Global Business Analysis

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Support Globalisation: Some argue that falling barriers to international trade and investment are the twin engines driving the global economy toward greater prosperity. Increased international trade and cross- border investment will result in lower prices for goods and services. They believe that globalisation stimulates economic growth, raises the incomes of consumers and helps create jobs in all countries that participate in the global trading system. Anti- Globalisation: In December 1999, more than 40000 protesters blocked the streets of Seattle in an attempt to shutdown a WTO meeting held in the city. The demonstrators were protesting against a wide range of issues, including job losses in industries, downward pressure on the wage rates of unskilled workers, environmental degradation and the cultural imperialism of global media and multinational enterprises. Critics of globalisation view that falling barriers to international trade destroy manufacturing jobs in wealthy advanced economics such as the US & West Europe. The falling trade barriers allow firms to move manufacturing activities to countries where wage rates are much lower. In the service sector, many Multinationals Corporations have outsourced to nations with low labour costs (E.g. Dell, IBM have “exported jobs”) to more manufacturing activities to low wage nations and contributing to higher unemployment and lower living standards in the home nations. The whole concept of fair trade is specialising in the production of those goods and services that they can produce most efficiently, while importing goods and services that they cannot produce as efficiently. It is also seen as when a country embraces free trade, there is always some dislocation; lost call centre jobs in Dell (but the whole economy is better off as a result). Lost textile jobs at Harwood Industries. According to this view, it makes little sense f or the US to produce textiles at home when they can be produced at a lower cost in Honduras as China (which unlike Honduras is a major source of US textile imports). Importing textiles from China leads to lower prices for clothes in the US, which enables consumers to spend more of their money on other items. At the same time, the increased income generated in China from textile exports increases income levels in that country, which helps China purchase more products produced in the US, such as Boeing Jets , Microsoft software etc. The same argument can be made to support the outsourcing of services to low wage countries. By outsourcing its customers service call centres to India, Dell can reduce its cost structure and thereby its prices for PCs. The United States consumer benefit from this development. As prices for Cps fall, Americans can spend more of their money on other goods and services. Moreover, the increase in income level in India allows Indians to purchase more U.S goods and services, which helps create jobs in the US. In this manner, supports of globalisation argue that free trade benefits all countries that adhere to a free trade regime. If these critiques are correct, three things must be shown: first, the share of national income received by labour, as opposed to the share received by the owners of the capital (e.g.shareholder) should have declined in advanced nations as a result of downward pressure on wage rates. Second, even though labour’s share of the economic pie may have declined, living standards need not deteriorate if the size of the total pie has increased sufficiently to offset the decline in labours share if economic growth and rising living standards in advanced economies make up for labour’s smaller proportion of the world (this is the position argued by supporters of globalisation.) Third, the decline in labour’s share of national income must be due to moving production to low wage countries, as opposed to improving production and productivity.

As noted earlier, globalisation critics argue that the...
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