GLOBALISATION

GLOBALIZATION DEFINED..
Joseph Stiglitz, an economist and winner of the Nobel Prize

defines Globalization as follows: Globalization "is the closer integration of the countries and peoples of the world ...brought about by the enormous reduction of costs of transportation and communication, and the breaking down of artificial barriers to the flows of goods, services, capital, knowledge, and people across borders."

(Economic)Globalization:the integration of national

economies into the international economy through trade, direct foreign investment, short term capital flows, international flow of workers and humanity generally, and flows of technology(By J. Bhagwati.)

Guy Brainbant: says that the process of globalization

not only includes opening up of world trade, development of advanced means of communication, internationalization of financial markets, growing importance of MNCs, population migrations and more generally increased mobility of persons, goods, capital, data and ideas but also infections, diseases and pollution.

Globalization

(or globalisation) describes the process by which regional economies, societies, and cultures have become integrated through a global network of political ideas through communication, transportation, and trade.
Globalization encompasses:

Internationalization (trade & investment) Liberalization (freeing markets) Universalization (cultural interchange)or Westernization (Western cultural dominance)

Best example.
An English princess and her Egyptian lover perish in a car crash inside a French tunnel while traveling in a German vehicle with a Dutch engine driven by a Belgian, who had earlier had a sip of Scottish whisky and was trying to elude their Italian paparazzi pursuers driving a Japanese motorbike. She is subsequently administered CPR by an American paramedic using Brazilian pharmaceuticals. And this text was written by a Filipino operating on technology patented by Bill Gates, who had borrowed it from the Japanese. And you're probably sitting there reading this on a clone of the American IBM that depends heavily on Taiwanese hardware and has a Korean monitor assembled by Bangladeshi workers at a Singaporean factory, transported by truck by Indians, stolen in an ambush orchestrated by Indonesians and finally sold to your country of residence by the Chinese.

THAT is globalization!

REASONS FOR GLOBALIZATION

Education: People has always been attracted to learning

new things. Centuries ago, wealthy families used to travel to specific countries for education. Similarly, today many people has Student Visas that allow them to stay in a particular country, in order to gain education on a specific subject. Travel: Since always, human curiosity has led many to discover new cultures and learn from them. Travel, globalisation and new forms of communication are levelling our dialectal differences." Technology: This is probably the main reason for Globalization, as it has changed the world dramatically. Mass media and Internet have given the world a new perspective of life and communications. According to BBC News "Some technologies change the world in ways that were never imagined when they were first created or sold."

Trade Barriers-companies move from exporting their products to manufacturing them overseas in order to avoid the burden of tariffs, quotas, the policy of buy-local and other restrictions that make export too expensive to foreign markets. Globalization of Competitors-companies are aware that if they leave companies overseas too long without challenge or competition, their investments or foreign operations in the world market may be so solid that competition will be difficult. Economies of Scale-. Companies seek economies of scale in order to achieve a higher level of output spread over large fixed costs to lower the per-unit cost. They also, want to maximize the use of their manufacturing equipment

opportunities-Many companies will prefer to invest their excess profits in order to expand, but sometimes they are limited because of the maturity of the markets in their area. Therefore, they seek the overseas new markets to provide such growth opportunities.
Growth

Resource assess and Cost Savings-Access to raw materials and low operational costs in financing, transportation, low wages, lower unit costs, and power are attractive in terms of resource access and cost savings.

POSITIVE EFFECTS OF GLOBALISATION

One of the most visible positive effects of globalization is the improved quality of products due to global competition. Customer service and the 'customer is the king' approaches to production have led to improved quality of products and services. As the domestic companies have to fight out foreign competition, they are compelled to raise their standards and customer satisfaction levels in order to survive in the market. Besides, when a global brand enters a new country, it comes in riding on some goodwill, which it has to live up to. This creates competition in the market and a 'survival of the fittest' situation.

