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Globalization means the integration and democratization of the worlds culture, economy, and infrastructure through transnational investment, rapid proliferation of communication and information technologies, and the impacts of free-market on local, regional and national economies. According to late Pakistans most prominent economist late Dr. Mahbub-ul-Haq "Globalization is no longer an option, it is a fact. Developing countries have either to learn to manage it far more skillfully, or simply drown in the global cross currents."
The process is not new of course, and started almost as soon as mankind began to trade. It experienced, however, through history a number of "bursts", such as at the time of the Great Explorers, the Industrial Revolution, the Colonial Experience, and more recently, the Transport and Communication Revolution, through which the world has progressively "shrank" as far as the economic space and time is concerned.
Causes of Globalization
While it is truethat state ventures (or adventures) have at times driven the process, e.g. the colonial conquests, the globalization process has largely reflected market forces, specifically, the exploitation by large and smaller businesses in the world of benefits from trade in commodities, goods, services, capital, and even labor, and of opportunities for new investments and markets.
The process of global economic integration was perpetrated at the behest of World War II, when the leaders of Britain and the US helped establishing the World Bank and International Monetary Fund in 1944 to promote a liberal, capitalist world to counter the shadows of Socialism and Marxism.
The loans are granted by IMF and WB on the condition that the borrowing country will reduce the state's role in the economy, lower barriers to imports, remove restrictions on foreign investment, eliminate subsidies for local industries, reduce spending for social welfare, cut wages, devalue the currency, and emphasize production for export rather than for local consumption. Such conditions imposed laid the basic foundation to open economies to steer the mechanism of economic integration giving birth to the World Trade Organization.
By mid 1950s Pakistan had become a favorite candidate for receiving the benefits pledged by President Truman, having joined the network of international defense treaties with the United States. It marked the beginning of an enduring trend in Pakistan to follow every one of the strategies of development devised successively in Washington and promoted globally. Pakistan's own Dr. Mahbub-ul-Haq called this trend the pursuit of "development fashions" and listed it among his "seven sins of economic planners."
Before development theory and practice could be redesigned in any significant way to address the lingering issue of social justice it was literally hijacked to serve the agenda of a more aggressively mobile global capital which aimed at a deeper integration of all national economies into the structures and ideological framework of neo-liberal globalization. Foreign debt is the main lever used by donor countries and multilateral aid organizations to break resistance to the imposition of external economic agendas and development policies.
Claimed Benefits of Globalization
World has discovered new trade routes and improved the technology of transport to obtain the benefits from the process of openness.
Openness to foreign direct investment can contribute to economic growth by stimulating domestic capital formation and improving efficiency and productivity, as a result of greater access to new technologies.
Increased competition and access to the domestic financial system by foreign banks may improve the effectiveness of the intermediation process between savers and borrowers, thereby lowering markup rates in banking, as well as the cost of investment, and again raising growth rates.
Financial openness helps to lessen asymmetric information problems and to reduce the fixed costs associated with small-scale lending; it can enhance the opportunities for the poor to access the formal financial system.
It is widely accepted that openness has long been seen as important element of good economic policy and trade liberalization as necessary step for achieving it.
Trade liberalization process often works as an instrument to combat poverty: it usually tends to increase not only incomes but also provide some additional resources in order to overcome the issue of poverty.
Globalization or trade liberalization in general is being found to increase economic opportunities for consumers and producers and to raise earnings for workforce and that under grater openness to trade, resources tend to be reallocated towards productive activities and away from less efficient activities.
Foreign Direct Investment (FDI) is well attracted by openness to the free flow of capital, which then stimulates domestic investment and contributes to employment generation and economic growth. Financial openness also helps to increase the depth and breadth of domestic financial markets, leading to increased efficiency in financial markets through lower costs and improved resource allocation.
The Consequences of Globalization
Mainly, the general views about globalization can be categorized into four main perspectives that are economic, technological, development, and societal respectively.
