our present social condition of conventional
nationality into one of globally.” (Steger, 2003:12). Dicken (2003) defines as the increased depth of economic
integration or interdependence in the world economy as a whole. Increased depth
here usually refers to the integration of different parts of the world and
different working populations in the world in the process of economic
production itself. Despite the definitions shown
above, many argue that globalisation causes the world to become more unequal
and therefore it motivates a growing division between rich and poor. This
perspective is known as Marxist view.

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From the Marxist
point of view, it is unlikely that globalisation will benefit all but, rather,
only the rich elites and businesses (Wetherly and Otter, 2014). This
perspective argues that among the disadvantages of globalisation are: pollution,
increase disparities between rich and poor, business ethics and others.

 

Activists have pointed out that globalization has led
to an increase in the consumption of products, which has impacted the
ecological cycle. Increased consumption leads to an increase in the production
of goods, which in turn puts stress on the environment (Environment, 2013). As
the demand for products increases, people tend to waste more and consequently
it causes damages to the environment. One of the most known examples is meat
production. To meet the demand, farmers have changed their practices and
therefore it contributes to water pollution by attacking the biodiversity and contaminating
the drinking water and air pollution by increasing the emissions of carbon dioxide.
According to Mark Lloyd, Chief Executive of the Angling Trust and Fish Legal, agricultural pollution is an “endemic
problem” that is the major cause of the drastic decline in UK freshwater fish
species (Wasley, A., Davies, M., Adams C. and Robbins J., 2017).

 

Globalisation has not only polluted the water and the
air but also the land. The world population is rising and so its food demand.
Over the last century, the global population has quadrupled (Elferink, M and Schierhorn, F, 2016). Developed countries
produce the most waste per capita because they can afford to purchase more
products and services and therefore the waste tends to be higher. “The wealthier a place is, the more is
wasted and thrown.” (Adler, 2017).

 

This relates to the Marxist perspective, since the rich will benefit
more due to the fact that they have a greater disposable income. According to
the World Bank (2012), current global MSW generation levels are approximately
1.3 billion tonnes per year, and are expected to increase to 2.2 billion tonnes
per year by 2025. Globalisation has caused many
environmental problems and the most affected are the poor since many of them
rely on the water from rivers to survive and unfortunately some of them are
really damaged by the oil and chemicals used by humans.

 

Many argue that cultural identity is getting lost due
to globalization because the movement of people and cultural traits is growing.
As Stief (2017) argues,
although different cultures are able to interact, they begin to meld, and the
contours and individuality of each begin to fade. English has dominance over the other languages and
became the world’s language. Many languages are being lost due to the use of
them is diminishing since the languages of greater use, like English, are
making those languages no longer ‘useful’. The legacy of colonialism can be
seen because developed countries impose their culture into developing countries
and these countries have no option due to the fact that they need their
investments and technology to develop.

 

Cultural identity loss can be caused by one of the most discussed
processes of recent times: McDonaldization. It can be defined as “the process by which the
principles of the fast-food restaurant are coming to dominate more and more
sectors of American society as well as of the rest of the world” (Ritzer,
1993:1). These principles are evident nowadays as countries are becoming more
homogenous as the Western culture is being implemented in developing nations by
virtue of globalization. According to Crossman (2018), McDonaldization is a global phenomenon, driven by Western corporations,
the economic power and cultural dominance of the West, and as such it leads to
a global homogenization of economic and social life.

 

From the Socialist perspective, globalization has
brought the chaos due to supply and demand nature. As people demand more,
companies tend to increase their production to meet their customers’
satisfaction. However, there are MNCs that go beyond the ethics to meet their customers
needs and wants. To cut down costs, firms have settled their industries in
countries like India, Bangladesh and China where labor cost is lower. Moulds (2017) notes that children work at
all stages of the supply chain in the fashion industry: from the production of
cotton seeds in Benin, harvesting in Uzbekistan, yarn spinning in India. Chlid labor is a major problem because
the fashion industry is a huge market and children are more obedient therefore
it is difficult to supervise the industry. The legacy of colonialism can be
seen today as MEDCs have total control over LEDCs. “Panorama investigated
factories in Turkey and found children had been working on clothes for Marks
and Spencer and the online retailer Asos.” (BBC News, 2016). In many cases, the
business ethics is forgotten because profit comes before human rights, which is
one of the critics that the Marxist view imposes.

 

On the other hand, Neo-classical perspective claims
that globalization has brought many good aspects such as: free trade,
employment, advanced technology and others.

 

One of the main reasons why people are in favor of
this view is because of comparative advantage. This perspective believes
globalization is beneficial for both parties and it is based on the comparative
advantage. It can be explained as the ability a country has to produce a
product using a fewer amount of resources than others. It means that due to
globalization, countries are able to specialize in one area whilst they can
import the other products/services.  It permits
countries to be more efficient and globalization allows trade between nations,
which makes cheaper to get products all over the world. “In the east, exports of food and drink are very
important, including coffee, grains and livestock” (Myers, 2016:online). The
citation explains that due to globalization, east African countries like
Ethiopia, Somalia and Kenya are able to export their products. It improves the
economy of many African countries, which enables them to improve education,
healthcare and infrastructure.