EMPLOYMENT
With globalization, companies have forayed into the

developing countries and hence generated employment for them. But it is one of the positive and negative effects of globalization, depending on the point of view you wish to see it from. It has given an opportunity to invest in the emerging markets and tap up the talent which is available there. In developing countries, there is often a lack of capital which hinders the growth of domestic companies and hence, employment. In such cases, due to global nature of the businesses, people of developing countries too can obtain gainful employment opportunities. But the developed countries have lost jobs on account of this movement of jobs to the developing world and hence it is a pinch felt by people in the First World.

INVESTMENT AND CAPITAL FLOWS

One of the most visible positive effects of globalization in

India is the flow of foreign capital. A lot of companies have directly invested in India, by starting production units in India, but what we also need to see is the amount of FII that flows into the developing countries. Indian companies which have been performing well, both in India and off the shores, will attract a lot of foreign investment, and thus pushes up the reserve of foreign exchange available in India. This is also one of the positive effects of globalization in US and other developed countries as developing countries give them a good investment proposition.

FOREIGN TRADE
While discussing the positive effects of globalization, how

can I leave out the impact of foreign trade on an economy. Comparative advantage has always been a factor even in the old times. While trade originated in the times of early kingdoms, it has been institutionalized due to globalization. Previously, people had to resort to unfair means and destruction of kingdoms and countries to get what they wanted. Today, it is done in a more humane way, with mutual cooperation. People who operate in uncivilized ways, now have to face the WTO and other world organizations that have been established with a view to control and regulate the trade activities of the countries.

SPREAD OF TECHNICAL KNOW HOW

While it is generally assumed that all the innovations happen in the Western world, due to globalization, the know-how also comes into developing countries due to globalization. Without globalization, the knowledge of new inventions, medicines would remain cooped up in the countries that came up with them and no one else would benefit. But due to improved political ties, there is a flow of information both ways. And this point - the spread of know-how, can also be expanded to include economic and political knowledge, which too has spread far and wide. The most obvious example of the spread of knowledge is that the Western world today are waking up to the benefits of Ayurveda and Yoga, while the Western antibiotics are flooding the Indian markets improving the quality of life (and the longevity too) of people in India.

SPREAD OF CULTURE
The positive effects of globalization on culture are many!

Not all good practices were born in one civilization. The world that we live in today is a result of several cultures coming together. People of one culture, if receptive, tend to see the flaws in their culture and pick up the culture which is more correct or in tune with the times. Societies have become larger as they have welcomed people of other civilizations and backgrounds and created a whole new culture of their own. Cooking styles, languages and customs have spread all due to globalization. The same can be said about movies, musical styles and other art forms. They too have moved from one country to another, leaving an impression on a culture which has adopted them.

SPREAD OF EDUCATION
One of the most powerful positive effects of globalization

on women and men both is the spread of education. Today, you can move in the search of the best educational facilities in the world, without any hindrance. A person living in US can even go to another continent for a new experience and some courses which one may not find in the home country. If one is interested, one can even get a specialization in subjects indigenous to a country and spread that knowledge to the home country. A good example of that is how the American managers went to Japan to learn the best practices in the field of mass production and incorporated that knowledge in their own production units.

LEGAL AND ETHICAL EFFECTS

Gone are the days where the limited jurisdiction became a

hindrance in the prosecution of criminals. These days due to international courts of justice, these criminals can no longer seek asylum in a foreign country, but will be brought forward and there will be justice. Due to globalization, there is also an understanding between the security agencies and the police of two or more different countries who will come together to curb global terrorism. Hence, it is now possible to catch the perpetrators of crime irrespective of which country they choose to hide in. This is undoubtedly one of the greatest positive effects of globalization on society.