The Economic Perspective: of globalization is the growth of world trade as a proportion of output (the ratio of world imports to gross world product, GWP, has grown from some 7% in 1938 to about 10% in 1970 to over 18% in 1996). It is reflected in the explosion of foreign direct investment (FDI): FDI in developing countries has increased from $2.2 billion in 1970 to $154 billion in 1997. It has resulted also in national capital markets becoming increasingly integrated, to the point where some $1.3 trillion per day crosses the foreign exchange markets of the world, of which less than 2% is directly attributable to trade transactions.
The Technological Perspective: involves Information Communication Technology (ICT) what explains this globalization? It certainly lies in the development of technology. The costs of transport, of travel, and above all the costs of communicating information have fallen dramatically in the postwar period, almost entirely because of the progress of technology
The Development Perspective: is the most controversial and important of all. It touches the heart of dichotomy which today globalization phenomenon faces. It tries to find the clues of the increasing divide between the rich and the poor, the existing cleavage between the ICT haves and have-nots, under the umbrella of one world concept of integrated markets and capital flows. Above all it challenges the greatest protagonists of globalization, the global institutions of World Bank, IMF, and even WTO one hand. One the other it has created a massive wave of antagonists threatening the industrial nations through anti-globalization relays, protests, and strikes.
The Societal Perspective: focuses on some key factors which have become pivotal to ensure the longevity of success of developed nations and that are their sensitivity to the community, cultural norms, and environmental care. This includes the condition of human rights, women empowerment, gender sensitization, civic education, status of women in the society, political status becoming more democratic, freedom of speech, rule of law, equal access to resources and level of education.
Globalization is also a key to future environmental changes. Decisions made by the private sector, in its search for comparative advantages, are increasingly affecting where and how people live and work. Globalization is having a major impact on population migration, population distribution, particularly through accelerating urbanization trends, and growth of mega-cities. These population changes are in turn impacting on security, governance, poverty, health and environmental factors
Globalization research raises many questions with respect to contemporary forms of power--economic, political, cultural--as well as strategies to challenge power and promote alternatives. To what extent do globalization processes produce global convergence, for example, towards economic insecurity? Do local conditions produce "varieties of globalization" at local levels? Are states overwhelmed by corporate power? To what extent do states shape the new global economy? With respect to questions of resistance, in what ways do globalization processes facilitate or constrain new opportunities for collective action? In the age of transnational corporate institutions, in what ways has social activism responded to this transnational context?
Know the advantage of globalization to an organization
It is theÂ advantages of GlobalizationÂ which act to bring aboutÂ economicÂ welfare on international levels, thereby benefiting the worldwide population.
Mentioned below, are the advantages of Globalization which facilitate the development of world economies immensely:
Free movement of capitals offers access to the foreign investments to many countries like the United States of America.
The worldwide commercial market becomes so flexible due to the advent of Globalization, that transactions of the international companies are not restricted to geographical borders of the countries.
Globalization enhances the flow of capital, permitting the investors to invest on the untapped resources of the developing countries.
Globalization of the mass media has reduced the global space substantially, keeping the people informed about all latest international happenings through different television channels.
Improvement in global communication networks leads to easy flow of important information not only to individuals but at company levels as well.
The democratic thoughts are rapidly spread among countries across the world, owing to Globalization.
Globalization stresses on increasing mutual dependence among all the nation-states across the world.
Globalization lessens the possibilities of warfare among developed countries to considerable extents.
The developed countries display a tendency for working towards protecting their surrounding environments to large extents.
Globalization enhances free international trades among countries across the world.
The total output levels of a country increase when productions become competition-oriented. This means that to compete with the existing world market, the products must be of best qualities and they also improve the lifestyle of the overall population.
Cheap imports and extensive competition on international level keep a check on the prices leading to lower inflation rates, which occasionally interrupt the economic growth and development of a nation.
EconomicÂ GlobalizationÂ ushers in the concept of Open Economy, where there is an extensive promotion of technological growth and inventions. This requires new topics and concepts to be imported from abroad.
Employments in the export-oriented industries generally pay its employees approximately 15% more than the import-oriented jobs in a country.
One of the positiveÂ effectsÂ ofÂ GlobalizationÂ is the smooth and speedy transportation of people and commodities to different corners of the world.
