Globalization

At the beginning of this century the world society has faced with various crisis phenomena and their consequences of different character: international, systematical, social and economic, political, ecological etc. Such processes also take place in social and cultural, religious and inter confessional relations, in difficult interaction of moral standards and politics. World society is facing a problem of integral comprehension of the society development in new conditions, when human interests become dominant in international life, although it is still overwhelmed with contradictions regarding class, national and ethnical, group levels. The paradox of the situations lies in the fact that globalization of social processes and of human interests are closely connected with civilization crisis.

The term Globalization is a highly controversial one and there are many debates associated with it. One of the key debates is the extent to which it has really taken root or not; is with or without historical precedent.

On one hand, people argue that we live in an era that is highly globalize and has no historical precedent. The argument is that there have been a number of changes over the last twenty five years which now mean that borders don’t really matter, governments cannot control economic flows in the way that they could previously, and companies, particularly multi national companies (MNC's), don’t have any particular allegiance to any one country. These are the elements of the argument suggesting that globalization has happened in the last twenty five years or so, which is really different from what we have experienced before.

On the other side of the spectrum, the view is that this is not an accurate description of the world in which we live on the basis of a number of different things. The view is that when we actually look at some measures, dimensions, or indications of globalization carefully, then one will notice that actually they are not as widespread, and not as powerful as many portray or assume. As a result, i do not simplistically agree to the question above. I will look carefully at a number of indications qualifying the two pictures of globalization, concluding with a middle-ground view of the debate.

One way in which globalization is evident, and is without historical precedent, is to look at how MNC's have dominated the various economies of the world. The conventional measure is to look at the scale of Foreign Direct Investment (FDI) and its patterns overtime. Over the last twenty years or so, there has been a sharp increase in FDI, which now means that more and more people are working for MNC's, more goods and services used are produced by MNC's , and they now have more and more resources to lobby the governments. As a result, MNC’s overtime having become the key players in international economy. A better measure though is to measure FDI as a ratio of World GDP, as FDI would increase overtime as economies grow. Over the past twenty years or so, there has been a significant growth of FDI in terms of World GDP, along with a growth in Sales and Assets by MNC's in terms of World GDP. Moreover, MNC's are now increasingly outsourcing parts of their production or services to other countries. Examples include Nike outsourcing its production, or perhaps increased use of call centers (sub-contractors) for sales and administration to countries like India. This, however, is difficult to measure, and does not show in the FDI pattern.

As a result, there has been a strong evidence of MNC’s becomes more globalize. The second evidence suggesting the prevailing phenomena of globalization is in relation to patterns of trade. Now, when looking at the mere volumes of trade, we will see that those are raised. So overall levels of exports and imports have risen quite significantly. Exports have increased quite dramatically in France, Germany and US in the last twenty five years or so. However, similar to FDI, a proper comparison should be to look at the value of exports and imports in relation to GDP. When one does that, then certainly the world trade clearly outstrips the world output (economic growth), qualifying that globalization is clearly taking place. So, quantitatively trade has grown faster than output in the last twenty five years or so. This is regarded as significant as qualitatively, as consumer tastes seem to have become more homogenous and increase in trade means that development of products in one country are available to consumers in other countries.

The third aspect of the "Strong Globalization Thesis" is in relation to Business Services. Previously, services such as accounting, auditing, and consulting, were provided by national firms tailored to national markets and were different from counter markets. In recent years, markets have been increasingly dominated by a number of highly globalized business services firms. Such firms have widely diffused fashionable concepts like JIT (Just-in-time), or perhaps Business-Process-Reengineering, in a range of different countries.

Fourthly, financial systems in various countries are now strongly linked. There is no parallel for the current ease with which large sums of money can be transferred from one place to another, or how financial assets and currencies can be traded across borders. It used to be the case where technology was time consuming, and hence, there was a danger that if you were trading in equities, the delay in making the transfer of money would mean that the price has gone against you in the mean time. Moreover, if one compares the growth in foreign assets in relation to world GDP, there has been an unprecedented sharp growth in the last twenty five years. Besides that, the Daily Currency Exchange turnover, in the last twenty five years, accounts for more than 6% of world GDP. As a result, not surprisingly, it was the enormous flows of financial assets across borders which caused the ERM (Exchange Rate Mechanism) in Europe to collapse.

The reason for such a strong link of financial systems across borders is perhaps is as follows. Firstly, there has been outstanding advancement in Information Technology, which now means that slow cumbersome process of form-filling has been replaced by technology, easing trade across borders. Secondly, laws and regulations regarding, for instance, the transfer of money across the border, have been seen as restricting free trade and not a desirable thing to control, and as a result have been abolished leading to globalized financial markets.

The final element of the strong globalization thesis relates to migration - the ease with which people can now move across borders. In EU, for instance, there has been a reduction in formal barriers. If a person is member of the EU, he or she has the right to live and work in any of the twenty four EU countries legally. Linked to this is the reduction in the cost of travel in relation to income which has now made traveling cheaper. As a result, stock of international migrants has doubled to nearly 3%, as a percentage of the world population.

All of the above reasons so far point to one direction and form the strong globalization thesis, suggesting that globalization is a reality, and really is without historical precedent. And a well known component of this view is Anthony Giddens, who wrote extensively about globalization, particularly the argument that economic and social forces have become highly globalized, and governments cannot control them. However, there are other views as well which throw doubt on the extent of globalization.

The first area in which we can doubt the extent of globalization is in relation to FDI. If we look at the patterns of FDI and where it tends to occur, then there are some sectors which are dominated by MNC, for instance, the automotive and pharmaceutical sector. But if we see other sectors like public services, which tend to government controlled, such as health and education, there has been little FDI and MNC's are exceptions rather than norm.

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