The winners and losers of the globalisation process

There are both winners and losers associated with globalisation, however what exactly is globalisation and how can it be defined? Daniels et al. Defines the term globalisation as follows: ‘A contested term relating to the transformation of spatial relations that involves a change in the relationship between space, economy and society’. [1] There are a few key dimensions connected to globalisation, these are economical, political, social, cultural and environmental. This paper will argue that there are some positives linked to globalisation, however many people are still worse off and suffer as a result of this phenomenon. There are some general winners as a result of globalisation: the highly skilled and educated, large firms, global markets, men, or any people with assets. Then there are the losers of globalisation: the workers, women and children, local communities, the uneducated, people without skills, the environment and small firms. For globalisation to work inequality must be decreased in order to close the gap between the rich and poor countries.

Transnational and Multinational Corporations are those corporations which have headquarters in a certain country (mainly in a global city) and operate in several other countries around the world. They have been the central players in the evolution of globalisation since the Second World War. These have continued to become some of the most powerful economic and political entities in the world today. The corporations can influence globalisation greatly and bring wealth to developed countries. Many of the larger Transnational Corporations (TNCs) have a higher turnover than the majority of the world’s countries. For example, the combined revenues of General Motors and Ford alone, the two largest automobile corporations in the world, exceed the combined Gross Domestic Product (GDP) for all of sub-Saharan Africa. [2] 

Economic globalisation refers to increasing economic interdependence of national economies across the world through a rapid increase in cross border movement of goods, service, technology and capital. [3] Capitalism drives globalisation in this present era and will continue to do so with the markets opening up and becoming neo-liberal. Whilst economic globalisation has been occurring over several thousands of years, recently it has expanded rapidly with the increasing improvements in technology, transportation and free trade. This recent growth has occurred mainly because of developed countries integrating with less developed countries, by means of foreign direct investment (FDI), the reduction of trade barriers and the modernisation of these developing cultures. Countries involved in trade liberalisation benefit from an increase in living standards, increased incomes, and higher rates of economic growth. For economies to grow, TNCs need to generate profit and expand globally. They achieve this by moving their production line to less developed countries in order to decrease production costs and increase profit. The winners of this process are the major corporations (Nike, Gap, Tommy Hilfiger, etc.) whose products are made at a minimal cost, thus generating increased amounts of profit allowing them to globalise their business and become wealthier.

TNCs have been heavily criticised, however they have invested in developing countries and by doing this, have managed to raise the living standards. Despite the western view that sweatshops are unethical, the labourers who work in them are often benefiting greatly. Many economists whose studies are directly related to sweatshops find that after controlling for other factors, multinational firms pay higher wages than domestic firms in Third World countries. [4] Many citizens in developing countries are unqualified or uneducated, thus making it extremely difficult for them to find employment by being unqualified. Feenstra and Hanson (1997) find that multinational firms improve the lives of workers by increasing the demand for labour. [5] This indicates that unqualified citizens still have a chance of employment and receiving an above average income. The apparel industry has drawn most attention in the press for its use of sweatshop labour. Evidently, the apparel wages are low by Western country standards however, these wages compare favourably with the average standard of living within these countries. For example, in Honduras, the site of the famous Kathy Lee Gifford sweatshop scandal, the average apparel worker earns, $13.10 per day, yet 44% of the country’s population lives on less than $2 per day. [6] Evidently, sweatshops do play a major role in developing countries, however there still are some negatives surrounding them.

The negative associations with globalisation cannot be overlooked. The losers of this process are the workers who work increased hours, earn little income, along with poor living and working standards. Even though sweatshops produce a reasonable, above average income for its workers, they usually work in dirty polluted factories which may have a negative effect on the worker and may decrease their life span. For example, Tommy Hilfiger a world renowned brand has set up sweatshops in developing countries, where products are made at a minimal cost and sold in developed countries at a high cost, producing major profits which return to the specific TNC headquarters, thus the developing countries economy does not benefit greatly. This in turn leads to an increase in inequality between the rich and the poor. As a result of sweatshops, citizens in the developing world may suffer as well. When these major corporations move their production line to reduce costs they leave several thousands of local citizens unemployed, which may lead to them relying on welfare. They may also substitute humans with labour saving technologies which will also increase unemployment levels. This can continue to lead to issues such as a loss of tax revenue which may be detrimental to the home country and halt them from moving forward. An additional loser in this process can be the consumer who purchases these products which can be described as being ‘highly overpriced’.

Another significant and often overlooked loser from economic globalisation is the environment. Major corporations’ decreases in environmental integrity as polluting corporations take advantage of weak regulatory rules in developing countries. For example, human systems are depleting resources and degrading the environment at unprecedented rates, such as mining companies clearing land for production causing deforestation and pollution. There are many more examples of environmental degradation such as urbanization of productive land; water logging and salinization of soil; soil erosion; deforestation; ground water depletion; ozone depletion; pollution; and climate change to name a few. These are all issues which are currently being seen through media sources. Such as the BP oil spill which has been graded the biggest environmental disaster in the US history, “The oil rig, about 40 miles (64km) off the coast of Louisiana, sank two days later, gushing an estimated 12,000 to 19,000 barrels of crude oil a day into the Gulf of Mexico.” [7] This appears to be a prime example of environmental degradation. This disaster has continuing effects on the environment and economy such as killing wildlife and habitat, and effecting tourism on this part of the coast. Ms Wickman, owner of the Treasure Trove gift shop that occupies an 18th century church, one of Alabama’s oldest buildings, estimates that her business has dropped by half since news of the April 20 explosion that destroyed an oil rig under contract with BP. [8] Due to the interconnectedness of globalisation when this disaster occurred all the oil prices around the world fluctuated and were unstable at the time.

Some countries may suffer from the ‘resource curse’. A prime example of the resource curse is Nigeria, a country rich in land, but poor in population. Despite its large earning from oil, 70% of its estimated 140 million people live below the poverty line. [9] About 95 percent of Nigeria’s revenue is generated by oil and gas, resulting in billions of dollars in state funds every year, though much of the country remains impoverished and underdeveloped this is mainly due to a high level of corruption in its government. [10] These can lead to much greater issues within developing countries such as an increase in the chances of civil war within developing countries and open war between developing countries as they fight for resources.

In conclusion, there are evidently positive impacts which have occurred as a part of the globalisation phenomenon. It has contributed to increased job opportunities for uneducated or unqualified citizens, has increased economic growth for developed countries through transnational and multinational corporations, and increased living standards due to trade liberalisation. Even though there are some negatives associated with globalisation such as increasing the gap between the rich and poor, exploiting labourers, along with having environmental impacts, globalisation has still continued to have many great benefits on the world. It is unreasonable to predict that globalisation will encourage equality around the world; there will always be winners and losers, regardless.