Globalization reduces cultural blockages and differences among nations, by encouraging fellow-feeling and mutual compassion.Â
Understand cultural dimensions of globalization
Culture as a Dimension of Globalization
Most of the foregoing discussion has been within a broadly cultural 'register', distinguishable in its vocabulary and its stress from that of, say, economics or politics. But how precisely should we think of culture as a concept and an entity in relation to globalization? One common answer is to see it as a 'dimension' of globalization. Globalization is now widely regarded as a 'multidimensional' phenomenon - on the surface an unproblematic description but, taken seriously enough, one with demanding implications for (not least, cultural) analysis.
The Multidimensionality of Globalization
Multidimensionality is closely related to the idea of complex connectivity. For the complexity of the linkages established by globalization extends to phenomena which social scientists have laboured to separate out into the categories into which we now, familiarly, break down human life: the economic, the political, the social, the interpersonal, the technological, the environmental, the cultural and so forth. Globalization arguably confounds such taxonomy.
Take the example of an environmental issue like ozone depletion caused by the use of chlorofluorocarbons (CFCs) in aerosol sprays or refrigerators. The recognition of the effects of these chemicals on the earth's protective ozone layer established a prime example of a global problem, one involving, as Steven Yearley says, the 'compression of the globe'. This in the sense that some of the main (if unknowing) culprits - deodorant users and furniture polish sprayers in the dense centres of population of the developed world - were producing pollution which could 'despoil the environment of [their] neighbours, thousands of kilometers away on the planet' - most intensely at the polar regions (Yearley 1996: 27). The CFC problem is certainly one of connectivity in this direct geographical sense. But it is also one which, in its complex ramifications, links together a number of interpretative discourses. It is obviously a technological matter for which a technical 'solution' in the form of alternative chemical propellants was quickly developed. But the adoption of this technical solution raised a whole raft of international political issues in the attempt to achieve a treaty on the regulation of CFC use: the 1987 'Montreal Protocol'. During these negotiations differences emerged between the economic interests of CFC-producing nations and those that were only consumers of the products.
The Cultural Dimension
Taking multidimensionality seriously can actually be too demanding. The sheer scale and complexity of the empirical reality of global connectivity is something, which defies attempts to encompass it: it is something we can only grasp by cutting into it in various ways. What this suggests is that we are pretty much bound to lose some of the complexity of globalization in any feasible account of it, but it doesn't follow that an account of one dimension - one way of slicing into globalization - has to be a 'one-dimensional' account. For there are better and worse ways of doing this.
A bad way would be to start from the premise that the dimension under consideration is the master discourse, the domain that 'things really all boil down to', the logic that unlocks all else. A better way would be to identify the specific way of describing the world that is contained within an economic, a political or a cultural discourse, and to try to draw out an understanding of globalization within these terms, whilst always denying them conceptual priority: pursuing one dimension in the self-conscious recognition of multidimensionality. This sort of deliberately anti-reductionist analysis should also make us sensitive to the points at which different dimensions interconnect and interact.
So it must be for cultural analysis. Particularly so since the concept of culture is so 'encompassing' that it can easily be taken as the ultimate level of analysis - isn't everything in the end 'cultural'? Well, no. Or, at least it gets us nowhere to think of culture in this way, as simply a description of a 'total way of life'. For, as Clifford Geertz once memorably described it (Geertz 1973: 4), this leads to 'pot-au-feu' theorizing - the throwing of anything and everything into the conceptual stew that is the 'complex whole' of human existence.
The dimension of culture has to be made more specific, and yet this has proved difficult to achieve, since culture is anyway such a complex and elusive idea (Williams 1981; Clifford 1988; Thompson 1990; Tomlinson 1991; McGuigan 1992). I do not, however, intend to dwell here on problems of definition. There are some fairly widely accepted features of 'the cultural' which we can build upon to get a reasonable sense of what properly belongs to the cultural dimension of globalization.
In the first place culture can be understood as the order of life in which human beings construct meaning through practices of symbolic representation. If this sounds a rather dry generalization, it nevertheless allows us to make some useful distinctions. Very broadly, if we are talking about the economic we are concerned with practices by which humans produce, exchange and consume material goods; if we are discussing the political we mean practices by which power is concentrated, distributed and deployed in societies; and if we are talking culture, we mean the ways in which people make their lives, individually and collectively, meaningful by communicating with each other.
