GLOBALISATION

GLOBALISATION

Definition…IMF defines Globalisation as:

“ The growing economic interdependence of countries worldwide through increasing volume and variety of cross border transactions in goods and services and of international capital flows, and also through the more rapid and widespread diffusion of technology”

In other words globalisation is a process of economic, political and cultural integration and unification.

The historical origins of globalisation are the subject of on-going debate. Though several scholars believes that the origins of globalisation in the started in modern era, others regard it as a phenomenon with a long history.

HISTORY

Stages First Stage1490

Second Stage1890

Third Stage1990

ImpulseNautical developments

Industrialization in Europian countries

Multi-National Companies in 1970s, Communication Reform in 1980s.

Result Colonialism Imperialism Globalisation

Stages of Globalisation

What are the components of the globalisation process?

Advances in :- o Transportationo Telecommunicationso Infrastructureo Rise of the telegrapho Interneto Interdependence of economic and

cultural activities.o Business  and work organizationo World Economy o Socio-cultural resources, and the

natural environment ,etc 

A Multinational Company is a company that owns or controls productions in more than one nation. MNCs set up offices and factories for productions in regions where they can get cheap labour and other resources. This is done so that the cost of productions is low and the MNCs can earn greater profits.

Designs its products in United States

Components manufactured in China Assembled in Mexico

Sold in USA and Europe

Call centers located in India

They are originated from different countries Their goods are sold not only in their country but are sold globally Most of them are estabilished in the 20th centuary They have both producers and consumers globally

What are the common features that we can grab from above example ?

Overview in INDIA Indian economy had experienced major

policy changes in early 1990s.

The new economic reform, popularly known as, Liberalization, Privatization and Globalisation (LPG model) aimed at making the Indian economy as fastest growing economy and globally competitive.

The series of reforms undertaken with respect to industrial sector, trade as well as financial sector aimed at making the economy more efficient

The Indian sectors which grew tremendously as a result of globalisation of the Indian manufacturing

sector are as:

Capital goodsEngineering goodsChemicalsPetroleumChemicals &

fertilizersPackagingConsumer non-

durables

ElectronicsIT Hardware &

peripheralsGems & jewelryLeather & leather

productsMiningSteel & non-ferrous

metalsTextiles & apparelsWater equipment

• Globalisation has also created new opportunities for companies providing services, particularly those involving IT.

• MNCs have increased their investments in India over the past 15 years, which means investing in India has been beneficial for them. New jobs have been created. Local companies supplying raw materials, etc. to these industries have prospered

Effects of Globalisation

Social relations are stretching across the globe. Capitalist markets are spreading everywhere Competition became world-wide and became

neck-tight in all aspects Increasing travel and migration (international

tourism and domestic diversity) Increasing communication and interaction

between people (through all sorts of media) Greater employment opportunities Liberalisation of world trade , etc

• Effects of globalisation on Indian Industry started when the government opened the country's markets to foreign investments in the early 1990s. Globalisation of the Indian Industry took place in its various sectors such as steel, pharmaceutical, petroleum, chemical, textile, cement, retail, and BPO.

Economic Globalisation is the increasing economic interdependence of national economies across the world through a rapid increase in cross-bordermovement of goods, service, technology, and capital

It has begun to occur at an increased rate over the last 20–30 years under the framework of General Agreement on Tariffs and Trade and World Trade Organization which made countries to gradually cut down trade barriers and open up their current accounts and capital accounts.

DIMENTIONS OF GLOBALISATION

Pros - Economic Aspect

Employees of a transnational corporation may be well paid compared to other workers in the country

Increased investment in developing countries stimulates their economies

Free trade between nations is established – countries can produce to its strengths and import the goods it needs without the threat of tariffs

A wide range of products are available at affordable prices due to free trade

Sharing of technological innovations is fast and fair

Cons - Economic Aspect

Jobs are being outsourced from developed countries to less developed countries resulting in higher unemployment

Transnational corporations are becoming so large they are beyond the power of smaller governments

Economies are linked due to trade – economic hardship in one country will more greatly affect other nations

Cultural identity is lost due to mass use of western consumer products and entertainment

Profits usually do not stay in developing countries – they are returned to developed world

This term means the process of spreading social relations from one end of the world to the other end.

This help new ideas in one place become a idea in the other and it helps people communicate with each other from different countries.

This is a big part of society and could help bring everyone closer.  

Political globalisation

Pros – Political Aspect

Gradually there is a world power that is being created instead of compartmentalized power sectors. Politics is merging and decisions that are being taken, are actually beneficial for people allover the world

Since we share financial interests, corporate and governments are trying to sort out ecological problems for each other

International agreements are working towards trying to protect the environment from pollutants that cause global warming, destroying ecosystems, and increasing acidity levels in seas and oceans

Communications allow for the message of political freedom tyranny in the for of democracy to spread globally

Cons – Political Aspect

For nations that are at the receiver’s end are also giving up the reins in the ends of a foreign company which might again lead to a sophisticated form of colonization

Cultural globalisation refers to the transmission of ideas, meanings and values across world space.

Some critics argue that the dominance of American culture influencing the entire world will ultimately result in the end of cultural diversity.

A visible aspect of cultural globalisation is the diffusion of certain cuisines such as American fast food chains. McDonald’s is the world’s largest global food service corporation with more than 35,000 chains serving approximately 75 million people in 130 countries each day

Cultural Globalisation

• Cultural Changes Access to television grew from 10% of the urban population (1991) to 85% of the urban population (2012).

