Why Globalization Matters? Critically Discuss the Implications of Globalization for Firms and Countries. Use Examples to Support Your Arguments.

Topics: World Trade Organization, Developed country, Globalization Pages: 8 (2640 words) Published: December 18, 2012
1. Introduction

On the threshold of 21st century, international communities have been drastically globalised or internationalised as the World Trade Organisation (WTO), which is the successor to the General Agreement on Tariffs and Trade (GATT), launched in 1995. As many countries agreed to open to foreign intercourse, international trade, financial markets and foreign investment have been rapidly grown as well as the changes in culture have been undergone. The term ‘globalisation’, in this manner, refers to ‘a process of increasing international dependence in which countries become more integrated with one another economically and culturally.’ (Bentley et al., 1999, p.177) It is generally supposed that the origin of current globalisation was from the end of the Cold War. The American president in the late 1980s, George H. W. Bush, proclaimed ‘new world order’ which involved that “countries would cooperate peacefully as participants in one worldwide market, pursuing their interests while sharing commitments to basic human values.” (Lechner and Boli, 2004, p.7) In other words, economic and political interdependence would lead to more shared interests, which would help to grow economy and create both wealth and solidarity. The spread of market-orientated policies and individual rights promised to improve the well-being of billions of people. However, this positive perspective on globalisation has been strongly criticised by many socialists who see globalisation as the latest stage in the development of international capitalism. They have been argued that globalisation is westernization by another name, that is, it undermines the social and cultural unity of other cultures and is therefore exploitative, oppressive and harmful to most people in many places, especially in developing countries. Moreover, surprisingly, even developed countries are also undergoing some disadvantages from globalisation, leading to social problems. As Waters (1995) suggested, therefore, globalisation features a Janus-faced mix of trust and risk as it has both sides of impacts. This essay will critically discuss the positive and negative impacts of globalisation on firms and countries, by analysing the current circumstances of developed countries and the Third World.

2. Positive Implications

Globalisation is the inevitable course in current society. It can be easily seen that same products are being sold everywhere, as there has been a dramatic rise in worldwide trade and exchanges as well as flows of capital in an increasingly borderless international economy. It also introduces and shares the global standard with the better technology and innovation, which can accelerate the improvement of risk management and the cost reduction of production and service. Moreover, globalisation has brought the positive ripple effect on various areas – not only economics but also politics and culture. The following are some favourable effects of globalisation:

2.1 The major increases in trade and exchanges

Firstly, globalisation has eased international trade and commerce, foreign investment and the flow of capital. According to Intriligator (2003), there is over $1.2 trillion flowing through New York currency markets each day for the international financial transaction. Moreover, there has been an increase in direct foreign investment in recent years and a significant reduction in tariff due to economic liberalisation and fewer restrictions on foreign investment, based on the General Agreement in GATT. As a result, developed countries started to find cheaper market abroad and entered developing countries, such as the ones in Asia or Africa, with huge amounts of investment. (Kiely and Marfleet, 1998, p.49) In consequence, as Anthony Giddens (1999) emphasised in his lecture, African people, for example, could receive much wider range of goods and services as vast amounts of capital were transferred by western countries. Moreover, many factories of...
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