The important thing is that to grasp these as 'dimensions' of social life is not to see them as entirely discrete spheres of activity: people don't turn from 'doing the economic' to 'doing the' cultural' in the way that we might imagine them ending work for the day and turning to leisure activities. If this were so then we would have to suppose that no one ever derived any meaning from the activities by which they earned a living. And yet this way of thinking is quite deeply engrained in common-sense views of culture referring to the practices and products of art, literature, music, film and so on. These are all important forms in which specific meanings are generated, but they will not do to define, exclusively, the cultural dimension.
Rather, we have to unravel from the complexly intertwined practices of the cultural, the economic and the political, a sense of the purpose of the cultural - that of making life meaningful. Now everything that is symbolizable is, in a broad sense, meaningful. There are, for example, vast amounts of symbolizations attaching to economic practices, for instance the technical language of the production process (such as the specifications of a car engine) or of the market-place (such as the daily announcement of share prices). But such symbolizations do not, for me, press to the heart of the 'cultural', and I am happy to cede most of this area of instrumental symbolization to the domains of the economic, the technical and so on.
On the other hand, many of the symbolic representations found in marketing, whilst having ultimately an instrumental (economic) end, are, for my purposes, very properly cultural. Advertising texts, for instance, though part of what Horkheimer and Adorno (1979) referred to disparagingly as the 'culture industry' linked to the instrumental purposes of capitalism, remain significant cultural texts. The way people make use of advertising texts may often be similar to the way they use novels or films. This is because they offer narratives (however ideologically suspect) of how life may be lived, references to shared notions of identity, appeals to self-image, pictures of 'ideal' human relations, versions of human fulfilment, happiness and so on.
This is the sense of the cultural dimension that I want to stress, with the emphasis on meanings as ends in themselves, as distinct from simply instrumental meanings. To use a slightly high-blown formulation we could think of culture in this sense as the realm of 'existentially significant' meaning. By this I don't mean to emphasize the 'problem of existence' as formulated either in the ontological anxieties of existentialist philosophy, or yet in the range of formal religious responses to the human condition. However important these may be for the way many people interpret their lives - and notwithstanding the significance of globalization for religious institutions (Beyer 1994) - these are, as it were, too specialized existential discourses to grasp what I am after in the idea of existentially significant meaning. We have to add to this Raymond Williams's famous dictum that 'culture is ordinary' (Williams 1989; McGuigan 1992). Williams first used this phrase of course in opposition to the elite sense of culture as a rarefied 'special' form of life available only to the few through the 'cultivation' of certain sensibilities. Culture is ordinary, then, in the 'democratic anthropological' sense that it describes 'a whole way of life': it is not the exclusive property of the privileged, but inclusive of all manner of everyday practices. But for Williams this sense coexisted, importantly, with a sense of culture as providing 'personal meanings': 'The questions I ask about our culture are questions about our general and common purposes, yet also questions about deep personal meanings. Culture is ordinary, in every society and in every mind' (Williams 1989: 4).
The principle that 'culture is ordinary' makes what I am calling questions of existential significance matters that every human being routinely addresses in their everyday practices and experiences. It is not a question of some symbolic practices being more 'edifying' than others, getting closer to the quick of the human situation, being more concerned with the big questions of life. Nor is it a question of cultural or aesthetic value in relation to particular cultural 'texts'. The Tao-te-Ching, the late quartets of Beethoven, Picasso's Guernica, or Robert Mapplethorpe's photographs are no more and no less 'cultural texts' than NYPD Blue, a Spice Girls album, the media coverage of the death of Princess Diana, football 'fanzines' and the latest Levis advert. All qualify to the extent that people draw upon them in making sense of their existence. And, indeed, we have to include on this reading of culture all sorts of practices which do not directly hinge on a relationship between a 'reader' and a 'text': the trip around the local supermarket aisles, or to the restaurant, the sports hall, the dance club or the garden centre, the conversation in the bar or on the street comer.
Culture for my purposes refers to all these mundane practices that directly contribute to people's ongoing 'life-narratives': the stories by which we, chronically, interpret our existence in what Heidegger calls the 'thrownness' of the human situation.
