Essay: Negative impact of globalization

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  • Negative impact of globalization
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Many elements of globalization have an overall positive impact on our world economy. Though some positive aspects may take time, there are still several aspects of globalization that impact the world economy in a negative way. Now that we have explored that positive aspects in the previous paper. It is important to now reflect on some negative realms of globalization. Again, globalization refers to the trend towards a more integrated and interdependent world economy. Within that brief definition, we also breakdown globalization in how it comes into play in terms of the globalization of markets, production, and global institutions as well as the specific drivers of globalization. From local business to foreign business coming into our markets, globalization is changing the way we see and operate in the world. In this, we begin to see several drawbacks that are economic, global, and political.
The first negative impact of globalization that is important to talk about is how the labor force has shifted. This is a negative economic effect that can be seen in both countries as a whole, as well as certain sectors of an economy. Developed countries are now outsourcing to other countries, which in turn hurts their home labor force. This is an inequality among countries. For example, beginning in the 1990’s many firms from the developed world began to move production overseas. This was great for emerging economies like China who because of this started to converge with those of the developed world and overall growing economically. However, this resulted in manufacturing firms outsourcing most of their production. Real wages for unskilled labor fell within these developed countries. This demonstrates why many old industrial countries and cities in both Europe and North America are now struggling to stabilize the economy and related the rising number of jobless people. This process has led to a transfer of jobs from developed, and highly-successful countries to those that are less developed. This is because less developed countries that have lower wages overall, inexpensive coal, and little to no regulations when it comes to pollution. Leaving most developed countries unable to possibly compete. Just in the US, the percentage of employed citizens has drastically dropped, especially since China joined the World Trade Organization. However, the globalization negative effects can be seen all around the world, not just in the USA. So many countries are hiring help off shore due to employees who are willing to do the same job, at lower prices, which actually influences the economy of a country in a negative way, all because of globalization. This negative shift has a lot to do with one of the major driving factors of globalization; Declining Trade & Investment Barriers. So, though we produce more goods and services than ever before, a greater proportion is being traded and manufactured across national borders. The textbook also covers this important topic, and is often times a topic that gets lots of attention from globalization opponents. They argue that because many barriers are being lifted to encourage international trade, it has in turn destroyed manufacturing jobs in more developed countries like the United States. One of the examples given in chapter 1 that I think perfectly encompasses this argument is the case of Harwood Industries. Harwood Industries was a U.S. clothing manufacturer who moved their U.S. manufacturing to Honduras. The main reason behind this change was because in the U.S. they were paying workers $9 an hour, where in Honduras they could get the same skill level and manufacturing ability for $0.49 per hour. It was two journalists, and anti-globalization activists, D.L. Bartlett and J.B. Steele who used this case to support their thoughts. It is shifts like this that have caused developed countries to have depressed wages. When in all reality because of globalization, countries are no longer thinking about their own residents and local economy, but this idea of an overall communal economy.

Another source of concern as far as the negative impact of globalization is how free trade encourages the shift of business to less developed countries who lack adequate regulations. A lot of this concern actually spurs from the manufacturing shift discussed above, and it is how the overall ethical aspects of international business are being ignored. In a lot of ways, globalization has led to exploitation of labor. Many of the countries now being used a manufacturing hubs have little to none international or local regulation laws. This can have a very negative effect on the safety of workers and the environment of a nation if not watched. We cannot deny that cheaper labor costs more often than not translate to immense profits for the organization, that is why it is so appealing to big business. However, there are large negative factors that cause a negative outcome of this. The best example of this would be with Nike. Nike is an American multinational corporation who is the world’s largest supplier of athletic shoes, apparel, and sports equipment. Like many large companies in the 20th century, in 1975 Nike began to move production overseas. The untapped markets across the globe presented several benefits at this time. This seemed to be Nike’s next great idea. Stockholders and managers were receiving large dividends, and consumers were continuing to get the products they love. However, starting in the 90’s, Nike began to receive flack for inhumane working conditions which clearly violated ethical practices, as well as paying their workers way under minimum wage. However, Nike is not the only company that has received criticism for overseas manufacturing. The world got a reminder of this consequence of globalization in April of 2013 when a commercial building, home of several factories, collapsed in Bangladesh. This collapse was later named the deadliest garment-factory accident in history, as well as the deadliest accidental structural failure in modern human history, claiming over 1,100 lives. Companies who sold clothing made in this factory included the Children’s Place, Primark, and Walmart, as well as several others who then sold to bigger brands. After further investigation after the incident, it came out that the building’s owners ignored warnings to avoid using the building after cracks had appeared the day before. Garment workers were ordered to return the following day, and the building collapsed during the morning rush-hour. This incident was a huge wake-up call for the fashion industry of some negative aspects caused by globalization. Many times, factories aren’t checked by companies who use them. The main concern is how cheap they can get their products made. However, in places like Bangladesh these jobs are what really helps their economy move. For example, more than 80% of Bangladesh’s export earnings come from the fashion industry. Karen Webster, who is former director of the Melbourne Fashion Festival, commented on the Savar building collapse and what it means for the fashion industry moving forward. “Every company is reassessing how they get their garments produced – not even just those large-scale chains, even smaller independent businesses. Anyone who’s producing offshore would have to be looking at how their garments are being produced and making sure they are being made in adequate conditions.”

