The Growth of Globalization

Team C's Debate on the Growth of Economic Globalization

GMGT520 External Environment of Global Business

Week 5 Team Assignment

TEAM C:

September 17, 2005

Abstract

Human societies across the globe have established progressively closer contacts over many centuries, but recently the pace has dramatically increased. Jet airplanes, cheap telephone service, email, computers, huge sea vessels, instant capital flows, all these have made the world more interdependent than ever. Multinational corporations manufacture products in many countries and sell to consumers around the world. Money, technology and raw materials move ever more swiftly across national borders. Along with products and finances, ideas and cultures circulate more freely. As a result, laws, economies, and social movements are forming at the international level. Many politicians, academics, and journalists treat these trends as both inevitable and (on the whole) welcome. But for billions people around the world, business-driven globalization means leaving old ways of life and threatening livelihoods and cultures. The global social justice movement, itself a product of globalization, proposes an alternative path, more responsive to public needs. Intense political disputes will continue over globalization's meaning and its future direction. This paper argues the pros and cons of globalization with substantiating evidence that analyzes the implications of this debate on the opportunities and constraints of conducting business globally.

Introduction

In the most general sense, free trade refers to the process in which goods and services, including capital, move more freely within and among nations. As free trade advances, national boundaries become more porous and less relevant. Throughout history, adventurers, generals, merchants, and financiers have constructed a more global economy. Today, unprecedented changes in communications, transportation, and computer technology have given this process new impetus. As globally mobile capital reorganizes business firms, it sweeps away regulations and undermines local and national politics. Globalization creates new markets and wealth, even as it causes widespread suffering, disorder, and unrest. It is both a source of repression and a catalyst for global movements of social justice and emancipation. Globalization refers to global economic integration of many formerly national economies into one global economy, mainly by free trade and free capital mobility, but also by easy or uncontrolled migration.

In the globally integrated world of the late twentieth century, however, both capital and goods are free to move internationally in a majority of nations. One little-noticed, but important consequence of free capital mobility is to totally undercut. Comparative advantage argument for free trade in goods, that argument was explicitly and essentially premised on capital being immobile between nations. But the conventional wisdom seems to be that if free trade in goods is beneficial, then free trade in capital must be even more beneficial! In any event, it no longer makes sense to think of national teams of labor and capital in the global economy. The globalization debate is not about whether it exists; it's about what globalization is, what its consequences are, and what kind of framework we can develop for the world to accommodate it.

The growth of economic globalization is unstoppable and that supporting it is one of the best ways to improve its conditions.

Globalization leads to free trade. Free trade resulted at freedom of choice. Freedom of choice leads to less protectionism and dictatorship as well as the country approaches to democracy. Modern economies become rich and prosperous because countries invest, develop and improve products and services. Vietnam is a poor country that has had to recover from the war and the loss of financial support from the old Soviet. Since Vietnam opened its economy to Western world for foreign investment, it has achieved substantial progress and improvement in its economy and political system. According to http://www.photius.com, the progress of economy growth rate was achieved at the average 9% per year from 1993 to 1997. From 1997 to 2002, GDP purchasing power parity rose from 108.7 billion to 154.4 billion and GDP growth rate continued at moderately strong level of 5.5% per year. GDP per capita climbed up from $1,140 to $1,950 per person.

Globalization can help poor countries to grow its economy and to create more job opportunities. More jobs, lesser unemployment. More income, more spending. The changes of people's wealth in China and India speak the truth. In late 1978 the Chinese leadership began to de-centralize its political system. The government increased the authority of local officials and plant managers in industry and opened the economy to increased foreign trade and investment.

China's GDP per capita has increased from $966 in 2002 to $3482 in 2004. China's country wealth ranking has jumped up from 103 to 87 from 2002 to 2004. "The result has been a quadrupling of GDP since 1978. Measured on a purchasing power parity (PPP) basis, China in 2004 stood as the second-largest economy in the world after the US, although in per capita terms the country is still poor." (http://www.cia.gov/cia/publications/factbook/geos/ch.html#Econ) India's GDP per capita also rose from 2002's $486 to 2004's $2217 per person. (http://www.nationmaster.com)

Globalization can make lesser developed countries to have more communications and culture exchanges with other countries. More communications with other countries help to improve a country's literacy while the growth in GDP can lead a country to spend more on education. Thus, better education leads to improvement of literacy. According to http://nationmaster.com, literacy rates in developing countries improved from 40% in 1950 to 65% in 2002. Before 1975, China's literacy rate was below 50%. But, since China opened trade to foreign countries, its literacy rate improved sharply and reached 90.9% in 2002. India also shows the similar changes in literacy rates. Before 1985, India's literacy rate was lesser than 30%, while it improved to 59.5% in 2002.

Free trade or globalization can help a country to use its excess of resources to "exchange" directly or indirectly with other countries for what it lacks or needs. In other words, globalization can help countries