When we slice into complex connectivity from this perspective, what we are concerned with is how globalization alters the context of meaning construction: how it affects people's sense of identity, the experience of place and of the self in relation to place, how it impacts on the shared understandings, values, desires, myths, hopes and fears that have developed around locally situated life. The cultural dimension therefore spans what Anthony Giddens. has called both the 'out-thereness' and the 'in-hereness' of globalization: the connection between vast systemic transformations, and transformations in our most local and intimate 'worlds' of everyday experience (Giddens 1994b: 95).
Understand the implications of globalization for organization and their management
"Globalization" refers to the increasing integration of economies around the world, especially in terms of trade and financial flows, but also including labour and knowledge.1 One manifestation of globalization was the sharp increase in private capital flows to developing countries during much of the 1990s (IMF, 2000: 5). The removal of trade barriers has promoted more efficient markets by allowing each country to specialize in what it does best, that is to have a more refined division of labour. Global markets offer the benefits of increased efficiency in terms of better access to capital flows, technology, cheaper imports and larger export markets (IMF, 2000). Both sides of the income divide can benefit from globalization. Developed countries can tap into larger markets for innovations. Developing economies can gain access to these technical advances while sharing in global production via multinational enterprises (Sachs, 1998). Globalization permits ease of entry for those with skills, products and ideas. Declining transaction costs, such as the declining costs of electronic communication, are lowering entry barriers (Yusuf, 2001: 13-14).
However, markets do not automatically ensure that the benefits of increased efficiency are shared by all. Globalization does not progress evenly. Globalization has exacerbated differences in the relative advantages of countries (ILO, 2000a: para. 2). Volatile capital movements have shown that the opportunities of globalization do not come without risks (IMF, 2000). Globalization has made it easier for businesses to choose low-skilled workers at lower pay in other parts of the world, leading to lay-offs and economic hardship. The perception is widespread that workers in some countries and industries lose their jobs, the unskilled see their earnings fall and households face higher economic instability as a result of changes in terms of trade, global competition and the introduction of new technologies (Rama, 2003: 26). For some workers, globalization has meant improved career opportunities, living standards and prosperity, while for other workers it has resulted in job insecurity or unemployment, declining living standards and poverty (ILO, 2000a: para. 2).
Labour market and skill implications of globalization
First it is important to spell out the labour market consequences and skill implications of globalization. This involves three main topics: (a) changes in skill demands; (b) wage inequality; and (c) the brain drain.
Changes in skill demands
Employment of skilled workers has been on the rise in both developed and developing countries. The rate of growth of employment in advanced countries has usually been highest for professionals and technicians, while declining for production workers. In developing countries, professionals and technicians have also seen high growth rates (ILO, 1999: 33). Several factors account for this growth, including capital-skills complementarity.
The economic literature, as reviewed by O'Conner and Lunati (1999), suggests that a more educated labour force can raise the returns on investment in physical capital, or in other words that skills and capital are complementary. For example, Mincer (1995) notes the general tendency for skill demands to rise with development as a result of capital accumulation. According to Barro (1991), the stock of human capital affects growth principally through physical capital investment, with the two types of capital being complementary. The variation in investment rates in physical capital across countries is partly a function of absorptive capacity, which in turn depends on the availability of human capital and other institutional factors. The rate of return on investment in physical capital would appear to be a positive function of the supply of human capital; where the latter is scarce, the former is low and so too is the incentive to invest. If so, raising levels of educational attainment should, ceteris paribus, increase returns on physical capital and thereby boost investment rates. Benhabib and Spiegel (1994) found a significant positive association between the stock of human capital and productivity growth.
Technological change has shifted the relative demand towards skills in the labour force (World Bank, 2002a: 78). New technologies are knowledge and skill intensive and there is a need to train people to work with these technologies (IMF, 2001: 3). As with capital-skill complementarity, there is also complementarity between technology and skills. The stock of human capital appears to be positively correlated with technological dynamism. The introduction of new technologies in lower income countries implies a reallocation of labour from low to high productivity activities, which are generally both more capital and skill intensive. This means that increased technology imports are likely to be accompanied by a rising ratio of capital to labour, and an increase in the demand for skilled labour (Mayer, 2000: 23).