ORGANISATIONS FOR ENVIRONMENTAL AND SOCIAL CONCERNS

In cognizance of the damage that has been caused to

our world over the years, the individual nations have decided to come together to find a way to save our world from ourselves. Organizations monitoring climate change as well as those which look at the welfare of our animals and marine life, are undoubtedly one of the positive effects of globalization on the environment

NEGATIVE EFFECTS OF GLOBALISATION

Developed nations have outsourced manufacturing and white collar jobs. That means less jobs for their people. This has happened because manufacturing work is outsourced to developing nations like China where the cost of manufacturing goods and wages are lower. Programmers, editors, scientists and accountants have lost their jobs due to outsourcing to cheaper locations like India. Globalization has led to exploitation of labor. Prisoners and child workers are used to work in inhumane conditions. Safety standards are ignored to produce cheap goods.

Job insecurity. Earlier people had stable, permanent jobs. Now people live in constant dread of losing their jobs to competition. Increased job competition has led to reduction in wages and consequently lower standards of living. Terrorists have access to sophisticated weapons enhancing their ability to inflict damage. Terrorists use the Internet for communicating among themselves. Companies have set up industries causing pollution in countries with poor regulation of pollution. Fast food chains like McDonalds and KFC are spreading in the developing world. People are consuming more junk food from these joints which has an adverse impact on their health.

The benefits of globalization is not universal. The rich are getting richer and the poor are becoming poorer. Bad apects of foreign cultures are affecting the local cultures through TV and the Internet. Enemy nations can spread propaganda through the Internet. Deadly diseases like HIV/AIDS are being spread by travellers to the remotest corners of the globe. Local industries are being taken over by foreign multinationals.

There is increase in human trafficking. Multinatonal Companies and corporations which were previously restricted to commercial activities are increasingly influencing political decisions.

GLOBALIZATION IN CONTEXT TO INDIAN ECONOMY

It implies opening up the economy to foreign direct

investment by providing facilities to foreign companies to invest in different fields of economic activity in India, removing constraints and obstacles to the entry of MNCs in India, allowing Indian companies to enter into foreign collaborations and also encouraging them to set up joint ventures abroad; carrying out massive import liberalization programs by switching over from quantitative restrictions to tariffs and import duties, therefore globalization has been identified with the policy reforms of 1991 in India.

Globalization in India

In early 1990s the Indian economy had witnessed dramatic policy changes. The idea behind the new economic model known as Liberalization, Privatization and Globalization in India (LPG), was to make the Indian economy one of the fastest growing economies in the world. An array of reforms was initiated with regard to industrial, trade and social sector to make the economy more competitive. It also heralded the integration of the Indian economy into the global economy. The Indian economy was in major crisis in 1991 when foreign currency reserves went down to $1 billion and inflation was as high as 17%. Fiscal deficit was also high and NRI's were not interested in investing in India. Then the following measures were taken to liberalize and globalize the economy.

STEPS TAKEN TO GLOBALIZE INDIAN ECONOMY

1.

Devaluation: To solve the balance of payment problem Indian currency were devaluated by 18 to 19%.

2. Disinvestment: To make the LPG model smooth many of the public sectors were sold to the private sector. 3. Allowing Foreign Direct Investment (FDI): FDI was allowed in a wide range of sectors such as Insurance (26%), defense industries (26%) etc. 4. NRI Scheme: The facilities which were available to foreign investors were also given to NRI's.

INTERNATIONALISATION STRATEGIES
Exporting
Counter trade Mergers and Acquisitions Strategic Alliance Joint Ventures

Licensing
The Walt Disney Company, U.S.A. the world famous entertainment company, is entered in the indian market by licensing through a joint venture with the Modis . The joint venture would be licensed by Walt Disney to market products developed by the latter using its popular characters , concepts and ideas . The joint venture would bring to india a whole range of Walt Disney products including films, music cassettes, toys and educational aids.

