Negative impacts of Globalization on Economy

Name:

Institution:

Course:

Tutor:

Date:

Globalization has been defined in various ways by different scholars. In economic terms, globalization refers to progression of incorporating different isolated national markets of capital, labor and commodities into a single world market which different investors across the globe can exchange ideas (Garret, 2000). It is vital for quick flow of information. It also refers to the integration of diverse countries and economies where the impact of global pressures has a major impact on the international business operations. With respect to political dimension, political globalization can be defined as the integration or synchronization of the world political standards, labor standards, for the purpose of breaking the boundaries with the main object of making governance easier and promoting mutual international relations. Bodies like the United Nations play a defining role in this. Therefore, globalization is multidimensional and can be viewed on various aspects (Mike, 2001).

A global paradigm shift has been evident since the end of Cold War towards the close of 80s. With the introduction of globalization, international business is becoming increasingly popular, environmental advocacy more voiced, cultural aspects being shared more and legal issues being synchronized through the international law. Hence, these aspects are inseparably intertwined. The globalization age came with integration of nations, economies or markets and technologies (Emeriti, 2003). More countries have achieved free market economy and the setup stressed on global culture with power of individuals overriding the power of nations. Over the past, the merits of globalization have been overstressed. However, we should not be slow to note that globalization has numerous disadvantages to various countries and economies (Casson, 1999). Globalization has had a lot of negative impacts on the international economic operations, political relations, cultural aspects and environmental issues. The paper’s intention is to explain how globalization has negatively affected various economies (Garret, 2000).

Many economists have argued that globalization has positive impact to economy and especially to international business investors (Cleo, 2001). The major positive impact of globalization is that it has led to liberalization of international trade. Expansion of international trade has also been enhanced and cross border financial flow has been made possible. The fact that there is enhanced flow of ideas across border has led to intense competition in the international markets however (Mike, 2001). Most of the products from third world countries have not been able to make it to international market due to stiff competition. Some companies as a consequence have been forced to close down. The combined efforts of different countries in the national markets have resulted in good relations among then eliminating the others. These in turn has lead to unfair trade among various countries (Casson, 1999).

Globalization has a lot of impact on the economic performance in countries which are participating in the international business (Benjamin, & Virginia, (2003). Living standards of the people is affected directly due to changes that occur in economic performance in the region. Some of the impacts of globalization include increased competition, new technologies, intensive innovation which accompanies changes in technology and specialization in efficient industries (Edgar, & Dauvergne, 2005). Some Australian industries have been closed down as a consequence. It has also brought about more economic growth which had stagnated especially in most undeveloped countries gets to a point of economic transition. Lastly, there has been a rise of global elite resulting from widening of income gaps due to inability of other countries to attract globalization drivers. Some countries have become poorer (Garrett, & Geoffrey, 2007).

The major problem faced by many firms as they globalize is the difficulty in maintaining the original corporate culture. Maintenance of the cultural identity in the global markets is quite difficult. Firms which are globalizing through joint ventures and partnership led firms are forced to adopt the culture of the native and cultures of the diverse people where their clients operate (Casson, 1999). At times maintaining becomes very difficult and they drop. In the same manner, political views are as diverse as the cultural views are. Aligning the political views to reach a balance may not be easy and that is partially why the UN and international bodies like ICCJ face great challenges in the discretion of their sanctioned functions (Cleo, 2001). International firms are also faced with the problem of uncertainty on the extensibility of their business strategies and management networks. They are also faced with the problem of inability to solve problems that concerns project in the new areas (Garrett, & Geoffrey, 2007).

Political risks that are associated with global political change are multifaceted. International investors ought to be careful when dealing with long term assets in the global markets due to the risk of expropriation of these assets whenever there is a change in government. The impact is also felt when the existing government make a lot of changes toward foreign investment (Peterson, 2001). Currency has been a challenge to international business. Currency conversion is so hectic if global markets do not adopt one currency conversion method. The idea behind the inability to convert local currency into hard currency has posed a lot of challenges to international business. All these are in the hands of the government at any given time (Benjamin, & Virginia, (2003). The stance toward hard currency transfer in a nation might influence the proper business operations. Political changes that follows transition of government leads to shortfall in the national currency exchange. New government might introduce laws that lead to changes in currency transfer hence infringing the normal business transaction in the national markets (Edgar, & Dauvergne, 2005).

International politics affect international business through sanctions that some other states might impose on other countries. It is in relation with this that most developed countries impose sanctions on the third countries in the international markets. Political violence that accompanies national elections affects international business operations. This depends on the site of business operations. If in case sites where international business operations are affected by internal conflicts of the country, then there are chances that the facilities are damage leading to interruption of normal business operations (Garrett, & Geoffrey, 2007). This is sometime abrupt that no measures have been put in place to offset such crisis. These are very dangerous to international companies as it can lead to stoppage of business operations if substantial resources are damage during the time of violence. The place where the national markets are located should be a country of political stability to foster efficient and effective business operations. The diversity in the political structures that are presented by different countries also affects international business operations (Mike, 2001).

Globalization has made international traders to be ever cautious on their business operations. Terrorism has also increased due to globalization. International politics (brought by globalization) has a lot of limitations that has a far reaching influence on their operations. Doing business with international countries can lead to downfall of the operations due delays by most governments to settle bills in time (Emeriti, 2003). When a government is a buyer, there are a lot of inefficiencies associated with it. United Nations influence international business operations of a country i.e., it can impose an embargo on countries. This limits their ability to import goods hence markets for the global market goods are reduced. If for example a trader had exported goods to a government, but he later realized that embargo has been impose on that government, it has no option other than to cancel the export license of that trader (Peterson, 2001).

References

Benjamin, B. & Virginia, C. (2003): Globalization in Reshaping the Global Economy, New York: Schuster.

Casson, M. (1999): International Business and Global Integration, New York: Simon & Schuster.

Cleo, P. (2001). Financial Globalization: New York: Cambridge University Press.

Edgar, E. & Dauvergne, P. (Ed) (2005): Globalization and Environmental Protection on the High Seas; International Handbook of Environmental Politics: John Wiley and Sons

Emeriti, L. (2003): Regionalization and Globalization, Australian Journal of World Business

Fennimore, M. (2005): International Politics and International Society, Basingstoke: Macmillan publishers.

Garret, G. (2000): Global Economy and International Politics, Ithaca, N.Y.: Cornell University Press.

Garrett F. & Geoffrey, S. (2007). Partisan Politics in the Global Economy, New York: Cambridge University Press.

Mike, F. (2001). Global Culture: Globalization and Regionalization, New York: Cambridge University Press.

Peterson, G. (2001). The Global Shift and Internationalization, Ithaca, New York: Cornell University Press.