The world is increasing influenced by Multination Corporation and global brand. Nowadays, the idea that globalisation produces winners and losers are widely accepted. The winners and losers from globalisation can separated into two general categories. One is developing countries and the other one is developed countries. In this essay I will prove there are significant more winners than losers in globalization. The developed countries or developing countries all are being benefited by globalisation.
Definition of globalization
According to one of most popular definitions which International Monetary Fund(IMF) are given, globalisation is “the process through which an increasingly free flow of ideas, people, goods, services and capital leads to the integration of economies and societies.” Globalisation is not a recent phenomenon. In 1962, the term “globalization” was first time come forth to the journal called “The Economics”. However, at that time globalization more likely as a term to use by economists rather than popular words can be found everywhere.
Globalisation can be defined as following aspects: free trade, foreign investment, organizational change in corporate sector and technological change.
Trade make an important role in globalisation. According to Charles and McGraw (2008), the Great Depression of the 1930s was caused by highly barriers in international trade. Government who govern their countries constrained the exports goods and labour services to other countries and high imports taxation rate to protect their domestic manufactures. Due to this experience, after World War II, General Agreement on Tariffs and Trade (GATT) are founded and made big impact in global trade market. World Trade Organisation (WTO) was established by GATT which make global trade system lower barriers through the principle and rules they negotiated. Free trade could reduce overall costs of production due to the imports; which company can purchase cheaper resource and workforce. Ultimately, free trade can cut our living costs and improve our living standards. Furthermore, free trade gives customers more choice on which products they are willing to buy. Because of free trade, we can get wider choice on domestic productions or international productions.
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Opening the domestic economies to foreign direct investment (FDI) is an important part of globalisation. The evidence (Charles and McGraw, 2008) suggests that FDI is making a significant role in the global economy. The outflow of FDI increased faster which from $25 billion in 1975 to $1.2 trillion in 2000. The multinational company made a significant influence in FDI.
There has been a big change in the nature of the company due to the globalisation of the production and distribution. Corporations are now becoming part of global supply chains which spread their productions. As an international company they must adapt the international business environment quicker than domestic firms. Hence, they change their corporate strategy frequently.
According to Charles and McGraw (2008) the role of technological change has made globalisation become more reality. Since the end of World War II, the world technological dramatically improved through Internet, telecommunication and transportation. Those improvements provide better condition for globalisation world widely.
Winners in the developed countries
Many people believe globalisation make developed countries become to loser due to off-shoring. Large employment opportunities are moving to developing countries because of cheaper labour costs. Off-shoring made lots of job lost in developed countries. However, all coins have two sides, job losses in the developed countries do not means all negative sides in globalisation.
According to Charles and McGraw (2008), when the North American Free Trade Agreement (NAFTA) established in 1994, clothing prices in the United States have decreased. For instance, blank T-shirts wholesaled for $24 a dozen in 1994 but now they only sell $14 a dozen. The lower prices on production are benefit for most of American who have more money to spend on other times.
Generally speaking in economic aspect, most MNE’s are come from developed countries, which through FDI to expand their capital and make huge profits. FDI and free trade provide opportunities to MNE’s gather cheaper raw materials and workforce which reducing the overall costs of productions. Most of the MNE’s have more advantages because their enough capital and high technology supported. Therefore, MNE’s will establish subsidiaries in FDI countries and sell these products with high price directly which can make large profits. Multinationals benefit most from globalisation according to 87% of EU citizens. Nowadays, MNE’s seem as the leader in developed countries economics, they occupied large parts of domestic market. MNE’s doing their business development well which can reflect the developed countries are winners from globalisation as well. Overall, developed countries are winners in globalisation, they gains outweigh the losses.
Winners in the developing countries
According Lancaster (2000), the six billion people in the world which have five billion people live in developing world. How much impact of globalisation on this countries and people? There are many argument about winners from globalisation in booming are not necessary shared equally in the global wide. When the distributions are not equally, the developing countries might become losers due to their poor condition on economy and politics aspects.
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Peaceful and stable are essential for developing countries in long-term development. If trade flows could improve smoothly and countries enjoy that peaceful relationship, it might avoid many political and economic conflicts between countries or regions. WTO is an important organisation in globalisation that makes vital roles to keep world peace. Most of developing countries are following WTO’s principles and rules to trade and investment. Due to this peaceful environment, developing countries can concentrate on their trade market and economic development.
Moreover, investment and trade are increased dramatically since 1990. There are more and more foreign direct investment in developing countries such as China, Indian, Mexico, and Thailand. Investments in those countries provide large employment opportunities and increase their exports and growth rate therefore improve overall standard of living.
The Asian countries financial crises in the 1997 made many experts to fight globalisation become stronger. They believe developing countries are losers in globalisation. However, the experience of China has been used as a good example to prove they are the winner of globalisation. Before reform, China was the world most important opponent of globalisation which is not opening their trade market. Since 1979, reform policy made China’s economic become most competitive and booming country in world widely. According to Michael Dauderstädt & Jürgen Stetten (2005) purchasing power parity in China is ranks secondly after America. Share of world trade increased from approximately 1% to almost 6% between 1979 and 2003. Since 2001, China access to the WTO which provide better free trade market environment and also become more competitive in international market. In a word, China’s experience in opening up reveals in what way a developing country can become winners from globalisation. Besides, China gives other developing countries more confidence to support free trade market and globalisation.
In conclusion, both of developing countries and developing countries are winners eventually. Through free trade, foreign direct investment and organisation, world village becomes more and more possible. Whereas lose employment opportunities due to off-shoring or many domestic firms are bankrupted due to MNE’s, which can not stop the globalisation steps. As we have demonstrated that there are significant more winners than losers in globalisation.
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