Strategic Alliance
A strategic alliance between the U.S. multinational Procter and Gamble (P&G) and the Indian company Godrej Soaps Ltd has given birth to joint venture company called P&G Godrej (P&GG) to market detergents ,cleansing and personal care products of both P and G and Godrej Soaps. The alliance provides P and G with the advantage of large access to the indian market through the well established distribution network of Godrej Soaps . Godrej Soaps would benefit from the R and D and technological strength of P and G

Joint Ventures
Encompasses many diverse types of joint overseas operation
Sharing of ownership and mgmt in an enterprise Licensing agreements Contract manufacturing Management contracts

Contract manufacturing
Under contract manufacturing, a company doing

international marketing contract with firms in foreign countries to manufacture or assemble the product while retaining the responsibility of marketing the product. This is a common practice international business . MANGEMENT CONTRACTING Under the management contract the international firm supplies management know how for a company in foreign country. For example, Harrisons Malyalam Ltd., India has recently entered into an agreement for management of some plantation in Srilanka.

India is GLOBAL
The liberalisation of the domestic economy and the

increasing integration of India with the global economy have helped step up GDP growth rates, which picked up from 5.6% in 1990-91 to a peak level of 77.8% in 1996-97. Growth rates have slowed down since the country has still bee able to achieve 5-6% growth rate in three of the last six years.

 This is major improvement given that India is growth rate in the 1970's was very low at 3% and GDP growth in countries like Brazil, Indonesia, Korea, and Mexico was more than twice that of India.
Though India's average annual growth rate almost doubled in the eighties to 5.9% it was still lower than the growth rate in China, Korea and Indonesia. The pick up in GDP growth has helped improve India's global position.

ADVANTAGES OF GLOBALIZATION
With globalization, there is a global market for companies to

trade their products and a wider range of options for people, to choose from among the products of different nations. Developing countries benefit a lot from globalization, as there is a sound flow of money and thus, a decrease in the currency difference. To meet the increasing demands that follow globalization, there is an increase in the production sector. This gives loads of options to the manufacturers as well. Competition keeps prices relatively low, and as a result, inflation is less likely to occur. The focus is diverted and segregated among all the nations. No country remains the single power head; instead there are compartmentalized power sectors. The decisions at higher levels are meant for the people at large.

ADVANTAGES.
Communication among the countries is on the rise, which

allows for better understanding and broader vision. As communication increases amongst two countries, there is interchange of cultures as well. We get to know more about the other's cultural preferences.
As we feed to each other's financial needs, the ecological

imbalance is also meted out. Governments of countries show concern about each other.

DISADVANTAGES.
Higher chance of risk in importing diseases as people travel

around the world more frequently after globalization for example : Swine Flu, Bird Flu. More and more corporations invest on developing countries polluting the environment more and escaping easily from weak developing countries regulatory rules. Greater risk of spoiling the cultural values of a developing country as more and more foreign investments ,foreign people started working from developing countries, changes in the attitude, lifestyle of the existing developing countries due to foreigners. Greater risk for developing countries workers in foreign companies can be misused, exploited by making them work more hours, making them work at night shifts.

DISADVANTAGES
Anti-globalists feel that the economic growth is not the

only factor which make people happier but can often make their lives depressing with organizations like WTO making the rich richer and the poor poorer. These organizations get away with their share of profits by ignoring nature and human interests. Greater probability of civil war within the third world nations and open conflict between them as they compete for resources.

SUMMARY
The implications of globalisation for a national economy are many. Globalisation has intensified interdependence and competition between economies in the world market. This is reflected in Interdependence in regard to trading in goods and services and in movement of capital. As a result domestic economic developments are not determined entirely by domestic policies and market conditions. Rather, they are influenced by both domestic and international policies and economic conditions. It is thus clear that a globalising economy, while formulating and evaluating its domestic policy cannot afford to ignore the possible actions and reactions of policies and developments in the rest of the world.

Continued..
India gained highly from glpbalisation as its GDP increased to

9.7% in 2007-2008. In respect of market capitalization, India ranks fourth in the world. But even after globalization, condition of agriculture has not improved. The share of agriculture in the GDP is only 17%. The number of landless families has increased and farmers are still committing suicide. But seeing the positive effects of globalization, it can be said that very soon India will overcome these hurdles too and march strongly on its path of development.

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