Changes in work organization
As noted in an ILO report on the social impact of globalization, the progressive adoption of new work organization techniques is among the key factors behind globalization (ILO, 2000b: 15). Enterprises have traditionally organized work around a tight division of labour and narrowly designed specialized jobs under the close control of supervisors. The assumption of these traditional management systems is that the most efficient way of organizing the production of standardized goods for a mass market is for each task to be broken down into its most elementary components. Traditional (Taylorist) forms of work organization minimize the skills required of most employees to perform the job. However, increased competition and the introduction of ICT have prompted many firms to undertake fundamental changes in their internal organization and work practices. These include changes in factory lay-out, the flow of production, quality assurance and the use of inventory. There is no one model of such transformation, but collectively re-organized firms are called "high-performance enterprises" (ILO, 1999: 41-43). High-performance enterprises operate on the assumption that competition is based not just on cost, but also on incremental improvements in the quality of the goods or services produced.
Trade openness, competition and FDI
Several authorities agree that globalization places a premium on skills. With globalization, the competitiveness of regions is determined by skills rather than their resource base (Shankar and Shah, 2001: 1). Openness causes a demand shift in skills through induced capital deepening or technological change. Globalization raises capital flows which, in turn, raise the demand for skilled labour (Mayer, 2000: 23). Benhabib and Spiegel (1994), together with Lucas (1990), suggest that the stock of human capital serves to attract investment in physical capital, notably through foreign direct investment. Skills constitute a pull factor for foreign direct investment (Nunnemkamp, 2002: 35). Education and training are likely to attract investment in manufacturing (Velde and Morrissey, 2003: 19). Thus, a well-organized education system and a better educated labour force can have the effect of attracting globalized financial capital. In contrast, Lucas suggests that lack of human capital may deter foreign investment from a country, since physical capital tends to go to areas where human capital is abundant.
Openness does seem to stimulate investment in physical capital. If human capital and physical capital are complements, the higher investment-to-GDP ratio in open economies would tend to increase their demand for skilled labour without a corresponding increase in supply. This could explain the tendency for the relative wages of skilled workers to rise with economic opening. Given capital-skill and technology-skill complementarity, this suggests that more open economies should experience a more rapid growth in demand for skilled workers than closed ones (O'Conner and Lunati, 1999: 28-29).
Unemployment and wages
To what extent does globalization lead to greater wage inequality? Trade openness, at least initially, can reduce wages and increase unemployment. As observed by Rama, the processes of job destruction and job creation are not simultaneous. During periods of trade liberalization, job destruction proceeds at a faster pace than job creation. Trade liberalization is associated in particular with job losses in formerly protected sectors. Also, while not directly connected with globalization, increased competitiveness also pushes governments to privatize State-owned enterprises and retrench redundant civil servants. Globalizers therefore tend to have high unemployment rates after launching reforms. However, these rates decline substantially over time. Rama observed this pattern even among globalizers that could be considered as "models" in their own regions, such as Chile, Mauritius, Poland and Sri Lanka. In the long run, open economies do not appear to have higher unemployment rates. If anything, their unemployment rates are lower. Overall, however, only a fraction of the unemployed in developing countries are out of a job due to globalization. Integration with world markets is also accompanied by substantial job creation, especially in export-oriented activities, such as textiles, garments or footwear (Rama, 2003: 17, 19, 32).
Migration and the brain drain
In theory, under the effect of globalization, wages should converge over time between countries and skills should be paid the same regardless of country. In fact, the current extreme gap between wages for skilled personnel between advanced and developing economies provides a powerful magnet for migration from poor to rich countries. The one market in which poor nations have something in abundance to sell, namely labour, has remained relatively untouched by international liberalizing trends (Rodrik, 2002: 5). The exceptions are for highly skilled workers, especially in information and computer technology. The United States and the United Kingdom, as well as other countries, have relaxed rules to allow the in-migration of specific categories of skilled or "knowledge" workers. It has been reported that 38 per cent of the professional workforce in Silicon Valley is of Indian origin (Yusuf, 2001: 22).