Defining Globalization

Richard Luong
February 28, 2014
WHAT IS GLOBALIZATION?
ESSAY
Introduction
Many analysts have attempted to define globalization in a variety of ways. Some explain it only on economic perspective. Others define on more overall perspective, which means that globalization can affect several areas, not only economy. Each approach has its own strengths and weaknesses: general definitions will be likely to be more base-covered but less concrete, while specific definition will provide vivid images of how globalization has been impacting one or several particular area(s) but narrower in scope. George Soros, one of the world’s most famous speculators, and according to Paul Staines in his article “The benefit of speculation” (1996) is the man who created the Black Wednesday by breaking the Bank of England in 1992, described globalization in his book “George Soros on Globalization” as “the development of global financial markets, the growth of trans-national corporations, and their increasing domination over national economies”. George Soros’s definition provides an overall outlook of all elements related to globalization on economic perspectives, and this paper will present several specific definitions on the economic level based on Soros’s, which refer to global economic integration, “the development of global financial market”, and the “increasing domination over national economies”.
Discussion
Initially, according to most of the economists, globalization refers to “development of global financial markets”, which means that countries are now able to interact and benefit from each other, additionally globalization allows countries to specialize what they do best, and maximizing the revenue from their output through trade between countries. For example, Carnegie Mellon University’s research (n.d) pointed out that India has become the world largest software industry due to the country’s comparative advantage on cost and availability of software talent, compared to the U.S., one of their biggest competitors. Moreover, Lisa Mahapatra (2013) argued that 90.6% of all the personal computers produced in 2011 worldwide are made in China. In this case, India has got the comparative advantage in producing software, while China has got one in producing hardware. By that, each country will be able to maximize its revenue through selling the products it specialized at a lower price due to the lower opportunity cost compared to the other country. Now globalization plays an important role in supporting groups of countries to cooperate, and allowing these countries to deliver final products and services to customers with the lowest cost. This strategy has been using effectively for several decades, and there will be no “development of global financial market” without globalization.
Thanks to the growth of international trade, there are enormous opportunities for international corporations to dig in overseas markets and increase their sale volume. Coca-cola, Pepsi, McDonald’s, Burger King, etc. are major examples of applying globalization into corporations’ developing strategy. Nguyen Huy Thinh (2013), managing director of McDonald’s Vietnam, said that McDonald’s has opened in Vietnam and their target customers are kids and night workers, which action has shown that McDonald’s is looking for and penetrating into new market in developing countries. He also said that 80-90% of ingredients will be imported to guarantee the food’s quality and safety. The famous of McDonald’s brand, which is created by the expansion of communication technology, has turned Vietnam into a potential market for McDonald’s to invest in. Therefore, in some case, globalization not only refers to the development of global financial market, but also refers to cross-borders communication.
Economic globalization can also be described through two major elements of the global integration which are the reduced costs of transportation and communication, and the reduced policy barriers for trade and investment. Jeffrey A. Frankel (August 2000, pg.1) reported that “between 1920 and 1990 the average ocean freight and port charges per short ton of U.S. import and export cargo fell from $95 to $29 (in 1990 dollars)”, and “average air transport revenue per passenger mile fell from $0.68 to $0.11”. These number has shown how innovative technologies influence positively the products and services transportation, and these technologies seem to turn the world into a “single place, changing the meaning and importance of distance” (J. A. Scholte, n.d., p. 44). By the improvement of transportation, product movements will increase as a result of cheap delivery costs, allowing multinational corporations to convey products to customers worldwide. Not only the companies but also the customers can take profit from globalization.
In addition, due to the launch of transnational economic organizations such as WEF, ITO, or WTO, etc., economic borders between a group of countries are removed, operating costs (for example: tax rate, tariff, delivery costs, “undertable” costs, etc.) are lower and rate of product movements increase. By that, international corporations are provided opportunities to establish and penetrate into other countries. For instance, although average tariff rate in the US have fluctuated since 1850s, mainly it decreased slowly until nowadays, except when the U.S. was in the depressions (Steven M. Suranovic, 2006). In fact, tariff was created to protect domestic corporations from foreign business, so that a country can only reduce tax rate when its domestic companies are strong enough to compete with international companies. The mission of globalization is to encourage countries to interact with each other. So is that a good deal if the policy barriers are removed and national economies is dominated by foreign business, in case the domestic corporations do not have comparative or absolute advantage?
On the other hand, globalization implies large companies’ growing dominance and hegemony over national economies, and Dr. Rakesh Mohan Joshi (May, 2011) described globalization as Westernizaion, Walmartization, McDonaldization, or Coca-colonization, etc. The main point is every national corporation providing lower quality and the same price of a particular type of products compared to international companies has to face against the aggressive competitiveness from its competitors, or in some case, a proper marketplace will be dominate as well. For example, according to Vinaresearch (2012) in their research paper on Vietnamese buyer’s behavior on clothing products, brand is one of the most important elements that affecting customers’ decisions. Therefore, some Vietnamese brands such as CANIFA, Blue Exchange, and Ninomaxx have to face against famous brand from all over the world like Zara, H&M, Abercrombie & Fitch, F21, etc., and Vietnam is a potential market for foreign clothing corporations to invest and “dominate” local companies. As we can see, globalization sometimes can be known as the increasing popularity of individual products and services, but occasionally it refers to the dominance over particular national economies, in this case is the development of Vietnam’s apparel industry.
The growing dominance of these enterprises is also the depression of other corporations, which are usually domestic companies. As the example mentioning above, Vietnamese apparel brands have to compete with foreign brand in the “fight” for the domestic clothing market. The large expansion of famous brand from all over the world is the main obstacle for national companies to increase their sales, not only in Vietnam specifically, but also in every other country generally. Therefore, globalization sometimes is not stimulated by domestic companies, due to its negative effects on their business
Conclusion
Many authors, scientists, economists, or researchers have defined the term “globalization” on different viewpoints. Some of them gave us general definitions, while others provided specific explanation. This paper’s definition cannot cover all of the elements related to globalization, but we can define globalization on economic perspectives as the growth of international trade, along with the growing dominance of transnational corporations over national business.
REFERRENCES
Title Author & Date Source & Description
George Soros on Globalization George Soros
2002 Providing globalization on the economic perspectives.
The benefit of speculation: a bond market vigilante replies to will hutton’s The State we’re in Paul Stainesunknown http://www.libertarian.co.uk/lapubs/econn/econn069.pdf
The Globalization of software: The case of Indian software industry Carnegie Mellon University
n.d.http://www.heinz.cmu.edu/project/india/pubs/Sloan_Report_final.pdf
China Manufacturing: 10 Things The Chinese Make More Of Than Anyone Else In The World
Lisa MahapatraAugust 02 2013 http://www.ibtimes.com/china-manufacturing-10-things-chinese-make-more-anyone-else-world-infographic-1369727
Globalization and international business Rakesh Mohan Joshi Dr.
May 2011 http://www.rakeshmohanjoshi.com/images/files/globlizationandinternatinalbusiness.pdf
Globalization of the economy Jeffrey A. Frankel
August 2000 http://www.nber.org/papers/w7858.pdf?ne
Globalisation and Collective Identities” J.A ScholteN.d.Globalisation and Collective Identities”, in Identities in International Relations
International Trade Theory and Policy Steven M. SuranovicJune 14 2006 http://internationalecon.com/Trade/Tch20/T20-3.php
Providing information on US tariff rate over decades
Survey on Vietnamese consumers’ buying behavior and fashion style VinaResearch8/2012 Provide information on Vietnamese consumers’ buying behavior and fashion style.