Here is a graph that shows just how many people in Bangladesh are working in garment factories. It is graphs like this, as well as the tragic building collapse that really puts things into perspective on how important human safety and ethics is. Unfortunately, because of globalization and the business selfishness that comes with it, these simple safety measures are put on the back burner.

A final negative point that is made in regard to globalization is a political aspect that many argue. Critics argue that despite what seems to be benefits of free trade and an interdependent global economy, it is actually hurting national governments. This shift in power takes national government power and puts it in the hands of global organizations like the World Trade Organization and United Nations. Though these organizations are important, they are mainly being run by unelected parties who now have power to make policies that effect entire governments. This thereby undermines the authority of those states and limiting the nation’s ability to control its own economy. The organization that receives the most criticism is the World Trade Organization. The World Trade Organization was founded in 1995 and is the only global international organization dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments. The goal is to ensure that trade flows as smoothly, predictably and freely as possible. The WTO arbitrates trade disputes between over 160 member states. There is then an overall panel who can issue rulings and instructions to the member states. Then if a member refuses to follow the put forward policies the WTO will impose appropriate sanctions. As a result of this power, many argue that power is then taken away from state governments who should be the overall power to tariffs, trade, and overall control of their economy. Some also argue that small countries face difficulties in meeting the cost of the WTO compliance because the rules are written by and for corporations with inside access to the negotiations and that proceedings are held in secret. This makes them technically undemocratic and therefore struggle to make regulations that fit different forms of governments to be as successful as possible. A prime example of how the WTO has had a negative impact is the Russian Automotive industry. Russia joined the WTO in 2012 after several years of negotiation. An economic area that was severily impacted by Russia joing the WTO was the automotive industry. This industry is politically and economically a very important part of the country’s economy. It directly employs around 600,000 people or 1% of the country’s total work force and supports around 2–3 million people in related industries. In a study done in 2012 it was found that a short-term negative effect will take place on supply due to higher competition and bigger presence of car producers on the market. The main risk is the reduction of duties on used cars that leads to a significant gap in price between new and used cars. Following the announcement of Russia’s WTO accession and new regulations in the automotive industry, the growth of imports of used trucks, the Russian truck fleet will age and that will negatively affect the safety, reliability and efficiency of transportations. Overall, the argument makes an important point that the WTO in a lot of ways runs a risk business. One where the basic rights of a democracy are challenged and then put into a potential overall risky power.

The globalization debate will always be there. For every positive aspect found, there will be people finding double negative aspects. The first step to identifying what side of the argument you land is understanding that globalization means reduction of barriers for international trade. That means any company can sell their output freely in the other economies. Globalization is the process or the outlook in which the firms acclimatize to the international markets for their products or services. The process of globalization requires the firms to adapt to the global market rather than being confined to a single location. Firms adapt the globalization policy as an expansion strategy for their products to keep up their profit margins. Once you understand Globalization from a border aspect, you are able to see the positive and negative sides of the spectrum. Personally, after researching both sides of the argument, I see the effects of globalization as predominantly a good thing. Consumers across the globe are provided with a large number of options to meet their needs. Global markets ensure that the consumers are provided with the options or solutions to their problems that the domestic country does not provide. Globalization opens doors for new products and services in the economy. Efficient markets ensure that the consumer can get products at a much lower or optimal rate in an open market than a closed economy. Global products in the domestic markets increase competition and the suppliers are required to provide goods at competitive rates and the product variety is large for the consumers to choose from. The consumers can benefit by saving money or acquiring the goods at cheaper prices. Globalization also ensures that the quality of product that the consumer gets is good. If the domestic market lowers the prices to match that of the international companies, it is also important that the companies match the quality of the goods or even surpass it to ensure product differentiation and attract customers. Another benefit of globalization is that the consumers can get the same products irrespective of the country that they live in. The consumer can buy the same product that suits his taste or preference around the globe. So though negative aspects will and can always be found, these crucial positive aspects out way the negative and therefore come to a conclusion that the concept of globalization is the future.

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