• Cable television and foreign movies became widely available for the first time and have acted as a catalyst in bulldozing the cultural boundaries.

• Indian youths leaving education in mid-way and joining MNC's.

Cultural Changes

Pros – Cultural Aspect Globalisations of communications sees great quantities of

information shared around the world

The best of cultures can be shared and understood on a global scale

There is more influx of information between two countries, which do not have anything in common between them

There is cultural intermingling and each other is trying to know about the other’s cultural preferences and in the process of doing so, we are actually coming across things that we like and in the course of time, we adopt it

Cons – Cultural Aspect A small number of private media companies decided

what information is to be shared and shape public opinion through sensationalization (bias)

Media and entertainment impact is westernizing other cultures

There are some experts who think that globalisation; along with the positive aspects is also leading to the incursion of negatives like communicable diseases and social degeneration

There has been an increase in the violence, particularly against women.

FORCES OF GLOBALISATION1.International Monetary Fund- IMF2.World Bank- WB3.World Trade Organization(WTO) /

formerly the GATT4.Trans-national Corporations or Multi-

national Corporations5.European Union –EU6.United Nations – UN

Overview of IMF

• The IMF was created in 1944 for the purpose of providing loans to mainly western Europeans states that were facing balance of payment (b.o.p) problems. It comprises of 188 member countries.• Its overall mission is to oversee international monetary system; ensure exchange rate stability; to foster global monetary cooperation

OVERVIEW OF WORLD BANK

• The International Bank for Reconstruction and Development or World Bank is a sister organization to the IMF. It was established in 1944.

• The WB provides finance for projects to promote development and in recent times the emphasis has been on poverty reduction.

Policies of the WB

•Encouraging free market reform policies•Liberalization of trade and capital markets

The WTO is an international organization that was established in 1995 as a replacement for the General Agreement on Tariffs and Trade (GATT).

The WTO has 151 members, accounting for over 97% of world trade and is the only global international organization dealing with the rules of trade between nations

Its objectives are: to liberalise world trade and create an open global system; to supervise the settlement of commercial conflicts.

Decision making is by consensus. Each member has one vote.

Overview of the World Trade Organization(WTO)

WTO treaties are said to show a bias toward multinational corporations and wealthy nations.

Small countries in the WTO do not have much influence.

Countries that are not members of WTO are effectively under an embargo.

The influential countries of the WTO focus on their own commercial interests and the needs of developing countries are perceived to be insignificant.

The WTO’s promotion of free trade may result in uneployment and increased poverty.

Criticisms of WTO

When a corporation that is registered in more than one country or that has operations in more than one country may be attributed as MNC. Usually, it is a large corporation which both produces and sells goods or services in various countries.

Multi National Corporations (MNC’S)

They play an important role in globalisation.

The first multinational business organization was the Knights Templar, founded in 1120.After that came the British East India Company in 1600 and then the Dutch East India Company, founded March 20, 1602.

CONT..

European Union (EU)

• Established in 1951 as the European Coal and Steel Community by the six founding members• Today, the EU has 27 member states and acts in a wide range of policy areas - economic, social, regulatory and financial where its actions are beneficial to the member states.

MISSIONS OF EU• Provide peace, prosperity and stability for its

people,• Overcome the divisions on the continent,• Ensure that its people can live in safety,• Promote balanced economic and social

development,• Meet the challenges of globalisation and

preserve the diversity of the people of Europe,• Uphold the values that Europeans share, such

as sustainable development and a sound environment, respect for human rights and the social market economy.

United Nations(UN)

• The United Nations (UN) is an inter governmental organisation established on 24 October 1945 to promote international cooperation.

•  At its founding, the UN had 51 member states; there are now 193.

GOALS OF UN Grant free access to their markets for goods

produced in poor countries, Implementing debt relief program, Grant more generous development

assistance, Work with pharmaceutical companies and

other partners to develop an effective and affordable vaccine against HIV,

Make special provision for the needs of Africa.

ADVANTAGES OF GLOBALISATIONoDeveloping international trade and

companieso Increased free trade between nationso Increased liquidity of capital allowing

investors in developed nations to invest in developing nations

oCorporations have greater flexibility to operate across borders

oGreater ease and speed of transportation for goods and people

o Increases in environmental protection in developed nations

DISADVANTAGES OF GLOBALISATION• Exploitation of Underdeveloped Countries.• Greater risk of diseases being transported unintentionally

between nations.• Spread of a materialistic lifestyle and attitude that sees

consumption as the path to prosperity.• Increase in the chances of civil war within developing

countries and open war between developing countries as they vie for resources.

• Increase in Unemployment.• Widening of Rich-poor Gap.

• Prisoners and child workers are used to work in inhumane conditions. Safety standards are ignored to.

• 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.

• Bad aspects of foreign cultures are affecting the local cultures through TV and the Internet.

CONT..

Role government can play in making the globalisation a success : Government should prepare such policies that must protect the interests, not only of the rich and the powerful but of all the people in the country.

Government can ensure that labour laws are properly implemented and the workers get their rights.

Government can reserve some items exclusively for small scale and local producers.

If necessary, the government can use trade and investment barriers like quota system, imports, duties etc.

It can negotiate with the WTO for fairer rules. It can align with other developing countries with

similar interests to fight against the domination of developed countries in the WTO..

THANK-YOU