Overview of Globalization

Discuss about the Globalisation and Insecurity in Twenty-first Century.

Globalization can be fairly described as the integration of industries, cultures, economies and the policy making all around the globe (Mowforth and Munt 2015). The process of Globalization can be described as a procedure whereby the national as well as regional economies come together in the form of societies, economies and cultures in order to integrate the global network of trade, immigration and transportation.  According to Coker (2014), Globalization popularly seeks to concentrate on the economic side of the globe like the foreign direct investment, trade, capital flows and markets. However, recently the shift has been focused towards a broader range of areas like culture, media, technology, political, socio culture and biological factors as well.

For instance, since the World War 2 the global trade has witnessed enormous growth and the manufacturing of goods has increased 100 folds and now the concept of trade has spread much more than just normal trade which tends to take place. The link between nations has now grown via communication lines allowing globalized exchange in different aspects as well.

Competition: The competition in the global markets has increased largely due to globalization. Competition leads to higher product quality and design which shall have a positive impact on the production approaches.

Culture: The culture of different companies has also been affected in a positive manner as good practices from one culture have had an impact on another culture and made the world a better place. This led to social growth (Jones 2013).

Legal effects: The legal aspects relating to the Human rights have increased as a result of globalization since the coverage on media has received a wholesome attention. This enhances prosperity and democracy.

Environmental damage: An increased production tends to lead to an increased use of natural resources which then leads to an increase in transportation (Lexicon.ft.com. 2018). Pollution increases due to this and this serves as a serious threat to humanity and the future of the globe.

Job insecurity: Most jobs in these domains have been temporary and insecure. Developed countries have been affected deeply and due to the reduced wage rates in India and China, the developed countries like that of the United States and the United Kingdom have also been affected considerably.

Price Fluctuations: As the competition has increased considerably due to the increase in globalization, there has been a widespread fluctuation in the prices of the different commodities (Krugman 2017). For instance, the developed countries like the United States of America has been forced to lower the prices because the developing economies like that of China offer goods at cheaper prices. Hence, due to this the better companies have had to withdraw from competition and this tends to have an impact on the social welfare of the country.

Impact of Globalization on Competition, Culture, Legal and Environmental Aspects

Factors Proportion Theory

The factors proportion theory of international trade is an international trade theory which explains that in case there exists two countries, two factors and a two commodity framework then the different countries are endowed with different proportions of factors of the production. This simply means that as some companies tend to have a larger resource base than the others, hence, they will be able to produce the goods in larger quantities at a lower price by making use of the labor intensive mode of production (Viner 2016). In the same manner, those companies with a large capital base will specialize in those goods which can be termed as capital intensive in nature.  Hence, by following this technique both the countries will gain access to both the good at the minimum price possible. This means that the theory functions well in case the country which is abundant in capital has a preference for the goods being produced by the other country and vice versa.

However, in case this is not the scenario, then the theory does not hold good. For instance, as USA is capital abundant and China is labor abundant, it is not necessary that China would have an interest in the products being manufactured by USA. Hence, in this scenario, the theory would not hold true in nature.

The International Product Lifecycle theory is an economic theory which tends to observe the set pattern based on international trade and was formed primarily after the failure of the Heckscher Ohlin Model (Feenstra 2015).  The given theory is based on the underlying concept that when it is an early stage in the life cycle of the product the labor and the manufacturing of the product are associated. After the given step, the product is adopted and used in the different markets as present in the world. This makes the product move from the point of origin and one of the most common examples of this is the growing use of the personal computer in the United States which later spread to the other parts of the globe.

The model is extensively applicable to the labor saving and capital using products catering to the high income groups. The different stages are as follows:

• Introduction
• Growth
• Maturity (Helpman and Razin 2014)
• Saturation
• Decline
• Limitation

The product lifecycle theory however, provides a very clear image which is not always popular. For instance it is not always possible for the company to go through all the stages. Moreover, managers can foster rigidity in the system based on the theory and expect the unusual.

Factors Proportion Theory of International Trade and International Product Lifecycle Theory

In the recent time, one of the biggest news in the global scenario is the trade war between China and the United States. This mainly started when Donald Trump, the president of the United States imposed tariffs on imports from China especially the steel imports. Imposition of tariffs means paying extra for the imports and it will reduce the rate of import from the particular country. There are number of reason being identified behind this step being taken by Donald Trump. The major reason is the trade deficit between the United States and China. According to the reports, United States is having about US$ 375 billion of trade deficit with China (www.bbc.com 2018). This denotes that the United States is importing more from China compared to what they are exporting to them. Thus, according to Donald Trump, this is hurting the growth of the American economy due to capital drain from the country. Thus, imposing tariff will restrict the import from China and will help to reduce the trade deficit.

Another reason is the domestic steel industry of the United States, which is not competitive enough against the cheaper imports from China. This is due to the reason that steels imported from China are cheaper compared to the steel produced in the United States. Thus, the local companies are losing competitiveness. Hence, tariff is being imposed especially on the import of steel from China. According to the logic, imposing tariff will increase the cost of the imported steel and this will give the competitive edge to the American steel industry.

However, there are number of implications being faced by the domestic consumers in the United States. It is reported that countering the tariff imposed by the United States, China will also impose same on their imported goods from the United States. Thus, this will in turn affect the American economy (fortune.com 2018). This is due to the fact that China is one of the largest markets for number of American organizations and thus imposing tariff on their imports will restrict their potentiality. Thus, the entire economy will get hurt due to lack of market and this will eventually affect the employment scenario of the average population. Another major implication on the domestic consumers will be the increase in the price of the electronic products due to the reason that imposing tariff will lead to increase in the major electronic products from China. Thus, consumers have to pay more.

References

Coker, C., 2014. Globalisation and Insecurity in the Twenty-first Century: NATO and the management of Risk. Routledge.

Feenstra, R.C., 2015. Advanced international trade: theory and evidence. Princeton university press.

fortune.com, 2018. https://fortune.com. [online] Fortune. Available at: https://fortune.com/2018/07/04/china-us-trade-war-tariffs-friday/ [Accessed 24 Jul. 2018].

Helpman, E. and Razin, A., 2014. A theory of international trade under uncertainty management. Academic Press.

Jones, R.B., 2013. Globalisation and interdependence in the international political economy: rhetoric and reality. Bloomsbury Publishing.

Krugman, P., 2017. Crises: The price of globalisation?. In Economics of Globalisation (pp. 31-50). Routledge.

Lexicon.ft.com. ,2018. Globalisation Definition from Financial Times Lexicon. [online] Available at: https://lexicon.ft.com/Term?term=globalisation [Accessed 24 Jul. 2018].

Mowforth, M. and Munt, I., 2015. Tourism and sustainability: Development, globalisation and new tourism in the third world. Routledge.

Viner, J., 2016. Studies in the theory of international trade. Routledge.

www.bbc.com ,2018. What is a trade war and why should I worry?. [online] BBC News. Available at: https://www.bbc.com/news/world-43512098 [Accessed 24 Jul. 2018].