 

Improve education and healthcare systems are essential to the
development of the area. It can de done by investments from TNCs. In addition
to generating jobs for local workers, TNCs bring their currencies to the local
market, bringing wealth to the society. Foreign Direct Investment (FDI) is an
investment made by a foreign company in one country. Moreover, the money gained
by the local society can be used to invest on healthcare and education and so
improving the standards of living.

 

Trade allows countries to have access to any kind of product and
service, which makes people more knowledgeable about the culture of different
nations. Not only trade but technology as well. Due to globalization, LEDCs
have access to technology never seen before. It helps these countries to
develop their economies and consequently the population can benefit from it because they have access to information that makes
them more aware to news that happens in the country and in the world. It helps
by improving healthcare systems due to the information that the population
gains on the treatment of diseases. “Projects such as IEEE Smart Village have brought affordable
electricity to thousands in sub-Saharan
Africa, as well as Haiti by harnessing solar energy to power communities.”
(Howell, 2016).

 

Another important aspect of globalization and
supported by its specialists is remittance. “These are the monies that
transnational migrants, usually poor, ‘unskilled’ labor migrants from the
global South transfer to friends and families back home.” (Bakker, 2015).
Remittances play a major role in the economy of thousands of families
worldwide. They work as a key source for many communities. Since the money go
directly to people, they are more efficient since they have an immediate impact
on development. In 2014, remittances were equal to
more than 10 percent of gross domestic product (GDP) in 27 countries and they
were equal to more than 20 percent of GDP in 10 countries (Migration Policy
Institute, No date). Remittance improves the quality of lives by reducing
poverty and increasing the disposable income consequently rising consumption,
which helps the country’s economy. In addition, it stimulates economic
development.

 

Competition is one positive aspect of globalization
because it has led to the improvement of the quality of goods and services. Due
to globalization, domestic companies have to compete against foreign firms and
therefore need satisfy their customers. Consequently, clients have a greater
variety of products and services as well as better qualities.

 

The third competing view on globalization is the
Structualist. This perspective explains that globalization is good but not all
nations possess the same infrastructure and abilities and therefore different
policies must be taken.

 

Globalization has enable developing countries to trade
with nations from all over the world by following the comparative advantage
theory, which allows them to grow economically and increase employment rates. The
perspective claims that there are problems of reliance on primary goods. The
demand for such goods is inelastic and so prices are volatile which means that
if supply rises, prices will fall but since demand is inelastic, revenue tends
to fall and therefore countries would be worse off.

 

“Many developing countries do have strength in terms
of their economic base in that they can specialize in producing primary food commodities”(…)(Wetherly, P. & Otter, D., 2014:270). Most
developing countries such as Angola, Swaziland and Kenya are dependent upon
exports of primary commodities. In some cases, countries had no choice as some
of them were in civil war until very recently. The Angolan Civil War ended in
2002. After 27 years of war, crops and infrastructure were destroyed. The
country, which is highly dependent on the exploration of oil, had to start from
the bottom as the nations was once demolished. “Oil
represents about 1/3 of its GDP and over 95% of its exports”(…)(The World Bank,
2017:online).

 

Under this view, globalization is seen as a good
process although it has its weaknesses. The credibility of the two most
important bodies (IMF and World Bank) for the development of poorer countries
still raises many conflicts. “Sending money
to countries with misdirected policies and weak rule of law increases the
recipients’ debt without visible economic growth.” (Eiras, Ana). In 1981, the
World Bank helped finance the city’s road improvement to the Amazon forest in
Brazil. However, it generated a migration and land rush. Consequently, it caused
the destruction of the forest.

 

Developed countries do not need to worry about the
volatility of prices due to that fact that they are focused on manufactured
goods. However, developing countries like Angola need to face another reality.
The prolonged decline in oil price have caused serious problem to the country’s
economy. GDP growth decelerated and therefore the Angolan government had to
intervene by cutting expenditure and devaluing the kwanza (local currency). Diversification is the key word for the
Angolan economy to reduce its dependency on oil exploration. The agriculture
sector represents a small portion of its GDP regardless of the great potential
this sector has.

 

Globalization is one of the responsible for the
increase in world’s disposable income. As income increases, people tend to
consume more manufactured products and services and consequently primary
consumption declines. Developed countries intervene because they have to
protect their farmers and crops from this harsh market by imposing subsidies
and tariffs in order to eliminate foreign imports. It makes impossible for
small scale farmers to have access to foreign markets because they have
‘asymmetric’ information. In other words, producers do not have access to
information and hence it stops them to make the best business decisions.

 

To conclude globalization is a phenomenon that has
shown growth is the last decades. Despite its origins, its consequences still
bring much debate today. Wetherly and Otter (2014) divided globalization into 3
different perspectives. Each view has its own way of interpreting such
phenomenon. Neo-classical sees globalization as a good event because it allows
developing countries to trade with other nations, which enables them to improve
their economy and consequently their education, healthcare and infrastructure. On
the other hand, the Marxist view claims that this phenomenon is unfair due to
that fact that it will only benefit the elites increasing disparities between rich
and poor and sometimes violating business ethics. The third view is the
Structuralist, which alleges that globalization is helpful but not all
countries have the same abilities and therefore different policies must be
taken.

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