What You Should Understand About Globalization

If we went out on the streets of any major city and asked people to explain what globalization is and how it affects people in a “Jay Leno” style, we would almost certainly get a variety of different responses. Why is this the case? Why are there so many varying definitions of globalization and so many divergent viewpoints on the subject? In this essay, we will examine the definition of globalization, as well as the advantages and disadvantages of this concept. To begin, let us examine the definition of globalization.

Globalization comes in a variety of flavours, which allows us to describe it in a variety of ways. We could examine cultural globalization, for example, which explains and discusses the movement of a culture and cultural values across the globe, as well as the ways in which they build on and meld with one another, or we could examine communication and its globalization. However, for the purposes of this article, we will concentrate on economic globalization as defined by Bhagwati in his book “In Defense of Globalization.” According to Bhagwati, “economic globalization is the process by which national economies are integrated into the global economy through trade, direct foreign investment (by corporations and multinationals), short-term capital flows, international flows of workers and humanity in general, and technological flows…” Now that we have a basic understanding of economic globalization, let us examine some of the controversies surrounding it and identify both positive aspects of globalization and areas in need of improvement.

When was the last time you turned on the television or opened the newspaper and read an article about globalization and outsourcing, or about how globalization is contributing to the rise in poverty? This appears to be a hot topic in the media today, fueled by rallying youths, waving banners, and non-governmental organizations (NGO’s) expressing their views. Is this outpouring of anti-globalization sentiment justified? According to Bhagwati, the anti-globalization movement appears to be led by two types of people: “stake-wielders” and “stake-asserters.” Stake-wielding individuals are individuals who believe they are at odds with globalization and are typically wild extremists waving posters and shouting out arguments they most likely do not understand. Now, stakeholder assertors distinguish themselves by arguing their points rationally and generally attempting to educate and inform the public about globalization issues rather than protesting. Thus, what are some of the issues about which these individuals spend their entire time expressing concern?

One of the most frequently discussed issues is whether globalization increases poverty and widens the divide between rich and poor. One position we could take on this issue is that globalization enables us to gradually increase free trade and thus facilitate the movement of goods and services across borders. We would then benefit from trade gains that boost economic growth, creating more jobs and lowering the unemployment rate, lifting countries out of poverty. According to Bhagwati, the best way to accomplish this is through “an increase in the size of the pie.” This is accomplished not by an economy simply producing more of what it specialises in, but by increasing the profits it earns through international trade. Joel J. Toppen argues in his article “Fixing Globalization – A Review Essay” that globalization is still debatable and that our true focus should be on the poor. While globalization may not be specifically targeted at the poor, we can confidently argue that it aids in the emancipation of people from poverty. Thus, what are some other globalization-related issues that people are adamantly opposed to? Is globalization capable of resolving these issues or does it require repair?

Consider an issue that is constantly in the news: outsourcing. When Nike first began outsourcing jobs to other countries, outrage ensued. They were giving away American jobs in order to earn a few extra dollars, and the public was outraged. Thus, how is this form of globalization even remotely beneficial? An argument in favour of this aspect of globalization would be that by outsourcing jobs, countries in our economy are able to maximise profits and thus contribute to economic growth. This is all well and good, but how long will it be before we see some of these gains reflected in our economy? Are we not exploiting people in other countries by paying them next to nothing? If any of us went to work one day and discovered that our job had been eliminated due to outsourcing, we can be certain that we would not be satisfied with someone telling us that it would benefit the economy as a whole and eventually raise our standard of living. No. We’d be miserable because we’d lost our jobs and joined the ranks of the unemployed; a person does not live off future gains. Now, in order to determine whether or not we are exploiting those “less fortunate” overseas by paying them so little, we must examine real wages.

While it may appear as though we are exploiting people overseas and forcing them into sweatshop labour, we are actually increasing their real wages. As a result of this increase in the real wage, the cost of labour increases, and we see a shift away from longer leisure hours toward longer work hours. This explains why people spend so much time working in foreign countries. They desire employment. While this may explain why we are not exploiting people, we continue to see job losses in the United States. While we are experiencing job losses, Bhagwati asserts that we have “…actually increased the real wages of workers.” He asserts that lower-wage jobs are being outsourced while higher-wage jobs are being created through increased education and technology. As is another aspect of globalization that requires repair. If so, how are we to proceed?

If globalization results in an increase in real wages overseas and a subsequent increase in the economy as a result of the sacrifice of American jobs, how are we to halt the loss of these jobs while retaining the benefits of globalization? This is clearly in need of repair. One way we could assist with job loss is to compensate those who have been laid off as a direct result of outsourcing until they are able to re-enter the workforce. This is already being done through government programmes in the United States, though it is frequently difficult to make a clear distinction between the manner in which a job is lost and the manner in which it is gained.

Along with the benefits of globalization, there are some areas that require attention. A clear consequence of globalization is the problem of illegal immigration from poor to rich countries. Globalization has made it easier and more advantageous for people living in impoverished countries to relocate to a country with a stronger economy. This is particularly true when considering migration from Mexico to the United States. Therefore, why don’t we simply open our borders and legalise it? If we simply opened the borders between the United States and Mexico, our economy would collapse. There would be a massive rush from people waiting along the border into the United States. This massive influx of people would devastate our economy, leaving us in a far worse state. As a result, we are faced with the dilemma of how to prevent illegal immigration. Historically, the majority of our illegal immigration from Mexico came via the Rio Grande, though this has changed. According to Bhagwati, 50% of illegal immigrants now enter through legal channels such as visas. They enter the country legally and remain in violation of the law. We recognise that eradicating illegal immigration is impossible; therefore, what are our options? He explains that in order to address this issue, “developed country governments must pursue policies that integrate migrants into their new homes while minimising social costs and maximising economic benefit.” This is a problem that will affect not only Mexico and the United States, but also other countries.

Now, we’re going to revisit an area of globalization that could be improved. This issue is the ease with which capital can enter and exit an economy. It has become increasingly easier to invest in foreign economies as barriers have been removed as a result of pressure from institutions such as the IMF and OECD. According to Stiglitz, “the most adverse effects have resulted from financial and capital market liberalization—which has posed risk to developing countries without corresponding rewards.” Globalization has made it easier to invest in foreign economies due to lower barriers and instantaneous transfers via the Internet. This has the potential to create massive problems because “as investor sentiment shifts, money is pulled out, leaving economic devastation in its wake.” So how do we address this issue that has arisen as a result of globalization? Capital flows clearly require some form of restriction. [Capital-market liberalization] demonstrates how globalization can go wrong. Even strong proponents of free trade, such as Jagdish Bhagwati, see the folly of liberalising capital markets.” It is self-evident that we require some form of resistance to the ease with which capital flows into and out of a country.

We have examined the definition of globalization, the aspects of globalization that are sound, and the aspects of globalization that could be improved. This enables us to better comprehend the issue’s complexity and, hopefully, gain insight into how we can live in a way that contributes to the improvement of our world.